|All About Annuities|
How Rates Are Calculated
For Fixed and CD-Type Annuities
How annuities calculate interest rates, surrender charges and withdrawals is of great importance in understanding the benefits of one product over another. Our comprehensive database provides you with the details of how each policy handles these values and what impact they have the annualized returns and fees.
Yield to Surrender
We have created a general calculation which we have coined "Yield to Surrender". Essentially it is the annualized yield (accumulated dollar value) of the annuity calculated over the time the surrender charges can be applied against withdrawals from the account value. The Yield to Surrender can be calculated on a "current basis" or "guaranteed basis".
Current Yield to SurrenderSM
This is the yield based on the first year current interest rate and any number of successive years in which the interest rate is guaranteed. Then the calculation uses the base rate through last year in which the surrender charge applies.
Guaranteed Yield to SurrenderSM
This yield is calculated only using the guaranteed interest rate for each year through last year in which the surrender charge applies. In the category of "CD-Type Annuities" aka "Multi-Year Annuities" the Current Yield to SurrenderSM is also the Guaranteed Yield to Surrender.SM The interest rate is guaranteed for every year in which a surrender charge exists.
Calculating Account Value
Utilizing the calculations "Current Yield to Surrender SM and Guaranteed Yield to SurrenderSM it is now possible to compare the interest rates paid on fixed annuity in a meaningful way.
One can compare the current interest rate and guaranteed interest for any annuity product by using the number of year the surrender charges last as the common denominator for the comparison.We project the dollar accumulations and the yield calculation based on the following assumptions.