Annuity companies earn money by collecting fees from customers, investing customer funds, and keeping the difference between what they promise to pay and what they actually earn. These companies are fundamentally in the business of taking your money, managing it, and profiting from every stage of that relationship.
The Core Business Model: Where Profits Come From
Annuity companies operate on a surprisingly simple principle—they collect large sums of money upfront, invest those funds, and pocket the gains that exceed what they owe you. When you buy an annuity, you’re essentially entering into a contract where the insurance company bets they can earn more from your money than they must legally pay back to you.
The insurance industry generates profit through multiple streams that work together like an interconnected system. Think of annuity companies as middlemen: they stand between your investment and your retirement income, taking cuts at every transaction point.
Federal regulation under the Securities and Exchange Commission oversees variable annuity products, while state insurance commissioners regulate fixed and indexed annuities. This dual regulatory structure creates opportunities for profit because different rules apply to different product types.
What Gets You to Hand Over Money: The Sales Process
Sales fees are often the first way annuity companies profit, though you may never see this line item on your contract. When you purchase an annuity, the insurance company typically pays the financial advisor selling it a commission ranging from 3% to 10% of your initial investment.
The company recoups this commission through something called a sales load, which they’ve already built into the contract’s pricing. In other words, they’ve already accounted for paying your advisor’s commission before they take your money. You’re not paying the commission directly—the insurance company advanced it, and they’ll take it back through fees over time.
| Sales Cost | How It Works |
|---|---|
| Upfront commission (3-10% of investment) | Company pays advisor, recoups through contract design |
| Marketing expenses | Advertised heavily; costs built into pricing |
| Back-office processing | Administrative staff and systems; absorbed into fees |
The Investment Spread: How Companies Profit From Your Money
The investment spread is the single biggest money-maker for annuity companies. Here’s how it works: the company invests your money in bonds, stocks, and other securities. Federal Treasury bond rates and corporate bond yields serve as benchmarks—the company earns whatever the actual market returns are, but only has to pay you a guaranteed rate set in your contract.
If the company invests your $100,000 in bonds earning 5% annually but only promises you 2% in your fixed annuity contract, they keep the 3% difference. Over a 30-year retirement, that spread compounds into hundreds of thousands of dollars. The Federal Reserve’s interest rate decisions directly affect how large these spreads become.
Variable annuities create different spread opportunities. Your money goes into mutual funds where you bear the investment risk, but the insurance company still earns management fees from those mutual fund investments. Indexed annuities use even more sophisticated strategies—they invest your money broadly but only credit you with a portion of market gains, keeping the remainder as profit.
The company’s investment expertise becomes a profit center. Professional portfolio managers at the insurance company make strategic decisions about bond durations, credit quality, and asset allocation. When they outperform the guaranteed return they owe you, the excess becomes company profit.
The Mathematics of the Spread in Practice
Imagine a company collects $1 million from 100 customers buying fixed annuities, each investing $10,000. The contract guarantees 2.5% annually for 20 years. The company invests this $1 million in a diversified bond portfolio earning an average of 4% annually.
| Year | Customer Earnings | Company Earnings | Company Profit |
|---|---|---|---|
| Year 1 | $25,000 (2.5%) | $40,000 (4%) | $15,000 (1.5% spread) |
| Year 5 | $125,000 cumulative | $200,000 cumulative | $75,000 cumulative |
| Year 20 | $500,000 cumulative | $800,000 cumulative | $300,000 cumulative |
Over 20 years, the company’s 1.5% spread generates $300,000 in pure profit from a single cohort of customers. Multiply this across hundreds of thousands of customers, and the spread becomes a massive revenue driver. Interest rate risk can work against the company if rates rise and their bond portfolio loses value, but most companies manage this through careful hedging strategies.
Annuity Fees: The Visible and Hidden Charges
Every annuity contract contains fees, though companies don’t always make them obvious in sales presentations. Federal law requires disclosure of variable annuity fees, but the complexity often obscures the true cost.
Mortality and Expense Charges (M&E charges) are the most common fee in variable annuities. These typically range from 0.5% to 1.5% annually of your account value. The company justifies this by explaining that they’re charging for the risk of guaranteeing you benefits even if you live longer than expected and the market crashes.
Administrative fees cover the company’s back-office operations—customer service, statements, record-keeping, and systems. These range from $25 to $300 annually, depending on the product and company. Some companies charge this as a flat dollar amount, while others assess it as a percentage of your balance.
