On October 28, 2026, the Federal Reserve announced that it would keep its benchmark interest rate where it was. If you're thinking about a fixed annuity, the natural question is what that means for the rates you'll be offered in 2027. The honest answer is that the Fed matters less to MYGA rates than most people think, and nobody, including us, can tell you what the next Fed decision will be. Here's how the pieces fit together.
What the Fed Announced on October 28
The Federal Open Market Committee (FOMC) voted 10 to 2 to keep the target range for the federal funds rate at 3.75% to 4.00%. Two members, Lisa D. Cook and Beth M. Hammack, dissented, preferring a quarter-point increase. In its statement, the Committee said inflation remains elevated, that economic activity has been expanding at a strong pace, and that job gains have roughly matched labor-force growth, with the unemployment rate little changed.
It's worth noticing what that mix doesn't say. A hold with two members leaning toward a hike isn't a signal that cuts are coming, and it isn't a signal that hikes are coming either. It's a pause. You can read the full statement on the Federal Reserve's website.
Why Fed Policy Reaches Across the Economy
The federal funds rate is the rate banks charge each other for overnight loans. It directly influences short-term borrowing costs: credit cards, variable-rate loans, savings accounts, and money market funds tend to follow it closely. It also shapes expectations for the future, which spills over into longer-term rates. That is why markets react to every Fed meeting.
Why Fixed Annuity Rates Don't Directly Track the Fed
A MYGA (multi-year guaranteed annuity) isn't priced off the overnight rate. It guarantees a rate for several years, so insurers price it off longer-term bond yields, such as Treasury and high-quality corporate bonds with maturities similar to the contract's term. When an insurance company sells you a 5-year MYGA, it generally invests the premium in bonds and other fixed-income assets to support the guarantee. What it can credit you depends on what those investments can earn, less its costs, its capital requirements, and its profit margin.
So the sequence runs more like this:
- Bond yields move for many reasons, including Fed expectations, inflation, economic growth, and investor demand for safe assets.
- Insurance companies see what new money can earn in the bond market.
- Each carrier decides what it can offer, given its own investment strategy and how much new business it wants.
Why One Carrier Cuts While Another Raises
You may have noticed that carriers don't all move together. That's normal, and it's one of the main reasons comparing is worthwhile. Differences come from:
- Appetite for new business. A carrier that has taken in a lot of premium may trim rates, while one that wants growth may raise them.
- Investment strategy and asset-liability needs. Each carrier's portfolio and the maturities it needs to match are different.
- Product design and distribution. Commission levels, withdrawal features, and the premium size a product targets all affect what a carrier can credit.
- Capital and ratings considerations, which can affect how aggressively a carrier prices.
We see this in our own tracking every month. For example, our October 2026 rate update highlighted 3-year MYGAs at 6.10% and 5-year MYGAs at 6.40%, but those were different carriers, and individual carriers reprice on their own schedules, sometimes weekly.
Why MYGAs Can Offer Yields Well Above the Fed Funds Rate
With the federal funds range topping out at 4.00%, it can look odd that guaranteed MYGA rates have recently been in the 6% range in our rate updates. A few things explain it, though they don't make the comparison apples to apples:
- The fed funds rate is an overnight rate. A MYGA locks in a rate for years, and longer-term investments can pay a different yield than overnight money.
- Insurers can earn a spread by investing in higher-yielding fixed-income assets than Treasuries.
- MYGAs trade liquidity for yield: you accept surrender charges and market value adjustments if you take out more than the free amount early.
- Carriers compete hard for fixed annuity premium, and that shows up in the rate.
Guaranteed rates are backed by the claims-paying ability of the issuing carrier, not by the FDIC, so the carrier's financial strength matters as much as the rate. See our guide on how to read an AM Best rating.
What Could Push MYGA Rates Up or Down Heading Into 2027?
Nobody knows, and anyone who tells you with certainty that annuity rates will fall in 2027 (or rise) is guessing. Here are the factors worth watching:
| Could push rates higher | Could push rates lower |
|---|---|
| Higher longer-term Treasury and corporate bond yields | Lower longer-term bond yields |
| Persistent inflation that keeps yields elevated | Slower growth or a weaker economy |
| Carriers competing for more fixed annuity premium | Carriers that already have plenty of inflows |
| Fed policy that signals tighter-for-longer | Fed cuts that pull yields down |
Notice that those lists overlap with the Fed but aren't driven only by it. Rates could also move in different directions at different terms.
Should You Lock In Today's Rates or Wait?
Here is the balanced version. If you lock in: you know exactly what you'll earn for the term, regardless of what rates do next. If rates fall, you keep your guaranteed rate. If you wait: you may find higher rates if yields rise, but you may also find lower ones, and you earn nothing extra while waiting. The cost of guessing wrong is real in both directions.
A simple example shows what a guaranteed rate does. $100,000 earning 6% annual compound interest for five years grows to approximately $133,823 before taxes or withdrawals. If the same $100,000 had earned 5.5% instead, it would have grown to about $130,696. That is a difference of roughly $3,100 over five years. Note that this is an illustration of how compounding works, not a current product quote, and your actual rate depends on the carrier, product, state, and premium.
A better question than "what will the Fed do?" is "when will I need this money, and what rate am I comfortable locking in?" If the guaranteed rate on offer meets your goal for money you don't need right away, waiting for a slightly better number is a bet, not a plan.
How MYGA Laddering Helps You Spread the Risk
If you don't want to bet on a single date, you can split your money across several contracts with different maturities, say 3, 5, and 7 years. As each one matures, you decide whether to renew at whatever rates are available then, spend the money, or move it. A ladder doesn't predict rates, it gives you regular chances to reinvest and keeps some of your money coming due on a schedule. Our MYGA laddering guide walks through how to build one, and you can model your own with the MYGA calculator.
Contract Guarantees and Your Own Liquidity Matter More Than Forecasts
When you pick a MYGA, a few details matter more than the next Fed decision:
- The guaranteed rate and the term, including how interest is credited (compound vs. simple).
- The carrier's financial strength and the state guaranty association protections in your state (see state guaranty coverage).
- Your liquidity needs: the surrender schedule, any market value adjustment, and what you can take out each year without a penalty (free withdrawals explained).
- How it fits the rest of your plan, including money you'll want available for emergencies and healthcare.
The Fed will meet again, and rates will move again. A contract you understand and can hold to maturity is one that works whatever the Fed does.
Sources
This article is for educational purposes only and is not a prediction of future interest rates or a solicitation for any specific product. The $100,000 example assumes a 6% annual compound rate for five years with no withdrawals and before taxes; it is hypothetical and is not a current product quote. Actual rates, availability, and minimum deposits vary by state, carrier, and product, and carriers may change rates at any time. Withdrawals may be subject to ordinary income tax and, if taken before age 59½, an additional 10% IRS tax. Early withdrawals beyond free-withdrawal amounts may be subject to surrender charges and market value adjustments. Guarantees are backed by the claims-paying ability of the issuing insurance carrier.
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