Best Fixed Annuity Rates in Tennessee: What to Know Today

Best Fixed Annuity Rates in Tennessee: What to Know Today

Looking for the best fixed annuity rates in Tennessee? Compare MYGA terms, carrier ratings, and tax benefits to find the right fit for your retirement savings.

Full written article: Best Fixed Annuity Rates in Tennessee: What to Know Today

Tennessee Annuity Rates

Transcript

SPEAKER_01 0:03

Welcome to the Tennessee Annuity Show. I'm Jessica.

SPEAKER_00 0:06

And I'm Caleb. We break down complex annuity products in plain English, fixed annuities, indexed annuities, income annuities, all of it.

SPEAKER_01 0:13

We cover the products, the fine print, and the questions you should ask before you sign anything.

SPEAKER_00 0:18

Quick note before we start. This show is for general information only and is not financial, tax, or legal advice. Annuity guarantees depend on the issuing insurance company's ability to pay claims. Talk with a licensed professional before making decisions about your retirement income.

SPEAKER_01 0:33

All right, let's get into today's episode. So I had a conversation with my aunt a few weeks ago. She's 64, just retired from teaching in Knoxville. And she called me because her CD at the bank was maturing, and her financial guy mentioned something called a MIG. And she goes, Jessica, what even is that? Is that like a CD but from an insurance company? And honestly, I didn't have a great answer for her in the moment.

SPEAKER_00 1:01

Aaron Ross Powell That's such a common entry point. Someone's CD matures. They go looking for something with a better rate, and suddenly they're hearing terms like MIG A, fixed deferred annuity, single premium deferred annuity. And it all sounds like the same thing described five different ways.

SPEAKER_01 1:16

Aaron Powell Which it kind of is, right? Like are those all actually the same product?

SPEAKER_00 1:20

Aaron Powell Mostly yes. The core structure is the same, regardless of what label the carrier slaps on it. You put in a lump sum, the insurance company credits your account at a set contractual rate, and that rate holds for a defined term, anywhere from one year to ten years typically. The interest grows on a tax-deferred basis. That's the engine underneath all those names.

SPEAKER_01 1:39

Okay, so the tax-deferred piece that was actually the thing that surprised my aunt the most. Because with her CD, she was getting a tax form every year, even though she wasn't touching the money.

SPEAKER_00 1:51

Right. That's one of the real functional differences. With a CD, the IRS treats the interest as earned each year. So you're paying taxes on it annually, whether you withdrew it or not. With a fixed annuity, that interest just sits inside the contract and compounds. You don't owe tax on the gains until you actually take a withdrawal.

SPEAKER_01 2:08

And over several years, that actually adds up to something meaningful.

SPEAKER_00 2:13

It can, yeah. If you're in a higher tax bracket and you're letting money sit for five or seven years, not having that annual tax drag on the compounding, that's a real difference in your ending balance. It's not dramatic in year one, but it compounds over time.

SPEAKER_01 2:29

Okay, so let's talk about rates because that's what people are actually searching for. What does the landscape look like right now in Tennessee?

SPEAKER_00 2:38

So as of mid-2026, you're looking at a pretty wide range, depending on the term you choose. On the short end, a one-year contract, you're around three and a half percent. But as you stretch out to five, six, seven years, rates climb into the mid to upper sixes. There's a seven-year contract out there right now at six point eight percent.

SPEAKER_01 2:59

Six point eight? That's not nothing.

SPEAKER_00 3:01

No, uh oh, it's not. And there are five-year options at six point four five, a ten-year at six point one five. The curve isn't perfectly smooth. You'll see some terms that are almost the same rate as the term above them, uh, which can make the decision a little counterintuitive.

SPEAKER_01 3:16

Wait, what do you mean by that?

SPEAKER_00 3:17

Like a four-year and a five-year might be only a few basis points apart. So you have to ask yourself, is it worth locking up your money for an extra year for essentially the same rate? Sometimes the answer is yes, because you don't need the money anyway. Sometimes no.

SPEAKER_01 3:31

And these rates, they're not all from the same carrier, right? Different companies are competitive at different terms.

SPEAKER_00 3:37

Aaron Powell Exactly. And that that's actually important. The carrier offering the best rate on a seven-year might be completely different from who's competitive on a three-year. So you really do have to shop across multiple carriers and terms at the same time.

SPEAKER_01 3:48

Aaron Powell Which brings up something I want to push on a little bit, Caleb, because I feel like people see a high rate and that's the thing that grabs them. But you've mentioned before that rate isn't the only thing to look at.

