The short version

A fixed annuity is a contract between you and an insurance company. In plain terms, you hand the insurer a sum of money, and in exchange the insurer promises to credit interest at a rate it guarantees for a set period of time. That promised percentage is what people mean by a "fixed annuity rate." The most common way this shows up today is a MYGA — a multi-year guaranteed annuity — where the carrier locks in a single guaranteed rate for the whole term.

This guide explains, in everyday language, how that rate is actually set, why it changes from carrier to carrier, how the guarantee works, and — just as importantly — the trade-offs you accept in return for that guarantee. Everything here is educational. It is not investment, financial, or tax advice, and The Jordan Insurance Agency is a licensed independent insurance agency, not a financial planner or advisor.

What a fixed annuity rate actually is

A fixed annuity is, at its core, an insurance contract. According to the SEC's Investor.gov, an annuity is "a contract between you and an insurance company," and a fixed annuity guarantees that your money "will earn at least a minimum interest rate during the accumulation phase." The insurer — not the market — sets those rates.

There are two related ideas worth separating right away:

  • The declared (current) rate. This is the rate the insurance company is currently crediting. With a MYGA, this rate is locked for the entire term you choose.
  • The guaranteed minimum interest rate. Fixed deferred annuities also carry a floor — "the lowest rate the annuity can earn. It's stated in your contract and disclosure and can't change as long as you own the annuity." This matters most on older or renewing contracts where the declared rate can move; the floor is the line it cannot fall below.

So when you ask "what's the rate?", you're really asking about the declared rate for a specific term — while the contract also carries a separate guaranteed minimum in the fine print.

How a MYGA locks the rate

A MYGA is the fixed-annuity type built specifically around a locked rate. Here's the mechanic in plain English:

  • You typically pay a single lump-sum premium.
  • The insurer guarantees one interest rate for the entire term you select.
  • Terms are commonly offered in 3-, 5-, 7-, and 10-year lengths.
  • Interest usually compounds annually and is added to your principal.
  • That interest grows tax-deferred inside the contract — you're not taxed on it while it stays in the annuity.

The appeal is predictability. Once you sign, you know the rate for the whole term regardless of what happens to interest rates in the wider world. The trade-off is that your money is committed for that term (more on the surrender period below).

A quick, clearly-labeled hypothetical

The following is a made-up illustration to show how the locking mechanic works — not a rate quote, not a real product, and not a promise of any result. Suppose someone in Charlotte places money in a hypothetical 5-year MYGA. Whatever rate the carrier declared on the day the contract started is the rate credited in year one, year two, and every year through year five — compounding annually onto the balance. If general interest rates fall the next year, this contract's locked rate doesn't fall with them; if they rise, this contract's locked rate doesn't rise either. That certainty in both directions is the entire point of the "guaranteed" in multi-year guaranteed annuity. What the actual dollars come to depends entirely on the specific contract, the specific carrier, and the specific rate in effect — which is why we never quote a number from memory.

How the carrier sets the rate

Here's the part people are most curious about: why is one carrier's rate different from another's, and why do rates move over time?

Because the insurer holds your premium over a multi-year commitment and invests it — largely in bonds — the rate it can afford to guarantee depends on a few things:

  • The term length. A 3-year guarantee and a 10-year guarantee are different promises, so they're usually priced differently.
  • The carrier. Each insurance company has its own portfolio, costs, and pricing, so declared rates vary from one company to the next.
  • The interest-rate environment. Fixed and MYGA rates move with the broader rate environment because the insurer is investing your premium in interest-bearing assets.

Two things follow from this. First, there is no single "fixed annuity rate" — there's a different declared rate for each term at each carrier at any given moment. Second, rates change continually. That's exactly why, in keeping with our compliance rules, this article does not quote any current rate percentage. A number printed here would be stale the moment the environment shifted, and it would vary by carrier and term anyway. When you're ready to compare real numbers, those come from live carrier illustrations — not from an article.

Comparing rates the right way

Because rates aren't the whole story, the smart way to compare fixed annuities is to look at two things together:

  • The guaranteed rate for a given term length — apples to apples, a 5-year quote against another 5-year quote.
  • The carrier's financial-strength rating — because the guarantee is only as strong as the company standing behind it (covered next).

