January 2019: Annuity Rate Declines Have Started — More Likely Coming

Published January 9, 2019

December and early January saw a precipitous drop in yields in the bond market, including in Treasuries. Coupled with a decline in November, this has caused many insurers to reduce annuity rates. Rates, however, have been reduced by less than the drop in bond market yields would indicate, meaning that there likely are still more drops to come.

Click to download the January 2019 Annuity Intelligence Report.

blueprint-income-annuity-intelligence-report-201901

Market Update

5 Year Treasury

  • Yield on 11/2/18 3.02%
  • Yield on 1/7/19 2.53%
  • Drop In 5 Year Treasury Yields Over Last 2 Months: -0.49%
  • Increase in Top 5 Year Fixed Annuity Rate: +0.05%

10 Year Treasury

  • Yield on 11/2/18 3.22%
  • Yield on 1/7/19 2.70%
  • Drop In 10 Year Treasury Yields Over Last 2 Months: -0.42%
  • Drop in Top 10 Year Fixed Annuity Rate: No change

The punchline: The market has moved against annuity investors, but that negative movement has not been reflected in all insurers’ pricing (and for those that have lowered pricing, it’s been less severe than might have been expected). That means that pricing is likely to be better now than it will be a month from now.

We’ve fielded a lot of recent questions about why rates are going down even though the Fed just increased rates. In short, it’s because longer-term Treasuries are influenced by the market’s expectation of long-term interest rates and economic prospects. Those have dimmed over the last two months, despite the fact that the Fed sees enough positive near-term data to continue raising rates. Market expectations of 2019 Fed rate increases have been significantly dampened. Contact us to learn more.

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Nimish Shukla

Nimish Shukla

Financial Planning Professional

Nimish has spoken with thousands of customers about retirement spending. As a CFA Charterholder and licensed fixed annuity producer he values the importance of building an income stream for retirement. In addition to his work at Blueprint Income he is also a regular contributor to Nerdwallet.

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