Surrender charges apply if you want to withdraw more than a small amount before a specified period ends (typically 7-10 years). These penalties can consume 5-10% of your withdrawal in the early years, gradually declining to zero. The company keeps 100% of this surrender charge as profit.
Investment management fees apply to variable annuities because your money sits in mutual funds. The underlying mutual fund manager charges an expense ratio (typically 0.5-2% annually), plus the insurance company may add an additional investment management fee on top.
Rider fees allow you to purchase add-on guarantees like income riders or death benefit riders. These cost 0.5-1.5% annually and go directly to the insurance company. Some riders become extremely profitable because customers rarely exercise them, and the company collects fees for years without paying benefits.
| Fee Type | Typical Range | Who Benefits |
|---|---|---|
| M&E charges | 0.5-1.5% annually | Insurance company gets 100% |
| Administrative fees | $25-$300/year | Insurance company gets 100% |
| Surrender charges | 5-10% if withdrawn early | Insurance company gets 100% |
| Investment management fees | 0.5-2% annually | Shared with fund managers |
| Rider fees | 0.5-1.5% annually | Insurance company gets 100% |
The Three Most Common Annuity Profit Scenarios
Scenario 1: The Fixed Annuity Spread
Maria invests $200,000 in a fixed annuity at age 55 that guarantees 3% annual growth. The insurance company invests her money in a bond portfolio yielding 5% annually. Over 25 years until she withdraws, the company keeps the 2% spread on her growing balance.
| Timeframe | Maria’s Account Value | Company’s Investment Returns | Company’s Annual Profit (2% spread) |
|---|---|---|---|
| Year 1 | $206,000 | $210,000 | $4,000 |
| Year 10 | $269,159 | $258,008 | $5,382 |
| Year 25 | $428,968 | $644,140 | $8,576 |
The company profits even though Maria receives her guaranteed 3%—they simply earned more and keep the excess. This continues every single year, with the profit growing as her account balance grows. If interest rates rise dramatically and the company’s bonds decline in value, they absorb the loss while still owing Maria her guaranteed 3%, which is why interest rate risk is critical to their business model.
Scenario 2: The Variable Annuity with Multiple Fee Layers
James buys a $300,000 variable annuity at age 60. His money goes into mutual funds, and he pays an M&E charge of 1% annually ($3,000 Year 1), an administrative fee of $150 annually, and an income rider fee of 0.75% annually ($2,250 Year 1). The underlying mutual funds charge expense ratios averaging 0.8% annually ($2,400 Year 1).
| Fee Type | Year 1 Amount | Breakdown |
|---|---|---|
| M&E charges (1%) | $3,000 | Company profit |
| Administrative fee | $150 | Company profit |
| Income rider fee (0.75%) | $2,250 | Company profit |
| Mutual fund expenses (0.8%) | $2,400 | Shared with fund managers |
| Total Year 1 Fees | $7,800 | Company keeps $5,400 |
James pays $7,800 in total fees in Year 1 alone—2.6% of his investment—even before considering any bid-ask spreads when the company purchases securities. Over 30 years of retirement, assuming his account grows modestly, these layered fees could easily total over $200,000, most of which flows directly to the insurance company.
Scenario 3: The Indexed Annuity Profit Strategy
Sarah purchases a $150,000 indexed annuity linked to the S&P 500. The contract credits 60% of market gains (called the “participation rate”) while protecting against market losses. The company invests her money in a mix of stocks and bonds, but only guarantees that she won’t lose principal.
| Market Scenario | Actual S&P 500 Return | Sarah’s Credited Return (60% participation) | Company’s Retained Profit |
|---|---|---|---|
| Bull market | +12% gain | +7.2% credited | 4.8% retained |
| Flat market | 0% return | 0% credited | 0% (spreads earned) |
| Bear market | -15% loss | 0% loss (protected) | Invested position absorbs loss |
When markets rise 12%, Sarah earns 7.2% and the company keeps 4.8% as profit. The company’s actual investments might earn even more than that, further increasing their spread. If markets crash, the company absorbs losses on their hedging strategies (which protect Sarah from losses) but their investment spreads continue. Over a typical 10-year indexed annuity contract, the company profits through a combination of participation rate restrictions and investment spread management.
