Why are annuity rates increasing right now? If you’ve shopped for an annuity recently, you may have noticed something: the rates being offered today are meaningfully better than what you’d have seen just a few years ago. This isn’t your imagination, and it isn’t a sales gimmick. There’s a real, explainable reason annuity rates have climbed — and understanding it can help you decide whether now is the right time to act, or whether waiting makes sense for your situation.

Why Are Annuity Rates Increasing? The Short Answer: It’s About Interest Rates, Not the Stock Market

Annuity rates — particularly on fixed annuities and MYGAs (Multi-Year Guaranteed Annuities) — aren’t tied to how the stock market performs. They’re tied much more closely to the yields on U.S. Treasury bonds, especially the 5-year and 10-year Treasury.

Here’s why: insurance companies invest the premiums you pay largely into high-quality bonds. The interest they earn on those bond investments is what allows them to offer you a guaranteed rate in return. When Treasury yields rise, insurers can afford to offer higher rates on annuities. When yields fall, annuity rates tend to follow — though not always immediately, and not always by the same amount.

How We Got Here

Between 2022 and 2023, the Federal Reserve raised its benchmark interest rate at the fastest pace since the 1980s — roughly 5.25 percentage points in about 16 months — in response to high inflation. That rate-hiking cycle pushed Treasury yields sharply higher, and annuity rates followed, climbing to levels not seen in roughly two decades.

Rates moderated somewhat in 2024 and 2025 as the Fed began cutting its benchmark rate. But annuity rates didn’t collapse the way some expected. As of early-to-mid 2026, the Fed has held its benchmark rate steady, and top-tier annuity rates remain near multi-year highs — well above where they sat in the low-rate environment of 2019 through 2021.

Why Rates Aren’t Falling in Lockstep With Fed Cuts

This is a common point of confusion. People assume that if the Fed cuts rates, annuity rates should immediately drop too. In practice, it’s more complicated:

• Annuity rates track longer-term Treasury yields, not the Fed’s overnight rate directly. The 10-year Treasury yield reflects not just current Fed policy, but inflation expectations and long-term growth forecasts — all of which can move independently of the Fed’s short-term decisions.
• Inflation has remained somewhat persistent. As of mid-2026, inflation readings have stayed elevated compared to the Fed’s target, which keeps upward pressure on longer-term yields even when the Fed pauses or cuts.
• The direction of future Fed policy is genuinely uncertain. Leadership changes at the Fed and mixed economic signals mean forecasters don’t have full confidence in exactly how many cuts — if any — are still ahead in 2026.

Should You Lock In a Rate Now, or Wait?

This is the question everyone actually wants answered, and there’s no universal right answer — but here’s the honest trade-off:

The case for acting now: Rates are historically strong compared to most of the last 15 years. If economists’ expectations for gradual Fed cuts later in 2026 play out, new annuity rates could drift lower over time. Locking in a competitive rate today means you capture today’s environment for the life of your guarantee period, regardless of what happens afterward.

The case for waiting: If your specific financial situation doesn’t require committing funds right now, or if you’re still evaluating which structure (MYGA, fixed indexed annuity, income annuity) fits your goals, rushing into a purchase to chase a rate is rarely the right reason to buy an annuity. The rate matters, but it should be a factor in the decision — not the entire decision.

What This Means for Your Retirement Plan

Rather than trying to perfectly time the market for annuity rates — which even professional forecasters struggle to do — it’s usually more productive to start from your actual retirement income needs:

1. What income gap are you trying to fill between guaranteed sources (like Social Security) and your expenses?
2. How much of your portfolio should reasonably go toward a guaranteed-income product versus staying liquid or invested?
3. Given today’s available rates, does a specific product structure meet that gap in a way you’re comfortable with?

If the answer is yes, today’s rate environment is a genuinely strong one to buy into. If you’re still working through those questions, that’s worth doing first — a slightly better rate six months from now won’t matter much if the underlying structure isn’t right for your situation.

Get a Clear Picture of Today’s Rates

Rates shift regularly, and what’s competitive this month may change by next month. If you’d like help understanding where today’s rates stand and whether locking one in makes sense for your specific retirement timeline, download our free educational guides or book a no-obligation call to walk through the numbers together.