SPEAKER_00 4:02

It's not even close to the only thing. The rate is only as meaningful as the company behind it. If a carrier is offering a rate that's noticeably higher than everyone else, that should prompt a question, not just excitement.

SPEAKER_01 4:14

Aaron Powell So how do people actually evaluate the carrier? Like what does that even look like?

SPEAKER_00 4:19

The main tool is the AM best rating. It's a financial strength rating for insurance companies specifically. Uh you've got A ⁇ and A plus at the top, that's superior. Then A and A minus, which is excellent. B plus plus and B plus is considered good. Below that you're in fair or marginal territory. Marginal.

SPEAKER_01 4:37

And some of the carriers showing up with the higher rates right now, they're not all A rated.

SPEAKER_00 4:43

Right. And that's not automatically disqualifying, but it's a trade-off you need to consciously make. A B minus carrier offering six percent versus an A minus carrier offering six point four five, you might actually prefer the A minus, even though the rate is higher, because you have more confidence in the company's ability to honor that contract over seven years.

SPEAKER_01 5:02

And Tennessee has some kind of backstop if a carrier does go under, right? I know it's not FDIC, but there's something There is.

SPEAKER_00 5:10

It's called the Tennessee Life and Health Insurance Guarantee Association. If a carrier becomes insolvent, that association steps in to cover annuity benefits up to certain limits for Tennessee policyholders.

SPEAKER_01 5:21

Aaron Powell But it's not the same as FDIC.

SPEAKER_00 5:23

Aaron Powell Not the same? No. FDIC coverage on a CD is pretty straightforward. $250,000 per depositor per institution. The guarantee association coverage has its own limits and its own structure, and it's worth understanding before you commit a large sum. A licensed agent can walk you through the specifics.

SPEAKER_01 5:46

Um okay, so let's go back to the CD comparison because I think that's where a lot of Tennessee savers are starting from. My aunt was definitely in that camp. She understood CDs, she trusted CDs. What's the honest comparison?

SPEAKER_00 6:01

So uh the similarities are real. Both have a defined term, both have a set rate for that term, both have penalties if you pull out early. The differences are in the tax treatment, the rates themselves, and the protection structure.

SPEAKER_01 6:14

Rates? My gas tend to be higher?

SPEAKER_00 6:16

Often, yes. Not always, but often. And the tax deferral is a meaningful structural advantage. But the flip side is that CDs have FDIC insurance, which is a very well-understood, very reliable backstop. The Guarantee Association is real protection, but it's different.

SPEAKER_01 6:32

And liquidity. Because I know my aunt asked about this. She was nervous about locking money up.

SPEAKER_00 6:37

Most fixed annuity contracts do allow some penalty-free withdrawals each year. Commonly, it's up to 10% of the beginning account value or just the interest earned, whichever the contract specifies. So it's not like the money is completely locked in a vault. But if you need more than that, then surrender charges kick in. And those can be significant, especially in the early years. Well, some contracts start at 9% in year one and step down to zero by the end of the term. So if you're in year two of a seven-year contract and you need to pull everything out, that's a real cost.

SPEAKER_01 7:12

Right. And there's also something called a market value adjustment. I've seen that term and I'm not totally sure I understand it.

SPEAKER_00 7:19

Yeah, an MVA. So some contracts include this provision, where uh if you surrender early, the value of your contract is also adjusted based on what interest rates are doing at that moment. If rates have gone up since you bought the contract, the adjustment works against you, your surrender value goes down a bit more. If rates have dropped, it can actually work in your favor.

SPEAKER_01 7:37

So it's almost like an extra layer of variability on top of the surrender charge.

SPEAKER_00 7:42

Exactly. It's not on every contract, but it's common enough that you want to know before you sign whether your contract has one.

SPEAKER_01 7:48

Okay, let's talk about taxes, because Tennessee has a slightly unusual situation here.

SPEAKER_00 7:54

Yeah. Tennessee is actually pretty favorable from a state tax standpoint. As of 2024, Tennessee doesn't have a state income tax on wages or interest income. So for most people in Nashville, Knoxville, Memphis, the state level tax picture on a fixed annuity is pretty clean.

SPEAKER_01 8:09

But federal taxes still apply.

SPEAKER_00 8:11

Absolutely. And the way federal taxation works depends on how you funded the annuity. If you bought it with after tax dollars, what's called a non-qualified annuity, then when you take withdrawals, only the gain portion is taxable as ordinary income. Your original deposit comes back to you tax-free.

SPEAKER_01 8:30

That makes sense. What about if someone rolls over an IRA or a 401k into a fixed annuity?