How Different Annuity Types Generate Different Profits
Fixed Annuities: The Reliable Profit Machine
Fixed annuities represent a straightforward profit model. The company collects your money, invests it conservatively in bonds and mortgages, and guarantees you a set return. Any earnings above that guaranteed rate flow to the company. States regulate fixed annuities through insurance commissioners, who ensure companies maintain sufficient reserves to pay guaranteed benefits.
The risk to the company is interest rate risk. If interest rates spike upward after the company sells your annuity, they’re locked into earning less on new investments while still owing you the higher rate you contracted. Many fixed annuity companies solved this problem by offering shorter crediting periods—they might guarantee a high rate for only one year, then reset the rate annually. This pushes interest rate risk onto customers instead of the company.
Companies also generate profit through mortality pooling—they calculate how long the average person will live and how many customers will actually annuitize (convert their balance into income). Many customers never annuitize; instead, they surrender their contracts for surrender charges or let the contract sit as a death benefit. Every customer who doesn’t annuitize is pure profit for the company because they collected fees without being obligated to pay lifetime income.
Variable Annuities: Multi-Level Profit Centers
Variable annuities create profit through fees layered on fees. Your money invests in mutual fund sub-accounts where the SEC regulates the disclosure of these investments. The insurance company doesn’t assume investment risk—you do—but they collect fees regardless of whether your account grows or shrinks.
The M&E charge represents pure insurance company profit. It supposedly covers the cost of guarantees (like death benefits), but research shows these charges often exceed the actual cost of providing those guarantees. The company pockets the excess. Riders—additional guarantees that let you withdraw a fixed percentage of your peak balance regardless of market performance—generate extremely high profit margins because the company collects fees on most customers but few ever actually use the rider benefit.
Investment sub-accounts (the mutual funds inside your variable annuity) sometimes perform surprisingly poorly compared to standalone mutual funds. Theories about why include: the insurance company’s investment management adds value (sometimes true), the sub-account structure creates trading inefficiencies (often true), or the company charges higher fees that reduce net returns (very often true).
Indexed Annuities: Capped Gains, Unlimited Profits
Indexed annuities represent the most profitable product line for many companies. The SEC warns investors about complexity in indexed annuities because the profit mechanisms are deliberately obscure. Your money doesn’t actually invest in the S&P 500 or whatever index the annuity tracks.
Instead, the company uses your money to buy call options that limit your upside. If the market rises 20% but your contract has a 70% participation rate and a 10% annual cap, you receive only 7% (70% of 10%). The company keeps the remaining 13% of gains, plus the spreads on whatever else they do with your money. Some indexed annuities have spread fees in addition to participation rate limitations—these are percentage charges buried in the contract that are technically not “fees” because they’re not called fees.
The company’s profit is almost guaranteed because they control the participation rate, caps, floors, and spread charges. They can adjust these variables annually to ensure they earn 3-5% annually regardless of market performance. If markets soar, customers celebrate 7-10% gains while companies quietly pocket 10-15% gains. If markets crash, customers lose nothing and companies still earn spreads on their bond investments backing the floor guarantees.
How Annuity Companies Manage Risk to Protect Their Profits
Insurance companies use hedging strategies to protect their investments against market moves that could erode profit margins. When a company guarantees you a certain return, they must offset that liability by purchasing protective securities.
A fixed annuity company might use interest rate derivatives to hedge against rising interest rates. They essentially bet against their own bond portfolio rising in value, so if rates spike and bonds tank, the derivative position gains value and offsets the loss. This hedging costs money, but the spread they earn from your contract exceeds the hedging cost, so they profit anyway.
Variable annuity companies purchase guarantees on the options they sell you. If they promise you won’t lose money no matter how badly stocks crash, they buy protective put options on stock indices. These options are expensive, but the M&E charges they collect from thousands of customers pay for them many times over.
Indexed annuity companies must purchase call options to fund the cap on your gains. If the S&P 500 rises 20% and you’re entitled to 70% of the return capped at 10%, the company is short the additional gains on that cap. They manage this through options positions that hedge their liability. However, the participation rates and spreads are structured to profit even after accounting for these hedging costs.
The Mistakes That Make Companies Even More Profitable
Annuity companies profit massively from customer mistakes and misunderstandings. Federal FINRA regulations require advisors to act in customer best interest, but interpretation of “best interest” is contested in courts regularly.
Buying annuities you don’t need: Many people purchase annuities for safety when they already have secure pension income or substantial emergency funds. The company collects fees for providing a guarantee the customer didn’t need in the first place. Retirees with $500,000 in savings and a $4,000 monthly pension sometimes purchase $200,000 indexed annuities for “safety,” locking up money they could have kept flexible.