A slightly higher rate from a weaker carrier is not automatically the better deal. The guarantee and the guarantor go together.

What actually backs the guarantee (this is the big one)

This is the single most important thing to understand about a fixed annuity rate: the guarantee rests on the insurance company, not the government.

  • A fixed annuity's guarantee depends on the issuing insurer's financial strength and claims-paying ability. As the SEC puts it, the risk "is entirely based on the financial health of the company," and any guarantee "is only as good as the insurance company."
  • Annuities are NOT FDIC-insured. The FDIC covers bank deposits; annuities are insurance contracts issued by insurance companies and regulated by state insurance departments.
  • If a member insurer becomes insolvent, there is a state safety net: the North Carolina Life & Health Insurance Guaranty Association (NCLIFEGA) covers up to $300,000 for the present value of annuity benefits per individual, per member insurer. Note that NCLIFEGA is a private nonprofit created by NC statute — it is not FDIC or government-backed — and by law it may not be used as a reason to buy. We mention it only so you understand the full picture, not as a selling point.

Because the guarantee depends on the carrier, checking the insurer's financial-strength rating is the primary way to gauge safety. An AM Best Financial Strength Rating is an independent opinion of a company's ability to meet its ongoing obligations. On AM Best's scale, the "Secure" descriptors are A++ and A+ ("Superior"), A and A- ("Excellent"), B++ and B+ ("Good"), and B and B- ("Fair"); below that are "Vulnerable" categories. Higher generally means stronger claims-paying ability. A rating is not a recommendation to buy and doesn't address whether a product suits you — but it's a meaningful input.

If you want to go deeper on this exact point, see our guides on whether annuities are FDIC insured and what actually protects your money and whether annuities are safe.

The trade-offs you accept for a locked rate

A guaranteed rate isn't free — you accept some real constraints in exchange. Being honest about these is non-negotiable, so here they are.

The surrender period and surrender charges

When you commit money to a fixed annuity, you agree to leave it in place for the term. The surrender period is the span after purchase during which taking out more than the allowed amount triggers a surrender charge. In North Carolina, surrender charges typically apply during the first 5 to 15 years from the policy issue date. The charge declines over the life of the contract and reaches zero at maturity. The exact starting charge is set in your specific contract — we won't state a rule-of-thumb percentage, because it varies — but the key idea is simple: your liquidity is limited during the surrender period. Our full guide on the annuity surrender period and surrender charges walks through this in detail.

The free-withdrawal provision

Most fixed and MYGA contracts do give you some access. Many permit a penalty-free ("free surrender") withdrawal each year — commonly up to about 10% of account value — with the surrender charge applying only to amounts above that. The exact free-withdrawal percentage is contract-specific, so read your policy; treat "up to about 10%" as a common allowance, not a guarantee.

The 10% IRS early-withdrawal tax before age 59½

Separate from anything the insurance company charges, the IRS generally applies an additional 10% federal tax on the taxable portion of distributions taken before age 59½, unless an exception applies. This is a federal tax rule, and it is in addition to any surrender charge in your contract — two different things that can both bite if you pull money out early. If you're under 59½, weigh this carefully. (See our guide on the penalty for taking money out of an annuity early.)

Reduced liquidity overall

Put simply: a fixed annuity trades flexibility for certainty. You get a guaranteed rate for a set term; in return, the money is meant to stay put for that term. If you might need the funds sooner, that's a reason to think twice — or to size the annuity so you're not committing money you can't leave alone.

How a fixed rate differs from an indexed rate

People often confuse a fixed rate with the crediting on a fixed indexed annuity (FIA), so it's worth drawing the line clearly.

  • A fixed-rate annuity (including a MYGA) credits a set, declared interest rate. You know the rate up front.
  • A fixed indexed annuity is still a fixed annuity — principal is protected and interest can never be less than zero — but instead of a flat declared rate, its interest is tied to a market index through a formula. That formula is shaped by caps, participation rates, and spreads, which limit how much of the index change is credited. An FIA can offer more upside potential than a fixed-rate annuity, but the credited amount varies year to year rather than being a fixed percentage.