SPEAKER_00 8:36

That's a qualified annuity. And the tax treatment is different. Because that money was pre-taxed going in, the entire withdrawal principal and interest is taxable as ordinary income when it comes out. And you're also subject to required minimum distributions starting at age 73.

SPEAKER_01 8:52

Which is something people sometimes forget when they're excited about the tax deferral.

SPEAKER_00 8:57

Completely. The deferral is real and valuable, but it's not permanent. At some point, the IRS is going to want its share.

SPEAKER_01 9:02

And the early withdrawal penalty. That's a thing too.

SPEAKER_00 9:05

10% IRS penalty on gains if you're under 59.5. That's on top of ordinary income tax. So if someone's 45 and thinking about putting money into a seven-year fixed annuity, they need to think about whether they'll be past 59 and a half when the term ends or whether they might need that money before then.

SPEAKER_01 9:24

That's actually a really practical point. Like the math on the term and your age matters.

SPEAKER_00 9:30

It really does. A seven-year contract for a 58-year-old who doesn't need the money is a very different decision than the same contract for a 48-year-old who might.

SPEAKER_01 9:38

Speaking of which, there's also the question of what happens when the contract actually ends. Because I feel like people focus a lot on buying the annuity and less on what happens at maturity.

SPEAKER_00 9:52

That's a really underappreciated part of this. When your guarantee period ends, you typically have four options. You can roll into a new fixed annuity contract at whatever rates are available then. You can annuitize, meaning convert the accumulated value into a stream of income payments. You can let the contract auto-renew, which a lot of contracts will do automatically, or you can just cash out.

SPEAKER_01 10:11

Wait, auto renew? That one sounds like it could catch people off guard.

SPEAKER_00 10:16

It absolutely can. If you don't do anything when your contract matures, many carriers will just roll you into a new term at whatever rate they're offering at that moment, which might be great or might not be. You want to know that date is coming and actually review the new rate before it happens.

SPEAKER_01 10:33

I've heard of people missing that window and being stuck in a renewal rate that's significantly lower than what they could have gotten elsewhere.

SPEAKER_00 10:40

It happens. And that's where a tool called a 1035 exchange becomes relevant. If you want to move from a maturing annuity into a new contract with a better rate, a 1035 exchange lets you do that without triggering a taxable event. The money moves directly from one contract to another.

SPEAKER_01 10:56

But you'd want to talk to a tax professional before doing that.

SPEAKER_00 10:59

Definitely.

SPEAKER_01 11:04

Okay, I want to come back to something you said earlier about who this product actually fits. Uh, because I think there's sometimes this assumption that fixed annuities are for everyone who's near retirement. And I'm not sure that's quite right.

SPEAKER_00 11:20

Aaron Powell It's not a universal answer. The product tends to make the most sense for people who are within roughly 10 to 15 years of retirement, who have money they genuinely won't need for several years, and who want predictable growth without exposure to market swings. It also tends to make sense for people who've already maxed out other tax-advantaged accounts and are looking for another place to defer taxes.

SPEAKER_01 11:39

But someone who's 45 and still has a long runway and can tolerate more volatility may be not the right fit.

SPEAKER_00 11:47

Maybe not, or at least not for a large portion of their savings. The opportunity cost of locking money into a fixed rate for seven or ten years when you have a longtime horizon is a real consideration.

SPEAKER_01 11:58

And then on the other end, when someone who's already retired and needs income right now, a fixed, deferred annuity isn't really designed for that either.

SPEAKER_00 12:06

Right. Because it's deferred. The growth phase. If you need income immediately, that's a different conversation. Probably about income annuities or other structures. A myga is specifically for the accumulation phase.

SPEAKER_01 12:19

Let me throw a scenario at you. Picture a couple. Both 65, $100,000 sitting in a savings account earning almost nothing. They don't need this money for at least five years. It's kind of their backup reserve. What does the fixed annuity conversation look like for them?

SPEAKER_00 12:38

That's actually a pretty clean use case. If they genuinely won't need that money for five years, a five-year MIGA at something like 6.45% is going to grow that $100,000 meaningfully. And they're not paying tax on the gains each year while it's accumulating.

SPEAKER_01 12:52

And they're both past $59.5, so the early withdrawal penalty isn't a concern.

SPEAKER_00 12:58

Exactly. The 10% IRS penalty is off the table. Their main considerations are carrier strength or whether they might need more than the penalty-free withdrawal amount in any given year and what their plan is at maturity.

SPEAKER_01 13:11

Now flip it. Same $100,000, but they're 52, both still working.