Surrendering contracts within the surrender charge period: Customers who need to access their money within 7-10 years pay surrender charges of 5-10% of the withdrawal amount. A customer needing $50,000 from a $200,000 contract might pay $5,000 in surrender charges—pure profit for the company. Some customers unknowingly purchase multiple annuities or forget they already own an annuity, creating unintended surrenders.
Failing to understand the participation rate: Many indexed annuity customers believe they’re earning “market returns.” When the S&P 500 rises 20% and they receive 8%, they believe markets underperformed. They don’t realize the company is capping their gains intentionally. The company profits from customer confusion about what “market participation” means.
Purchasing riders they’ll never use: An 75-year-old purchasing a death benefit rider on an immediate annuity doesn’t realize their immediate annuity creates income by liquidating their principal—there’s nothing left to pass to heirs. The company collects rider fees for 10+ years on benefits that can never be paid. Roughly 80% of variable annuity rider fees are collected on riders that never pay benefits.
Holding annuities in retirement accounts: Annuities placed inside Individual Retirement Accounts (IRAs) create redundant tax protection. IRAs already defer taxes, so paying extra annuity fees for tax deferral is wasteful. The IRS provides guidance on annuities in IRAs, but many customers and advisors ignore this distinction, enriching insurance companies through unnecessary fees.
Not shopping for better terms: Annuity rates and terms vary significantly between companies. A customer might purchase a fixed annuity at 2.8% when the same company offers competitors rates of 3.5%. Rate comparison sites exist, but many customers never check them. The company profits from customer inertia and trust in the original advisor.
| Mistake | Why It Helps Company |
|---|---|
| Unnecessary annuity purchase | Collects fees on unwanted product |
| Surrender before deadline | Receives 5-10% surrender charge |
| Misunderstanding participation rate | Customer accepts lower returns |
| Purchasing unused riders | Collects fees on never-paid benefits |
| Annuity in IRA | Collects redundant tax deferral fees |
| Not comparing rates | Keeps higher spread for company |
Immediate Annuities and Lifetime Income Profits
Immediate annuities represent a different profit model because customers convert their entire lump sum into guaranteed monthly income. The company accepts the customer’s entire balance and pays them a percentage annually for life. Federal Social Security rules don’t directly regulate immediate annuities, but they provide a useful comparison point.
The company profits through mortality experience. They calculate that a 65-year-old female will live to age 85 (20 years), so they set the payout rate to recoup their cost over those 20 years plus profit. If the customer dies at 78, the company keeps the remaining balance—pure profit. If the customer lives to 95, the company pays out more than they received, taking a loss.
Across thousands of customers, the company relies on actual mortality to match their mortality projections. When mortality predictions are accurate, profits are predictable. If a customer lives significantly longer than predicted, the company’s profits decline. This is why immediate annuity rates for female customers are slightly lower than for males—women live longer on average, so the company must charge women more per dollar of lifetime income.
The company also profits from mortality pooling costs. They charge customers a percentage to account for the cost of pooling mortalities. A customer might receive a 4.8% payout rate, but the company’s cost is only 4.0%, with the 0.8% difference compensating the company for administrative costs and profit margin.
State Insurance Regulations and Profit Opportunities
Different states regulate annuities differently, creating profit opportunities. State insurance commissioners oversee insurance products, but each state writes its own rules. A company might structure products differently in high-regulation states versus low-regulation states.
Some states require stricter disclosure of annuity fees, while others permit more flexibility. New York, for example, requires more detailed fee disclosures than many states, so companies sometimes charge more in states with less transparency. A company selling in 50 states manages profit by adjusting product features and fees within each state’s regulatory boundaries.
Illustration rules vary by state too. The National Association of Insurance Commissioners provides model rules, but states adapt them. Some state rules permit using optimistic return assumptions in illustrations, allowing companies to show customers higher projected returns than more conservative assumptions would reveal. Better illustrations mean higher sales volume and higher profits.
