Illinois has one of the most favorable tax environments for annuity owners in the country — not because of a low rate, but because Illinois does not tax most retirement income, including distributions from IRAs, 401(k)s, and qualified pension plans. For retirees drawing from these sources, Illinois’ 4.95% income tax often doesn’t apply to a single dollar of their annuity income. If you’re new to the topic, learn how annuities work before exploring rates.
Below are today’s best MYGA rates available to Illinois residents, filtered to A-rated carriers only, updated daily.
2-Year MYGA Rates
| Carrier | Product | AM Best | Rate | Term | Min Premium | Free Withdrawal |
|---|---|---|---|---|---|---|
| Axonic Insurance | Waypoint 2 MYGA | 5.00%Top Rate | 2 yr | $100,000 | 10% | |
| Oceanview Life and Annuity | Harbourview 2 | 4.80% | 2 yr | $70,000 | 10% | |
| GBU Life | Asset Guard Select 2 | 4.75% | 2 yr | $25,000 | 10% | |
| Mass Mutual | Premier Voyage 2 | 3.45% | 2 yr | $1,000,000 | 10% |
3-Year MYGA Rates
| Carrier | Product | AM Best | Rate | Term | Min Premium | Free Withdrawal |
|---|---|---|---|---|---|---|
| Knighthead Life | Staysail 3 (Simple Interest) SI | 5.60%Top Rate | 3 yr | $100,000 | 0% | |
| Axonic Insurance | Waypoint 3 MYGA | 5.40% | 3 yr | $100,000 | 10% | |
| Fidelity Security Life Insurance Company | TaxVantage® Multi-Year Guaranteed Annuity 3 | 5.25% | 3 yr | $2,500 | 0% | |
| Knighthead Life | Staysail 3 With Liquidity (Simple Interest) SI | 5.25% | 3 yr | $100,000 | 10% | |
| Ibexis | MYGA Plus 3 (Simple Interest) SI | 5.20% | 3 yr | $100,000 | 10% | |
| Athene IA | Athene Max Rate 3 | 4.90% | 3 yr | $100,000 | Interest Only | |
| Oceanview Life and Annuity | Harbourview 3 | 4.90% | 3 yr | $70,000 | 10% | |
| Midland National Life | MNL Guarantee Pro 3 | 4.85% | 3 yr | $100,000 | Interest Only |
4-Year MYGA Rates
| Carrier | Product | AM Best | Rate | Term | Min Premium | Free Withdrawal |
|---|---|---|---|---|---|---|
| Oceanview Life and Annuity | Harbourview 4 | 5.20%Top Rate | 4 yr | $70,000 | 10% | |
| Oxford Life Insurance Company | Multi-Select 4 | 5.10% | 4 yr | $20,000 | 10% | |
| Clear Spring Life | Preserve MYGA 4 | 4.90% | 4 yr | $100,000 | 10% | |
| Pacific Guardian Life | Diamond Head 4 | 4.80% | 4 yr | $10,000 | 10% | |
| GBU Life | Asset Guard Select 4 | 4.75% | 4 yr | $25,000 | 10% | |
| Guardian Insurance & Annuity Co. | Guardian Fixed Target Annuity 4 | 4.65% | 4 yr | $100,000 | 10% | |
| S.USA Life Insurance Company, Inc. | Select Choice® Plus 1 (4) Year Plan Base Policy MVA | 4.55% | 4 yr | $100,000 | 0% | |
| Corebridge Financial | Corebridge Pathway Choicesm Fixed 4 Annuity GROP | 4.50% | 4 yr | $100,000 | 10% |
5-Year MYGA Rates
| Carrier | Product | AM Best | Rate | Term | Min Premium | Free Withdrawal |
|---|---|---|---|---|---|---|
| Knighthead Life | Staysail 5 (Simple Interest) SI | 6.30%Top Rate | 5 yr | $100,000 | 0% | |