SPEAKER_00 13:28

A five-year contract might make more sense, so they're clear of 59 and a half before the term ends.

SPEAKER_01 13:33

See, that's the kind of thing that doesn't jump out at you when you're just looking at a rate table.

SPEAKER_00 13:38

Which is exactly why the rate table is a starting point, not an ending point. You have to layer in your own timeline.

SPEAKER_01 13:43

I also want to make sure we're clear about something, Caleb, because I know we've been talking about rates and the numbers are real. But these rates change. Like what's on a table today might not be what's available next week.

SPEAKER_00 13:57

Absolutely. Migrate rates move with the broader interest rate environment. Carriers adjust their offerings regularly. The rates we've been talking about are a snapshot of mid-2026. By the time someone's actually sitting down to make a decision, the specific numbers may have shifted.

SPEAKER_01 14:14

And not every carrier is even available in every part of Tennessee.

SPEAKER_00 14:17

Aaron Powell That's an important one. Insurance products are state regulated, and not every carrier is approved in every state or every county, so you might see a rate that looks attractive and then find out that particular carrier isn't available to you as a Tennessee resident. That's another reason to work with a licensed Tennessee agent who knows what's actually on the shelf for your situation.

SPEAKER_01 14:34

And there are no hidden fees eating into the rate, because I feel like people assume there must be some catch.

SPEAKER_00 14:42

That's one of the things that actually makes fixed annuities relatively straightforward compared to some other products. There are no ongoing management fees being subtracted from your balance. The contractual rate is what your account grows at. The things that can cost you money are surrender charges if you exit early, and the tax implications when you withdraw, but there's no annual fee coming off the top.

SPEAKER_01 15:03

Which is different from, say, a variable annuity where you've got all kinds of fees layered in.

SPEAKER_00 15:10

Very different. Fixed annuities are genuinely simpler on the cost structure side. The trade-off is that you don't have upside participation in the market. Your rate is set, and that's it for the term.

SPEAKER_01 15:21

Right. You're not going to outperform a roaring stock market with a fixed annuity.

SPEAKER_00 15:26

No. And that's not what it's for. It's for the portion of your savings where you want a predictability and tax deferral, not growth potential tied to market performance. Different job, different tool.

SPEAKER_01 15:38

I think that framing actually helps a lot. It's not competing with your stock portfolio, it's doing something different.

SPEAKER_00 15:45

Exactly. Most people who use fixed annuities aren't putting everything into them. They're carving out a portion of their savings, the part they want to be stable and tax deferred, and using a myga for that slice.

SPEAKER_01 15:56

Aaron Powell So if someone in Tennessee is sitting there right now thinking, okay, this sounds like it might be worth exploring, what's the actual next step? Like practically.

SPEAKER_00 16:08

Talk to a licensed Tennessee insurance agent who works with multiple carriers, not just one company's agent, someone who can pull rates from across the market, confirm which products are actually available in your county, and help you think through the term, the carrier rating, and how it fits your timeline. It fits.

SPEAKER_01 16:24

And they can also help you think through the tax side of it, whether it's a qualified or non-qualified situation.

SPEAKER_00 16:30

Right. Though for anything specific to your tax situation, you'd want to loop in a tax professional too. The agent can explain how the product works from a tax standpoint generally, but your specific situation, your bracket, your other income, your RMD picture, that's a conversation for a CPA or tax advisor.

SPEAKER_01 16:48

My aunt ended up doing exactly that actually. She talked to an agent, got a few options laid out side by side, and then ran it by her accountant before she signed anything. Took a few weeks, but she felt really good about the decision.

SPEAKER_00 17:02

That's the right process. The rate table is where curiosity starts. The actual decision should involve a lot more than just the number at the top of the column.

SPEAKER_01 17:11

And I think the other thing worth saying, just because a fixed annuity is the right tool for one person doesn't mean it's the right tool for everyone in a similar situation. The details really do matter.

SPEAKER_00 17:24

A 58-year-old in Memphis, planning to retire in five years, and a 45-year-old in Knoxville still in peak earning years, they might both be looking at the same rate table and come to completely different conclusions about whether and how to use a fixed annuity. Same product, very different context.

SPEAKER_01 17:40

Which is kind of the whole point. The product is simple. The decision of whether it fits your life, that's where the work actually is. That's it for today's Tennessee Annuity Show.

SPEAKER_00 17:56

If you have questions about your specific situation, talk to a licensed advisor.

SPEAKER_01 17:59

Visit Tennessee Annuity Rates.com for show notes or to get matched to an advisor.

SPEAKER_00 18:04

We'll see you next time.