Comparing Annuity Company Profitability Models
| Annuity Type | Primary Profit Source | Secondary Profit Sources | Risk to Company |
|---|---|---|---|
| Fixed | Investment spread | Surrender charges, fees | Interest rate risk |
| Variable | M&E charges, fund fees | Rider fees, surrender charges | Market risk (limited) |
| Indexed | Participation rate reduction | Surrender charges, fees | Interest rate, cap management |
| Immediate | Mortality experience | Payout rate spread | Longevity risk |
Do’s and Don’ts When Buying Annuities
DO compare rates across multiple companies before purchasing. Rate aggregators let you see what different companies offer for your specific age and product type. A 0.5% difference in payout rate on $300,000 means $1,500 annually in lifetime difference.
DON’T purchase annuities inside retirement accounts unless you have a specific reason. The tax deferral benefit is redundant. Discuss with a tax professional before proceeding.
DO ask for a detailed fee breakdown before signing. Request the company provide all fees in dollars and cents, not percentages. Companies sometimes obscure fees by presenting percentages of large numbers that sound small.
DON’T assume your financial advisor has your best interest above their commission. Advisors earn larger commissions on some annuity products than others. Federal rules require suitability standards, but advisors can recommend expensive products and meet suitability requirements.
DO understand that immediate annuities lock up your money forever. You cannot change your mind or access principal once you annuitize. Consider keeping some funds in flexible investments for emergencies.
DON’T purchase multiple annuities from the same company without understanding duplication. Some customers unknowingly own three indexed annuities with overlapping surrender charge periods. Shop for each product separately.
DO know your mortality risk tolerance. If your family lives long lives and you expect to reach 95+, annuity guarantees become more valuable because the company charged assuming shorter lifespans.
DON’T ignore the power of flexibility. Liquid investments in taxable accounts cost slightly more in taxes but provide access to funds if circumstances change. Calculate whether flexibility is worth the higher annuity fees.
Pros and Cons of Annuity Products (From a Profit Perspective)
| Advantage for Company | Disadvantage for Company |
|---|---|
| Customers surrender before maturity and pay charges | Interest rates spike and spread becomes negative |
| M&E charges profit regardless of market performance | Market crashes create hedging costs that exceed spreads |
| Riders generate fees on unexercised benefits | Regulatory scrutiny increases, forcing fee reductions |
| Indexed annuity caps limit customer upside | Customer confusion about caps leads to poor word-of-mouth sales |
| Immediate annuity mortality pools create predictable profit | Customers live longer than mortality tables predicted |
| Spreads compound over decades as balances grow | Competition from other companies forces cap and participation rate improvements |
The Hidden Costs You Don’t See on Your Statement
Many annuity costs never appear as line items. SEC research documents that variable annuity costs often exceed what customers believe they’re paying. These hidden costs include bid-ask spreads when the company buys and sells securities, sub-account trading costs, and opportunity costs from being locked into certain investment choices.
Indexed annuity spread fees deserve special attention. Some contracts feature annual charges labeled as “risk charges” or “administrative charges” that are actually spreads the company earns. A 0.5% annual spread fee on a $200,000 contract means the company earns $1,000 annually without it appearing as a traditional “fee” on disclosures.
Fixed annuity companies earn implicit costs through the surrender charge structure and reset rates. If a company offered you 3.2% for five years but drops the rate to 2.1% after five years, the implicit cost is the rate reduction. You’re paying through lower returns, not through line-item fees.
Regulatory Oversight and Where Companies Exploit Gaps
The Securities and Exchange Commission regulates variable annuities as securities products. The Financial Industry Regulatory Authority enforces suitability and sales practice rules. State insurance commissioners oversee fixed and indexed annuities as insurance products. This fragmented regulatory landscape creates gaps.
Fixed annuities face less regulatory scrutiny on fees than variable annuities. Federal regulators don’t require fixed annuity fee disclosure at the same level as variable annuities, allowing companies more flexibility in hiding costs. A fixed annuity could feature a 0.5% surrender charge percentage that compounds across layers—a customer might surrender $50,000 and pay $2,500 in charges that appear as one line item but actually include hidden spreads.
State regulations on indexed annuities often lag behind industry innovation. Companies create new cap structures, participation rate calculations, and spread mechanisms faster than regulators can write rules. Some states still permit practice that more progressive states have restricted. Companies structure products in low-regulation states where they can charge more for the same features.
How Technology Increases Profitability
Annuity companies invest heavily in technology because it dramatically increases profit margins. Artificial intelligence helps companies design products that maximize profit within regulatory constraints. Computer models test thousands of fee combinations and marketing approaches to identify optimal pricing.
