The Best Annuity Companies: How to Choose the Best for You

In this article...
  • Annuities are often used to ensure a comfortable retirement. Explore some of the best annuity companies today and learn the steps you should follow to invest.

Because an annuity typically pays out as a fixed income stream once the fund matures, this type of investment is often used to supplement an individual’s savings, ensuring a comfortable retirement. As with any investment, it’s important to choose the right product and provider. In this article, we'll look at some of the best annuity companies in the industry today and the steps you'll need to follow when investing.

Where Can You Purchase an Annuity?

Because annuities are investment products, they may be purchased from a variety of financial institutions, including:

  • Brokerage firms
  • Commercial banks
  • Insurance companies
  • Mutual fund providers

You can also purchase an annuity through an independent insurance agent, a broker dealer or a trusted financial advisor.

Six Steps to Follow When Purchasing an Annuity

To make sure you choose the right annuity and provider, follow this six-step process.

1. Consider Your Financial Needs

Whether you consult a financial advisor or self-assess using online questionnaires, carefully consider your financial requirements prior to purchasing an annuity. Assess your current and future needs, and your time horizon, and take into account any specific financial goals you have for your retirement.

2. Decide on the Appropriate Annuity Product

Once you fully understand your financial needs and goals, you’ll be able to make an informed decision about which annuity product to buy. Types of annuities include:

  • Immediate annuities: Immediate annuities are typically funded with a lump-sum payment, with payouts beginning shortly thereafter.
  • Deferred annuities: Funding of deferred annuities may occur over time, and payouts begin at a predetermined future date.
  • Fixed annuities: Fixed annuities generally promise a predefined amount of income, which is paid at regular intervals over a specified period of time. These funds are generally invested in a low-risk asset class, such as U.S. Treasury securities.
  • Variable and Indexed Annuities: For investors who can tolerate more risk, indexed and variable annuities offer higher growth potential than their counterparts. For indexed annuities, growth corresponds to market indices such as the S&P 500. Variable annuities involve investment in a portfolio of buyer-selected mutual funds.

Ultimately, the annuity product you choose should satisfy your financial needs and fulfill your objectives.

3. Review the Contract Terms

Before signing a contract, thoroughly review the terms and any illustration or prospectus provided. These documents should give the buyer a clear picture of their investment. You may want to have a trusted attorney or financial advisor review the contract prior to signing.

4. Choose a Provider

Annuities aren’t federally guaranteed, so it’s important to choose a stable, reputable provider. Rating agencies provide transparency into the industry and help potential investors see how sound a financial institution is before purchasing an investment product.

The top rating agencies for financial institutions include:

  • Moody’s
  • M. Best
  • Fitch
  • Standard & Poor’s

When choosing a carrier, you may also want to compare rates and contract terms. Read online reviews, and don't hesitate to ask questions or request information about fees and administrative costs

5. Complete an Application

When you submit an application, you lock in your annuity rate. Complete all fields with accurate information to minimize the processing time and make sure you don’t forfeit your locked-in rate.

6. Fund the Annuity

Most annuities accept multiple payment methods, including cash, retirement fund transfers or brokerage account funds. Depending on your chosen payment method, there may be different tax implications. 

The Best Annuity Companies

The best annuity companies are those that have strong financial health, high ratings from independent rating organizations such as Moody’s, A.M. Best and Standard & Poor’s and consistently positive customer reviews.

Here are 10 of the best annuity companies:

  • American National Insurance Company: American National has provided financial solutions to consumers since 1905. Based in Galveston, Texas, American National specializes in insurance products and sells several types of annuities.
  • AIG Life: AIG, or American International Group, has a comprehensive product portfolio that includes annuities and life insurance coverage. The company, which has been around since 1919, provides financial solutions to customers in more than 80 countries.
  • John Hancock: John Hancock has been in business for more than 150 years, providing customers with an array of financial products, including annuities, mutual funds, 401(k) plans and insurance solutions. Products may be purchased through licensed financial advisors or the company’s network of independent firms.
  • Lincoln Financial Group: LFG, which has been around since 1905, sells a plethora of financial products and services, including annuities, life insurance policies and retirement plans. The company continues to receive high industry ratings and has a stable financial foundation.
  • MetLife: With more than 150 years of experience, MetLife provides annuities, insurance and other financial solutions to customers around the world. The company sells its products through agents, third-party distributors and direct marketing channels.
  • Mutual of Omaha: Mutual of Omaha has more than a century of financial services experience. The company, which provides several types of annuities, currently holds high ratings from at least three major industry rating agencies.
  • Nationwide: This reputable company provides insurance, investing and retirement solutions to individual customers and businesses, bringing more than 90 years of experience to the table. Available investment products include annuities, mutual funds, life insurance and exchange-traded funds.
  • New York Life: New York Life has been in business for more than 175 years, providing life insurance, annuities and other investment solutions. Consumers may also appreciate the company’s experience in retirement planning and wealth management.
  • Prudential: Prudential brings more than 145 years of experience to 50 million customers across the globe. The company has an array of retirement planning and investment management services and sells products such as life insurance, annuities and mutual funds.
  • TIAA: This Fortune 100 organization has served the financial needs of individuals employed in academia, nonprofits, government and several other industries for more than a century. TIAA offers a long-term approach to investments and sells products such as IRAs, mutual funds and retirement annuities.

Although the above-listed companies represent a sampling of the best annuity companies today, the right choice for you may depend on the type of annuity you wish to purchase and what products and services the company offers. Consulting a trusted financial advisor or doing research on the companies and products you're interested in can help you make an informed decision. Many companies also offer a free-look period, during which you may cancel your annuity and receive a full refund.