Leaving your money invested in the market could net you substantial returns, but market volatility might keep you up at night. Annuities can solve that problem, keeping your money safe and helping ensure your bills are covered. However, it can be a challenge to find the best annuity for your needs.
To aid in your search, Forbes Advisor has identified the 10 best annuity companies of 2024. We examined the 75 largest annuity companies in the U.S. and narrowed the list down to the very best based on their financial strength, product availability and customer service.
- The 10 Best Annuity Companies of August 2024
- Massachusetts Mutual Life Insurance Company
- USAA Life Insurance Company
- New York Life Insurance Company
- TIAA-CREF Life Insurance Company
- Allianz Life Insurance Company of North America
- MetLife Annuities
- Pacific Life & Annuity Company
- Prudential Financial PRUCO
- Securian Life Insurance Company
- Western & Southern Life Assurance Company
- Summary: Best Annuity Companies of 2024
- Methodology
- What Are Annuities?
- Types of Annuities
- How to Choose an Annuity
- Are Annuities A Good Investment?
- Annuities Frequently Asked Questions (FAQs)
The 10 Best Annuity Companies of August 2024
Summary: Best Annuity Companies of 2024
Methodology
For this listing, Forbes Advisor began by identifying the 75 largest annuity companies in the U.S. based on annual direct premiums sold. We then tracked down the following information in order to build our evaluations, according to the following weightings:
- NAIC Complaint Index Score (20%): The National Association of Insurance Commissioners tracks how many complaints an insurer receives. It then gives a complaint index score, showing a ratio of how many complaints an insurer received relative to the average for insurance companies of the same size. An NAIC score below average is a good thing, as it showed an insurer did not receive as many complaints as others.
- AM Best Financial Strength Rating (15%): AM Best is an independent rating agency that specializes in reviewing insurance companies. It gives companies a letter grade based on their financial strength and ability to pay claims.
- S&P Global Financial Strength Rating (15%): Standard & Poor’s is another independent credit rating service. It focuses on companies of all types, not just insurers.
- Capital Ratio (15%): Capital ratio was another measurement of financial stability. The capital ratio shows an insurer’s capital and surplus as a percentage of total admitted assets, excluding separate account assets. A higher ratio shows an insurer is in better shape financially.
- Comdex Rating (15%): The Comdex rating system looks at how an insurer scored with the four main credit rating agencies: AM Best, Standard & Poor’s, Moody’s and Fitch. The Comdex score then summarizes this average in a single number, from 0-100, with 100 being the best.
- Total Number of States Licensed (10%): Annuity companies that operate in more states received a higher score, as they were more widely available.
- Annual Direct Premiums Sold (10%): Annuity companies selling more annuity premiums were rated higher. We viewed a larger market footprint as a sign of success and availability. Larger companies can become too big to fail and would potentially be bailed out in a crisis, whereas smaller companies may not be.
Using this measurement, we gave each company a star rating out of five. The 10 highest ranked companies made the review.
What Are Annuities?
Annuities are a type of insurance contract designed to turn your balance into future income. You can buy an annuity with a single lump sum payment or through many small payments over time.
The annuity may then grow your balance, according to the type of annuity you choose. When you are ready, you can turn your annuity balance into future income payments. You can select payments that last a set number of years or payments guaranteed to last your entire life.
Types of Annuities
How an annuity works for the investment return depends on the type of annuity:
- Fixed annuities earn a set return, guaranteed by the annuity company. You pick how many years you want the fixed annuity to last. The annuity company will then pay the return each year guaranteed. This type of annuity is similar to a bank’s certificate of deposit with less protections. Unlike a CD, annuities are not FDIC or NCUA insured and protections can vary by state. To learn more, compare rates on our list of Best Fixed Annuity Rates.
- Variable annuities allow you to invest your balance in subaccounts, which are like mutual funds. Your return will depend on the performance of the investments. To learn more, compare companies on our list of Best Variable Annuities.
- Fixed index annuities are based on some sort of market index, like the S&P 500 or the Nasdaq. Your return each year depends on the index. However, a fixed index annuity sets limits on your potential gains and losses and does not participate in the interest or dividends of the companies within the index. Some even guarantee you will not lose money.
- Immediate annuities start your income payments within 12 months. There’s no investment stage to grow your balance first.
Before buying an annuity, make sure you understand the pros and cons first.
How to Choose an Annuity
Annuities are long-term investments. If you change your mind and cancel within a few years, most contracts come with a sizable surrender charge penalty. That’s why it’s important to pick the right annuity company before buying. A quality annuity company should offer the following:
- Competitive returns and income. Each annuity company offers different investment rates, as well as performance and income guarantees. Make sure the one you buy is competitive.
- Low fees. The more you pay in annual fees, the less you receive from your annuity. Check that what you are paying is reasonable.
- Quality annuity features. Ideally, your annuity gives at least some early access to your money, where you can make a partial lump sum withdrawal without a penalty. Some companies also allow you to customize the contract through riders for extra benefits.
- Financial strength. You might be depending on your annuity to make payments for years, even decades. Your insurance company must still be in business to make these payments. For this reason, financial strength was weighted heavily in our scoring.
- Customer satisfaction. You can get an idea how often an insurer receives complaints through its NAIC complaint index. You can also see whether a company scores highly in customer satisfaction through the annual J.D. Power survey for annuities. When you’re retired, you don’t want to spend time fighting on the phone trying to get payment issues fixed. The better the customer satisfaction rating with a company, the more likely you are to have few problems, or to have your problems resolved easily.
Like with any investment, the right fit depends on your personal situation and needs. For help, consider meeting with a financial advisor that doesn’t earn a commission selling the products.
Are Annuities A Good Investment?
As with any investment, annuities have pros and cons. They are extremely safe places to put your money, and they tend to provide a guaranteed return. However, they rarely offer the same opportunity for outpaced gains that a well-placed stock market bet might provide. Also, your money is usually tied up until the annuity’s term is complete.
If you are considering purchasing an annuity, you’ll want to consider your investment goals, time horizon and risk tolerance.
– Tyler Meyer, CFP, founder of Retire to Abundance and QED Wealth Solutions
Looking To Guarantee Income in Retirement?
Via Annuity.org
Forbes Advisor’s Rae Hartley Beck, a deputy editor of investing and retirement, contributed to this article.
Annuities Frequently Asked Questions (FAQs)
Are annuities taxable?
It depends on how you funded the annuity and how it pays out. If you purchased your annuity with pre-tax dollars like a rollover from a traditional IRA or 401(k) then your annuity is taxable. If you purchased your annuity with Roth money, it isn’t taxable.
Depending on the structure of the annuity, distributions may be taxed as a return on investment, a return of capital or a blend of the two. Consult with a tax professional when reviewing your annuity options so you don’t have any surprises.
How to understand which annuity companies to avoid?
Investors should prioritize companies that offer competitive returns, low fees and high customer satisfaction. Additionally, it is important that the company itself is financially stable. Avoid any annuity companies that do not meet these standards.
What are the largest annuity companies?
Prudential, Western & Southern, Allianz, MetLife and MassMutual rank among the largest annuity companies by annual direct premiums sold.
What are the safest annuity companies?
The safest annuity companies are often the largest and the ones with the highest financial strength ratings. MassMutual and Allianz are among the safest annuity companies.