Will Annuity Rates Continue To Fall? 
Annuity companies are required to invest the majority of their portfolios in bonds . They do have flexibility to invest in bonds that are rated high or low . If a high-grade bond is AAA rated , it will provide a lower return to the annuity company . If the annuity company is willing to invest in lower rated bonds , the return will be high because of the increased risk . Annuity companies also have the flexibility to invest in bonds with different maturity schedules . This can have an impact on your annuity renewal rate based on when you purchased your annuity and the timing as the bond market moves up and down over time . Annuity rates have recently dropped and while nobody has a crystal ball to know exactly where rates are going , here 's an approach you can think about and see if it addresses your concern . You can use what is called a `` ladder '' approach . Take the total amount of what you intend to put into an annuity and split it into 3 or 4 pieces . Purchase one annuity now with 1/3 or 1/4 of your total amount . Wait one or two years and do the same with the next 1/3 or 1/4 . Using this strategy can be effective during a time when annuity rates will be climbing . Of course , if annuity rates drop , it can work the other way . Remember , you always have the option not to purchase a 2nd or 3rd annuity if the interest rates are not to your liking . Using the laddered approach does leave the question as to what you do with the remaining funds during your `` wait and see '' time . That lost time can be a drawback if you 're just going to let your money sit in a bank CD which typically earns only a fraction of what an annuity can provide . Speak with a qualified retirement income professional that can look at your particular situation and help determine the best course of action for you . 