Administrative automation reduced the cost of servicing annuity contracts dramatically. A contract that cost $200 to service annually in 2000 might cost $25 today. Companies kept service costs from declining proportionally with their expenses, pocketing the difference. Digital transformation in insurance accelerated this trend substantially.
Customer data analytics let companies identify which fees customers notice and which they ignore. If research shows customers notice M&E charges but don’t understand spread fees, companies increase spreads and reduce M&E charges. The overall cost stays identical, but the hidden nature of spreads makes customers less likely to compare products.
FAQs
How much profit do annuity companies actually make?
Yes. Large annuity companies report annual profits of $1-$3 billion, with profit margins ranging from 10-25% after expenses. Some high-volume companies execute billions in annuity sales annually, meaning even small per-contract profit margins generate enormous aggregate profit.
Can I avoid annuity fees entirely?
No. Every annuity contract contains fees embedded through spreads, charges, or surrender penalties. Some products feature lower overall costs, but zero-fee annuities don’t exist. Compare fee structures across providers rather than seeking zero-fee products.
Do all annuity advisors profit more from selling high-fee annuities?
Yes. Commissions on variable annuities with riders run 5-7%, while fixed annuities might pay 3-4%. Advisors earning higher commissions creates inherent conflict of interest, even when suitability requirements technically exist.
Are indexed annuities actually tied to stock market performance?
No. Your money doesn’t invest in the stock market. The company limits your gains through participation rates and caps while keeping excess upside. The company profits from the difference between actual market gains and what they credit to your account.
What happens if an annuity company goes out of business?
Mostly protected. State guarantee funds protect annuity customers up to $250,000-$500,000 per contract (amounts vary by state). Coverage applies to contractual obligations, though it might not cover full account value if the company made bad investments.
Is buying an annuity inside a 401(k) a good idea?
No. 401(k)s already defer taxes, making annuity tax deferral redundant. You pay annuity fees for duplicate tax protection. Consider keeping 401(k) funds in regular investment options instead.
Do insurance companies make more profit from customers who die early?
Yes. For immediate annuities, early death generates pure profit because the company collected the full balance but pays out less. For other annuities, early death means the company collected fees without paying benefits or surrender charges.
How do indexed annuities calculate market caps?
Varies by contract. Some use annual caps (you earn 8% maximum even if market earns 20%), while others use term-based caps (caps reset at contract renewal). Companies profit because caps limit customer upside regardless of actual market performance.
Should I surrender my annuity if I need money early?
No. Surrender charges of 5-10% lock you into substantial costs. Explore loans or partial withdrawals first, as some contracts allow penalty-free withdrawals. Check your specific contract before deciding.
Can I negotiate annuity fees before signing?
Sometimes. Large investors ($500,000+) can sometimes negotiate fees, participation rates, or caps. Most retail investors face take-it-or-leave-it pricing, though shopping among companies provides the only real negotiation mechanism.
Do variable annuity death benefits actually help heirs?
Maybe. If you die and your account value exceeds what you paid in, the death benefit pays the excess. However, if you’ve withdrawn more than you contributed, there’s nothing to inherit. The benefit only helps if the market crashes and you haven’t withdrawn funds.
How long does it take a company to recover their commission on my annuity?
Varies. On a $200,000 annuity with a 5% commission ($10,000), the company recoups this through spreads and fees within 2-5 years typically. They profit for the remaining contract life after that.
What state regulations protect me most from unfair annuity practices?
Varies by state. New York, Massachusetts, and California have stricter disclosure and suitability requirements than other states. If you live in a state with weak annuity regulation, get extra advice from outside sources before committing.
Are surrender charges actually enforceable if I go to court?
Yes. Courts consistently uphold surrender charges as valid contract terms. The company disclosed the charges in your contract documentation, and you signed acknowledging them. Challenging enforceability is extremely difficult.
How do annuity companies decide what rate to offer you personally?
By your risk profile. Age, gender, health, annuity amount, and product selection determine the rate. Younger, healthier customers receive worse rates (annuities cost more for them). The company wants customers with mortality advantage.
Related reading
- Do Variable Annuities Protect Against Capital Loss? (w/Examples) + FAQs
- When Are Annuities a Good Investment? (w/Examples) + FAQs
- How to Make a Retirement Annuity Actually Work (w/Examples) + FAQs
- Can You Buy an Annuity With Cash? (w/Examples) + FAQs
- Should I Invest in an Annuity? (w/Examples) + FAQs
- Should I Convert My IRA to an Annuity? (w/Examples) + FAQs