Annuities math shines as 10-year Treasury yield tops 5 percent: American Equity

On Sept. 14, 2026, the U.S. 10-year Treasury yield broke 5% for the first time since 2023, and on Sept. 30 held near 5.23% for the first time since 2007; the hot bond market, paired with high and undeterred equity valuations, have garnished unusual skepticism upon defaulting to stock investments.

American Equity Investment Life Insurance Company sees this Treasury moment as another reason, among others, for advisors to revisit guaranteed retirement income with a fresh outlook.

Daniel Biagini, senior vice president and head of independent sales at the Des Moines, Iowa-based carrier, said he understands that annuities – trading access to wealth for longevity of wealth – are not on the table for virtually every investor. "If you have a client that is extremely averse to locking their money up, or a portion of it… if they want to be 100 percent liquid… an annuity is not for them,” he said.

But for clients who can accept less access to their money, Biagini said today’s Treasury market includes a unique advantage. Using the 10-year yield as an annuity value benchmark, he reads its climb past 5% as a clear sign of opportunity - the higher that yield rises, the more upside carriers can build into the income and growth features they offer buyers. That dynamic makes annuity pricing run opposite to most consumer finance - while falling rates reward homeowners who refinance a mortgage, rates anticipated to rise reward retirees who convert savings into income.

"When interest rates rise, our products get more competitive and give you more upside," Biagini said. "So, you almost want to refinance your retirement."

The Federal Reserve kicked off a hiking cycle in mid-September, and swaps traders now price in nearly a full percentage point of further increases over the coming year. Buyers already spent a record $464.1 billion on annuities in 2025, including $127.9 billion on fixed index annuities (FIAs), according to LIMRA's U.S. Individual Annuity Sales Survey.

Additionally, annuities offer three more traits stocks cannot – they pay a guaranteed income for as long as the client lives, so the client cannot outlive it. Market losses cannot reduce the principal in a fixed or fixed index annuity. And because the annuity covers part of the client's income, the client can keep the rest of the portfolio in the market for growth – and even take more risk with it.

"There hasn't been a better time in my lifetime in the annuity market to get into these products because of the upside that they're providing, given the interest rate environment we're in," Biagini said.

How the ART framework sorts retirement risk, amid the social security environment

American Equity, which sells only fixed and fixed index annuities (FIAs), built its 2026 e-book for financial professionals, The ART of managing income risk, around three choices: Avoid, Retain or Transfer risk. According to their study: clients who avoid risk hold Treasurys and certificates of deposit (CDs); clients who retain risk hold diversified portfolios and draw down at a safe withdrawal rate; clients who transfer risk hand part of it to an insurer through an annuity that guarantees income.

Biagini said that the middle road, the retain bucket, alone cannot handle the risk retirees fear most. "When you look at a portfolio holistically, most portfolios can diversify away from market risk. But what most portfolios can't do is diversify away from longevity risk," he said. "We're really trying to focus on that concept, that retirement's no longer an asset allocation problem; it's an income design problem."

Only 15% of private industry workers had access to a pension as of 2024, according to US Bureau of Labor Statistics data. The 2026 Social Security Trustees Report projects that the combined trust funds can pay just 83% of scheduled benefits once reserves run dry in 2034, unless Congress acts.

Withdrawal math offers little more comfort: Morningstar's 2026 State of Retirement Income research puts the highest safe starting withdrawal rate at 3.9%, with a 90% chance that the portfolio of assets will last 30 years. By way of analogy: told an airplane would have a 90% chance of landing safely, Biagini said he would get off of that plane; given the suggested odds of the trust fund’s success, he calls withdrawals beyond those 30 years "hope money."

"Would you rather hope or know?" he said. "With an annuity, you can know that you're not going to run out of money."

Transferring risk frees capital for growth

To generate $15,000 a year at age 65, a client who avoids risk needs $333,333 in a 10-year Treasury yielding 4.5%; a client who retains risk needs $375,000 in a diversified portfolio drawing 4%. A hypothetical FIA with a 10% simple roll-up income rider needs $209,790 after a one-year deferral, or $141,844 after five years. By American Equity's calculation, the one-year transfer route leaves $165,210 that a client can reinvest to fight inflation.

Those figures assume a 4.5% Treasury yield, and higher rates help the avoid bucket too: at 5.17%, a Treasury needs roughly $290,000 to produce the same $15,000, by InvestmentNews' calculation.

The e-book’s hypothetical 64-year-old retiree, “Kristen”, applies the same logic to a $1 million portfolio. Shifting $400,000 of fixed income into an FIA cuts her equity withdrawal rate to 2.73% and raises her projected probability of success from 66% to 99%. Biagini said that guaranteed slice gives clients room to take more risk with the rest of their investments.

Planning software brings annuities to fee-based advisors

Carriers originally designed their annuities products for insurance agents. But since about 2016, broker-dealer representatives and fee-based advisors have taken a growing share of the business. Biagini said the fintech planning software most advisors run now models annuities inside the client portfolio. That change puts the burden on carriers to get their products onto the platforms and to display them accurately. Investors arrive better informed too: Biagini said AI tools like ChatGPT now point do-it-yourself savers toward guaranteed income with greater frequency than conventional knowledge-holders. American Equity pairs its e-book with an Income Quick Quote Calculator, which models a client's guaranteed income by age and premium.

Biagini names the trade-offs plainly. "The catch may be a fee. Not always, but maybe," he said. Most FIAs allow 10% in free withdrawals each year, he added; American Equities e-book retiree, Kristen, assumes a 1.20% annual fee for the lifetime income rider.

Yet with equities near all-time highs on the AI boom and yields at a 19-year high, Biagini urges advisors to lock part of clients' market gains into guaranteed income before the market turns.

"It might be a good idea to take some money off the table and protect it if and when the market changes direction," he said.