Neither is "better" in the abstract — they answer different priorities. If you value a known, locked number, a fixed-rate/MYGA is the direct fit. If you'd trade a flat rate for index-linked potential with a zero floor, an FIA is worth understanding. Our guides on the fixed indexed annuity and on how annuity indexing works with caps, participation rates, and spreads break down the mechanics.

One boundary worth stating plainly: variable annuities and Registered Index-Linked Annuities (RILAs) are out of scope for The Jordan Insurance Agency. Those are securities that require a securities license, and their account values can go down. We work in the fixed and fixed-indexed lane only. We mention them here solely to be clear about what we do not do.

Fixed annuity rate vs. a bank CD rate

A fixed annuity rate is often compared to a bank CD rate, since both offer a stated return on "safe money." They're genuinely similar in feel but differ in a few important ways:

  • Backing. Bank CDs are insured by the FDIC up to $250,000 per depositor, per insured bank, per ownership category. Annuities are not FDIC-insured; they rest on the carrier's claims-paying ability, with the NCLIFEGA state limit as a backstop if an insurer fails.
  • Taxes. CD interest is generally taxable in the year it's credited, even if you don't withdraw it. MYGA interest is tax-deferred — you're taxed only when you take it out.
  • Liquidity. CDs tend to have shorter terms with bank early-withdrawal penalties; MYGAs are generally less liquid (a multi-year surrender period), though many allow that penalty-free annual withdrawal of up to about 10%. And before age 59½, MYGA earnings withdrawals can also trigger the IRS 10% additional tax.

For a fuller side-by-side, see our annuity vs. CD guide.

The North Carolina protections around your purchase

North Carolina builds in consumer safeguards for annuity buyers that are worth knowing before you commit to any rate:

  • Free-look period. After you receive the contract, NC law gives you a 10-day window to return it for a full premium refund — 30 days if the annuity replaces existing life insurance or annuity coverage. That's a real "change your mind" period after signing.
  • Best-interest standard. North Carolina adopted the NAIC's best-interest standard of care (effective January 1, 2023). When a producer recommends an annuity, they must act in your best interest — exercising care, disclosing their role and compensation and any material conflicts, not placing their own financial interest ahead of yours, and documenting the basis for the recommendation. NC producers also complete a one-time 4-hour annuity best-interest training before selling annuities.
  • Plain-language disclosure. The NC Annuity Disclosure Act requires you to receive a plain-language disclosure of the annuity's basic features at the point of sale.

These rules exist so that the rate you're offered comes wrapped in real disclosure and a right to walk away — not a high-pressure pitch.

Putting it together

So, how do fixed annuity rates work? A carrier declares a guaranteed interest rate for a set term; with a MYGA that rate is locked for the whole term and compounds tax-deferred. The rate varies by term, carrier, and the interest-rate environment, which is why there's no single number and why we don't quote current rates. The guarantee rests on the insurer's claims-paying ability — backed in NC up to $300,000 by NCLIFEGA, and never by the FDIC — so the carrier's financial strength matters as much as the rate itself. And the certainty comes with real trade-offs: a 5-to-15-year surrender window, surrender charges above the free-withdrawal allowance, the IRS 10% early-withdrawal tax before 59½, and reduced liquidity overall.

How The Jordan Insurance Agency helps

The Jordan Insurance Agency is an independent, licensed insurance agency based in Charlotte, North Carolina, serving clients across the state. Because we're independent, we represent multiple carriers rather than a single company — so when you're comparing fixed and MYGA rates, we can line up guaranteed rates for the same term length across carriers and put the current declared rate next to each carrier's financial-strength rating, apples to apples, instead of chasing a headline number.

We'll explain in plain English exactly what your contract locks in, how long the surrender period runs and what the free-withdrawal allowance is, whether a term fits money you can genuinely leave alone, and how the 10% IRS rule before age 59½ could apply to your situation — and we'll always point you to a tax professional for your personal tax questions, because this is education, not tax advice. We do this in the fixed and fixed-indexed lane only; we don't sell or advise on variable products, and we never present ourselves as financial planners. For any current rate or contract-specific figure not shown here, The Jordan Insurance Agency can pull live carrier illustrations and walk you through them, at no pressure and no cost to you.