Interest rates are on the move again—and not in the direction many retirees were hoping for.
The Fed recently lowered rates and has signaled that more cuts could be coming.
That’s why so many pre-retirees and retirees are reaching out in a panic saying:
“John, should I lock in an annuity before rates fall again?”
In this article, I’ll break it down simply, show you how rate locks actually work, and explain when it does (and doesn’t) make sense to move quickly.
Let’s break it down so you can decide for yourself.
Need help choosing the best annuity for your unique situation? Have questions about getting an annuity? If so, it’s best to speak with an annuity specialist. Watch this short video to see how I can help you do this (at no cost to you!)
Tip: See how much an annuity could pay you using our annuity calculator.
Why Interest Rate Drops Affect Annuity Payouts
When the Fed lowers rates, it creates immediate downward pressure on annuity payouts—especially:
- Fixed annuity rates (MYGAs)
- Lifetime income payouts
- Income rider growth rates
- Withdrawal percent rates
- SPIA, DIA, and QLAC income amounts
That means if you wait until after future rate cuts, the annuity you were considering may pay less income for life or offer lower guaranteed fixed rates.
💡 Pro Tip: Annuity companies often lower their payout percentages or their roll-up rates (for example, dropping an 8% roll-up to 7.5%) after Fed cuts.
👉 Want to ensure you get today’s higher income? You can lock in your rate through the application process—NOT the funding date.
2. How Annuity Rate Locks Actually Work
This part surprises most people.
When you apply for an annuity:
Your rate is locked in on the application date—not the date you send money.
Carriers give you:
- 45 days to fund non-qualified money
- 60 days to fund qualified money (IRA, 401(k), TSP, 403(b))
So even if the company lowers its rates next week, you still receive the higher rate you locked in.
This is why people rush when they hear about an upcoming rate cut—but I always tell clients:
Take your time. Don’t rush the decision. But if you know an annuity is right for you, locking in early does protect you.
👉 Want to check MYGA or income rider rates anytime? Use my website’s annuity calculators.
Real Example: Current Guaranteed Income (Before Cuts Hit)
Here’s a scenario I recently ran and in which I talk about in the video above:
- Married couple, age 62, Florida resident
- $250,000 premium
- Income starting in 5 years
Today’s top joint lifetime income: Nationwide Peak → $26,000 per year
Other competitive carriers:
- Corbridge
- Clearspring
- Delaware Life
- F&G
If income is your goal, Nationwide currently leads….But after rate cuts? That $26,000 number may decrease.
💡 Pro Tip: Accelerated payout carriers (like Ameritas, NASSA, Athene at times) often show high first-year payouts but reduce later. My calculator shows both the accelerated and highest level lifetime guaranteed options.
👉 Want to compare guaranteed lifetime income for your age? Schedule a call and I’ll run the exact scenario for you.
4. What If You Delay Income to Age 73?
Many people want to fund an annuity with IRA money and let it grow until RMD age.
In that same example, starting income at 73 (instead of 67):
- Clearspring → Highest lifetime income
- Followed by Nationwide and American Equity
Roll-up rates and withdrawal percentages determine income.
And yes—rate cuts can reduce both.
Even small reductions can cost you thousands per year for life.
5. What About MYGAs? (Multi-Year Guaranteed Annuities)
MYGAs are extremely popular right now because rates are so high.
But some carriers have already announced reductions.
For example:
- A 6-year MYGA dropping from 5.60% to 5.35%
- A 10-year MYGA dropping from 5.28% to 5.17%
And more reductions are coming.
💡 Pro Tip: Stick with 5-, 7-, or 10-year MYGAs.They offer the highest yields and the best balance of duration and rate.
Today’s top MYGA rates (examples):
- 5-year → up to ~6.25%
- 7-year → also strong, near the same range
- 10-year → still excellent rates
If you want compound interest growth (not simple interest), choose carriers with compound crediting.
👉 Want to see every MYGA available in your state? Use the free MYGA rate tool here!
Why Rate Drops Matter for Lifetime Income
Lifetime income products—SPIAs, DIAs, QLACs, and income riders—are heavily influenced by interest rate assumptions.
When rates fall:
- Roll-up rates may go down
- Withdrawal rates may go down
- Payouts on SPIAs & DIAs may decline
In other words: You may lock in $44,000/year today, but only $41,000/year after a rate cut.
If you’re counting on a specific income number, it’s smart to secure it now.
So… Should You Buy an Annuity Before Rates Drop?
Here’s the simple answer:
✔ If you’re planning to buy an annuity anyway… YES, lock in the rate now.
Future rate cuts will likely reduce payouts.
✔ If you’re still unsure about annuities… take your time.
No one should feel rushed into anything.
✔ If you want the highest guaranteed lifetime income…
Locking in early is a smart move.
And remember—submitting an application locks in your rate without sending money immediately.
👉 Want to see today’s income vs. projected post-cut income? Book a call with me and I’ll run it live on Zoom.
Conclusion
Interest rates are falling, and annuity companies always adjust downward when that happens. If securing the highest guaranteed income or MYGA rate is important to you, then yes—locking in now protects you.
But don’t rush blindly. Look at the numbers, compare the options, and make the right decision for your retirement.
Need help with finding the best annuity for your retirement?
Click here to schedule a call with me.
On the call, I can help you:
- Determine what type of annuity is best for you
- Find the highest paying annuities for your unique situation
- Answer any other questions you may have