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If you’re someone who is looking into a annuity, you may find the process to be overwhelming. Interest rates are an essential aspect of ranking annuities. The maze of information available causes a person to lose confidence in the final decision.

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You should concentrate on some key components of interest rates. This will enable you to ignore the information that isn’t relevant to you and streamline the decision process. Because the stock market causes changes in equity-indexed and variable annuities, focusing too broadly on components of interest rates doesn’t really apply here. Instead, let’s talk about fixed annuities.

There are four key interest rate components in an annuity contract. This will assist you in knowing where to maintain your focus.

- Base Guaranteed Rate : Your annuity is contractually guaranteed to yield this minimum. This rate will range from 1-3.5% except in the case of a CD-Type Annuity, which will lock a higher rate for the life of the contract.

Current Rate: Each year an insurance company will declare a rate to be applied to in-force contracts. This is what generates competition within the insurance industry. Every company will declare rates which are based on the performance of portfolios, projections for future business, and by comparing their rates to the competition. Establishing a steady current rate can be used as an indication of the financial health of that company, as well as providing as a fiscal outlook within the entire scope of the financial industry.

Bonus Rate: A lot of agreements insert a bonus rate to entice investors even more. Some annuities will present exceedingly high bonuses. You need to think about a few facts of bonus rates. Sometimes, bonus rates are only attainable once the annuity matures, so if you make an early withdrawal of your investment, you will lose the bonus as well. Big bonuses often lead to a longer surrender period because of the added cost to the company. Usually, these ‘bonus rates’ don’t provide you with any real bonuses in actuality. Verify all other contract components to your satisfaction before a bonus is considered.

Yield to Surrender: This is the rate of how much you are expected to earn over the length of the agreement. It is also the single most important interest rate to consider. The yield to surrender should be revealed by your agent in both current and guaranteed minimum rates. By calculating this amount, you can determine how valid your bonus rate is, objectively.

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In addition to the major interest rate components, there are a couple other things that deserve consideration when evaluating interest rates. Make sure to review the organization’s past renewal rate and their bailout rates.

- Renewal Rate : Any company’s performance in the long term can be ascertained by the history of their renewal rates. You can also compare past renewal rates with past economic conditions to see how the organization has fared during different market situations. Inflation and deflation are valid concerns that need to be addressed when considering a substantial cash investment over a long period of time. This is a very solid method to see how different annuities will perform as the environments of interest rates have changed.

- Bailout Rate : A bailout rate is not offered by all annuities. This is a component of high quality contracts offered by some very stable companies. This ‘bailout rate’ is typically fixed slightly above the rate of the base guarantee. You can get out of your annuity without paying any fees if the set interest rate is equal to or under the bailout rate. The holder of the contract is given extra freedom with this rate, and is given more options for their funds, all without paying fees for surrendering their annuity.

These are the fundamental aspects of annuity agreements that investors must think about when comparing interest rates. There are a large number of components to understand before one invests in annuities, and annuity rates are only one small aspect of the larger picture.

Annuities are extremely versatile financial products that will play an expanding role in the financial planning landscape. Selecting an annuity, though, can be difficult due to the sheer number of products available to investors.

We have provided an outline of what you need to know to choose the best product for you at AnnuityStraightTalk.com Visit the site for a list of all necessary contract components and the objective analysis needed to make an educated purchase.

Make an informed decision about annuities. Get the Free Annuity Report at www.AnnuityStraightTalk.com - annuity rates