Why it's best to buy fixed-rate annuities when long-term interest rates are significantly higher than short-term interest rates?

  • Because when predicting long-term costs of servicing the annuity, long-term rates are more directly applicable?
    – keshlam
    Commented Jan 22 at 6:21

1 Answer 1


I would not use the term "best" as it implies that you should time the market, but if short-term rates are higher than long-term rates, it's usually a temporary condition, and the market will eventually adjust by either either raising longer term rates or lowering shorter term rates.

In either case, it would be better to buy instruments that take more advantage of the higher short-term rates than annuities (annuities are fixed at an average of all projected rates over the life of the annuity) and wait to buy annuities until the market is back in its "normal" state.

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