Portfolio / New Money Renewal Rates
Insurers in the traditional fixed annuity market conceptually have two ways to declare renewal interest rates: Portfolio and New Money. With Portfolio, an insurer declares a rate based on their portfolio. Some might say that this method gives the most discretion to the insurer to what interest rate is paid. Most fixed annuities currently use the Portfolio method for crediting interest rates. On the other hand, the New Money Rate method of crediting interest is based on whatever interest rates they are paying to attract new business for that same annuity. Some might say that the latter is preferable and it might be during a rapidly increasing interest rate environment.

However, since most companies use Portfolio, one should feel relatively comfortable with that method especially if the insurer has a good track record for paying fair and competitive renewal rates. Since disappointing renewal interest rates are not uncommon, annuities with an interest rate guarantee for the entire surrender charge period is one effective way to sidestep decreasing renewal interest rates.

Fixed-Indexed Annuities are another way to remove the guesswork about renewal (unless participation rates, spreads, caps, etc. are not guaranteed).