Rates Hit Their Highest Since 2007. Here's What That Means for Your Safe Money

By Marc Gilman

Questions? Call (800) 927-9326 or email marc@gilmanagency.com

A longer version of this article was first published on gilmanagency.com.

For most of the past 15 years, keeping money safe meant accepting almost nothing in return. That has changed. This fall, the 10-year Treasury yield reached its highest level since 2007, and yields from 5 to 30 years moved above 5%, according to bond market analyst Jim Bianco of Bianco Research.

Retirees have noticed. U.S. annuity sales set a record in the first half of 2026, according to LIMRA, as reported by Barron's in October. If you're retired or getting close, here's why that's happening and what to weigh before you act.

Key Takeaways

• Rates are high by recent standards, and analysts like Bianco expect them to stay elevated unless the economy slips into recession, because inflation has averaged about 3.4% since the pandemic.

• Fixed annuity rates follow bond yields, so today's environment means higher guaranteed rates.

• A multi-year guaranteed annuity (MYGA) locks a rate for a set term with no market losses, even if rates rise further.

• The trade-off is access: surrender charges apply if you take out too much too soon.

Why Rates Matter for Annuities

When you buy a fixed annuity, the insurer invests your premium mostly in high-quality bonds and passes part of that yield to you as a guaranteed rate. Higher bond yields mean higher guaranteed rates, and a rate you lock in today stays locked for the full term even if market rates fall next year.

How a Fixed Annuity Behaves Differently

Bond funds can lose money. Barron's notes that the broad U.S. bond index is down about 1% this year after losing 13% in 2022, a hard lesson for anyone who thought of bonds as the safe part of their portfolio. Bianco himself points out that rising rates are the main risk to bond prices. A MYGA works differently:

• No market losses. Its value doesn't fall when rates rise or stocks drop.

• A guaranteed rate for terms often ranging from 3 to 10 years.

• Tax-deferred growth until you withdraw.

Decisions about bonds and other investments belong with your financial advisor. As Barron's puts it, annuities are insurance contracts, not investments. A fixed annuity trades flexibility for certainty, which can make sense for money you won't need during the guarantee period.

Protecting Savings vs. Creating Income

There are two different jobs an annuity can do, and it's worth knowing which one you need:

• A MYGA protects savings. It grows at a guaranteed rate for a set term, much like a long-term CD issued by an insurer.

• An income annuity creates income. It turns a lump sum into guaranteed payments, often for life.

A common approach is to cover essential bills, such as housing, food, insurance and utilities, with guaranteed income: Social Security, a pension, and if there's a gap, an income annuity. Then market swings can't touch your ability to pay the basics. Barron's cites J.P. Morgan research finding that retirees with more guaranteed income worry less about spending in retirement.

The Trade-Offs

• Access: Most contracts allow a limited withdrawal each year, often 10% or the interest earned. More than that during the term triggers surrender charges, and some contracts add a market value adjustment. An income annuity generally can't be undone once payments start.

• Insurer strength: The guarantee depends on the insurance company, so choose a highly rated, long-established insurer. In New Hampshire, the state guaranty association covers up to $250,000 in present value of annuity benefits per person.

• Inflation: A fixed rate may not keep up if inflation rises. Inflation riders on income annuities usually aren't tied directly to the Consumer Price Index the way Social Security's yearly increase is.

• Taxes: Withdrawals are taxed as ordinary income, may face a 10% penalty before age 59½, and can raise Medicare premiums through IRMAA.

The Bottom Line

The goal isn't to put everything in an annuity. It's to protect the part of your savings you can't afford to lose, cover your essential bills with income you can count on, and keep the rest invested and available. With rates near their highest in nearly two decades, this is a good time to compare your options.

Which matters more to you right now: protecting what you've saved, or turning it into a paycheck? Tell me in the comments.

Call Gilman Agency at (800) 927-9326 or email marc@gilmanagency.com

Jim Bianco, Bianco Research, Barron's and the organizations it cites are not affiliated with Gilman Agency and do not endorse Gilman Agency or any product; their work is cited for background only. This article is for general information only and is not tax, legal or investment advice. Gilman Agency is a licensed insurance agency and does not offer securities or investment advice. Annuities are insurance contracts issued by insurance companies; they are not deposits, are not FDIC insured, and are not investments in bonds or the stock market. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurer. Surrender charges and market value adjustments may apply. Rates and availability vary by insurer and state and may change.