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Good News! Gift Annuity Rates Just Increased
There is good news for those who established or plan to establish a gift annuity after December 31, 2022. They will receive larger payments than they would have received from an annuity established earlier.
The payout rate, also known as the annuity rate, is the percentage of the contribution paid to beneficiaries. For example, if an annuity were established with a contribution of $10,000 in July 2022 and there was one beneficiary aged 75, the annuity rate would have been 6% and the annual amount paid to the beneficiary would be $600. If that annuity had been established in January 2023 or later, when the new rate was effective, the annuity rate would be 6.6% and the annual payment would be $660. This would have been an 10% increase in the amount of payment.
The graph below compares the old and new rates at three ages.
Rate Increase Even Larger for Deferred Gift Annuities
Most gift annuities are immediate payment. The contribution is made now, and payments start in the very next pay period. They appeal to those who want an immediate impact on their cash flow. However, a number of people choose a deferred-payment gift annuity. They also make the contribution now, but they elect to start payments at some future time. Their annuity serves as a supplemental retirement plan.
Suppose, for example, that a person aged 52 contributes $10,000 for a deferred-payment gift annuity with payments beginning at the age of 67. If the old rates applied, the annual payment amount beginning at 67 would be $840; but per the new rates, it would be $1,050. That is a 25% increase. |
