Short Term Annuity Accounts

Fixed annuities are popular investments right now and for good reason. They offer guaranteed fixed rates, competitive returns, and are incredibly safe contracts.

Choosing the best fixed annuity at the right time maximizes growth and income. Currently, short-term annuity accounts offer some of the highest returns we’ve seen in decades. This is great for investors who want full liquidity in a short amount of time.

In fact, short-term accounts (five years and under) have higher yields than almost all bank CDs. And many one, two, three, four, and five-year annuities provide competitive returns when compared with annuity terms of six to ten years.

There is a reason for this. The investments that power annuity returns have maturity terms as well.

Who Offers Short Term Annuities?

First, a little background. Only insurance companies offer annuities. Even if you get your annuity from someone at the bank, it’s still an insurance product offered by an insurance company.

And insurance companies have rules about what they can purchase to fund their portfolios. The primary assets purchased are United States Treasury Bills. And when you look at their returns, you will see shorter durations are offering some of the highest yields in recent history.

Sometimes the yield curve inverts. This means shorter bond durations offer better yields than longer term ones. This does not always bode well for the economy, but it allows for very competitive annuity rates. (Sometimes inverted yield curves are linked to an economic recession.)

Other than Treasuries, most insurance companies purchase corporate debt and bundled consumer debt. Insurance company portfolios are usually at least 70% Treasuries. And with government debt offering some of the highest returns in years, annuities are highly competitive… and safe.

One-Year Fixed Annuity Accounts

The shortest annuity term available are one year plans. There are no 3, 6, or 9-month annuities like there are bank CDs. There is not much competition in this space, so usually just a small handful of companies offer these very short term annuities.

After twelve months, your money is free and clear of surrender charges. It is completely liquid. You can withdraw your entire principal and interest growth and invest your funds elsewhere. This is a great account for those who feel yields will be higher in the future. It’s also appropriate for those who have their funds earmarked for something else in the near future.

Best Rates On A Two Year Annuity Policy

There is much more competition in the two-year (and longer) annuity durations. While everyone’s idea of a short-term investment is different, most would agree that two years is not long when considering today’s yields.

Two year policies allow investors to lock in higher rates and shop with different insurance companies. These policies are also great for those who want to incorporate a laddering strategy. It can be wise to have different tranches of short term annuity money come due every year or so. With a two year annuity, you’ll benefit from more competition, lock in higher rates, and also have more features and liquidity riders to choose from.

Medium Term Duration Of Three Years

Three year fixed annuities are a bit longer, but the yields are often higher. These policies are on the longer end of a short-term strategy, but are much higher than almost all bank CDs and money market accounts. There are even more companies offering three year annuities than one or two year contracts.

These accounts are very safe. Insurance companies have strong reserve requirements. That makes it all but impossible for there to be a run on an insurance company that exposes customers to any losses. And Market Value Adjustment provisions protect depositors even further.

Our clients use longer term annuity policies for savings, growth, tax-deferred retirement accumulation and income needs. In several instances, 3-5 year annuity terms (or longer) are used for regular interest withdrawals.

Many of our clients want a guaranteed, systematic fixed income stream without reducing their principal. Annuities of all terms are great investments for both savers and those who desire regular income payments.

Short Term Fixed-Indexed Annuities

Many of our clients are interested in fixed-indexed annuities for higher growth opportunities. For many years, these plans only came in longer durations of 7-10 years or more. Some were this way so that larger first year premium bonuses could be made available.

With elevated interest rates, many new indexed annuity accounts offer shorter terms. Some are even as short as three years, while others are offered in 5 year terms. These are great options for those who want market exposure without taking on any downside risk.

We work with several short-term fixed-indexed annuities and can help you compare the ones that best fit your financial needs and goals. Contact us to discuss these unique products and we will illustrate your best options.

Contact Us For More Information

Of course, we offer annuities with longer durations as well. Some policies offer guaranteed rates for as long as 20 years. In these uncertain times, it’s wise to diversify. Stocks and bonds are extremely volatile. Your principal can change dramatically, but annuities offer no such concern. With short term fixed annuity accounts, your principal does not fluctuate due to market conditions.

Additionally, we’ve seen several prominent bank failures. Lending institutions are most susceptible to failure when market shocks or economic downturns occur.

If you want a safe and insured asset, you can count on fixed annuities are a smart choice. Short term annuity accounts offer a reliable and secure place for better rates, higher growth, regular income payments, and/or tax-deferral.