Fixed Annuities at 7.05%: Hot Rates, Cold Realities, and What Advisors Need to Do Now

Let’s get one thing straight: 7.05% on a fixed annuity isn’t just eye-catching—it’s era-defining.

As of June 3, 2025, Atlantic Coast Life dropped a 10-year MYGA with a headline-grabbing 7.05% rate. Knighthead Life followed with a 6.70% on a 7-year term and 6.45% for 5 years. For advisors, it’s a moment of unprecedented opportunity—and responsibility.

Because here’s the real question: Are we treating these rates as a short-term sales sprint or a long-term strategy rooted in client outcomes?

Why This Spike in Fixed Annuity Rates Should Make You Pause

On the surface, fixed annuities at 6–7% look like a slam dunk. They outpace CDs, beat inflation (finally), and carry that golden promise—principal protection with guaranteed growth.

But if you’re only pitching the rate, you’re missing the point.

These high yields aren’t just about attracting deposits. They reflect a broader play: insurers leaning into higher-yielding bond markets, adjusting duration risk, and trying to balance reserve requirements in a climate of economic uncertainty. That’s strategic—but potentially fragile.

So the rates are hot—but advisors need to stay cool.

Let’s Break Down the Numbers (and What’s Behind Them)

• Wichita National Life Insurance Company – 5-Year MYGA at 6.15%
  B+ AM Best rating. Highest current rate nationally.
  Great return, but consider credit quality and client liquidity horizon because there are 0 withdrawals and the surrender charge revolve every 5 years which increases the chance your client gets locked in for another 5 years.

• Lincoln Financial – 10-Year at 5.50%
  This is the rate where I begin to trust putting clients into.  This is the point where you see A and better rated companies without revolving surrender charges and 10% free withdrawal year 1+.

• Context:
  These rates aren’t flukes. They’re the byproduct of insurers buying long-dated, higher-yielding corporate bonds—many in the BBB space—and locking in spreads before any Fed pivot. But that strategy only works if the economy cooperates.

Three Risks Advisors Can’t Afford to Overlook

1. Rate Obsession = Client Myopia
When you lead with the number, you teach the client to shop with their eyes—not their goals. A 7.05% rate looks great, until your client realizes they’ve locked up capital for 10 years in a B+ carrier with a hefty surrender charge.

Fix: Lead with time horizon, carrier strength, withdrawal flexibility, and tax strategy—then talk rate.

2. Misaligned Liquidity Planning
Fixed annuities with long surrender periods can blindside clients if life throws a curveball: a healthcare need, early retirement, or a kid’s wedding.

Fix: Always stress-test your liquidity planning. Use annuities for the portion of assets earmarked for true “no-touch” duration. Everything else? Keep liquid or ladder it smartly.

3. Sustainability & Solvency Concerns
Some insurers may be “stretching” to compete on rate. If margins tighten or credit events rise, they may respond with lower renewal rates on newer contracts, tighter underwriting on other lines, or increased reserve cushions that limit product innovation.

Fix: Know your carriers. Look past the rate sheet—dig into AM Best outlooks, asset-liability matching disclosures, and surplus ratios. Choose carriers that won’t just write the business—but can support it for a decade or more.

What This Means for Ethical, Long-Term Advisors

Fixed annuities at these rates should absolutely be in your toolkit. But don’t let this be 2006 again—where everyone chased yield without understanding structure. Remember the real value we bring as professionals isn’t just finding the top-paying product. It’s creating strategies that stand up through both good markets and bad headlines.

Ethical sales start with suitability. Who is the right client for these products?

• Clients within 5–15 years of retirement

• Savers with low risk tolerance but high income goals

• Individuals concerned about market volatility but eager to beat cash

• Legacy planners who want tax-deferred growth for future beneficiaries

But NOT:

• Someone who may need the money in five years

• Someone who doesn’t understand surrender schedules

• Someone who thinks “guaranteed” means “flexible”

We owe it to the client—and the industry—not to repeat the sins of the past.

Final Thought: Are We Building Portfolios or Just Selling Products?

The MYGA space is sizzling, but fads fade. Foundations endure.

If we lead with planning, educate with purpose, and present fixed annuities as part of a broader de-risking strategy—not a flashy yield chase—we can grow our business and our integrity at the same time.

Because it’s not just about rates hitting 7.05%.
It’s about ensuring our clients still feel good about it at 7 years, 10 years—and beyond.