| Ibexis | MYGA Plus 5 (Simple Interest) SI | 5.75% | 5 yr | $100,000 | 10% | |
| Knighthead Life | Staysail 5 With Liquidity (Simple Interest) SI | 5.75% | 5 yr | $100,000 | 10% | |
| Axonic Insurance | Waypoint 5 MYGA | 5.65% | 5 yr | $100,000 | 10% | |
| Fidelity Security Life Insurance Company | TaxVantage® Multi-Year Guaranteed Annuity 5 | 5.65% | 5 yr | $2,500 | 0% | |
| Liberty Bankers Life | Heritage Elite 5 | 5.40% | 5 yr | $10,000 | 0% | |
| Liberty Bankers Life | Heritage Premier 5 | 5.35% | 5 yr | $10,000 | Interest Only | |
| Oxford Life Insurance Company | Multi-Select 5 | 5.20% | 5 yr | $20,000 | 10% |
6-Year MYGA Rates
| Carrier | Product | AM Best | Rate | Term | Min Premium | Free Withdrawal |
|---|---|---|---|---|---|---|
| Oxford Life Insurance Company | Multi-Select 6 | 5.55%Top Rate | 6 yr | $20,000 | 10% | |
| Oceanview Life and Annuity | Harbourview 6 | 5.50% | 6 yr | $70,000 | 10% | |
| Clear Spring Life | Preserve MYGA 6 | 5.10% | 6 yr | $100,000 | 10% | |
| Pacific Guardian Life | Diamond Head 6 | 5.00% | 6 yr | $10,000 | 10% | |
| Guardian Insurance & Annuity Co. | Guardian Fixed Target Annuity 6 | 4.80% | 6 yr | $100,000 | 10% | |
| Mass Mutual | Premier Voyage 6 | 4.70% | 6 yr | $1,000,000 | 10% | |
| American General Life Insurance Company | American Pathway VisionMYG 6 | 4.30% | 6 yr | $100,000 | 15% | |
| Corebridge Financial | American Pathway VisionMYG 6 | 4.30% | 6 yr | $100,000 | 15% |
7-Year MYGA Rates
| Carrier | Product | AM Best | Rate | Term | Min Premium | Free Withdrawal |
|---|---|---|---|---|---|---|
| Knighthead Life | Staysail 7 (Simple Interest) SI | 6.50%Top Rate | 7 yr | $100,000 | 0% | |
| Ibexis | MYGA Plus 7 (Simple Interest) SI | 5.95% | 7 yr | $100,000 | 10% | |
| Knighthead Life | Staysail 7 With Liquidity (Simple Interest) SI | 5.95% | 7 yr | $100,000 | 10% | |
| Fidelity Security Life Insurance Company | TaxVantage® Multi-Year Guaranteed Annuity 7 | 5.60% | 7 yr | $2,500 | 0% | |
| Axonic Insurance | Waypoint 7 MYGA | 5.50% | 7 yr | $100,000 | 10% | |
| Liberty Bankers Life | Heritage Elite 7 | 5.45% | 7 yr | $10,000 | 0% | |
| Oxford Life Insurance Company | Multi-Select 7 | 5.45% | 7 yr | $20,000 | 10% | |
| Liberty Bankers Life | Heritage Premier 7 | 5.40% | 7 yr | $10,000 | Interest Only |
8-Year MYGA Rates
| Carrier | Product | AM Best | Rate | Term | Min Premium | Free Withdrawal |
|---|---|---|---|---|---|---|
| Oxford Life Insurance Company | Multi-Select 8 | 5.20%Top Rate | 8 yr | $20,000 | 10% | |
| Clear Spring Life | Preserve MYGA 8 | 5.10% | 8 yr | $100,000 | 10% | |
| Pacific Guardian Life | Diamond Head 8 | 5.00% | 8 yr | $10,000 | 10% | |
| Guaranty Income Life | Guaranty Rate Lock 8 | 4.10% | 8 yr | $100,000 | 5% |
9-Year MYGA Rates
| Carrier | Product | AM Best | Rate | Term | Min Premium | Free Withdrawal |
|---|---|---|---|---|---|---|
| Liberty Bankers Life | Heritage Elite 9 | 5.50%Top Rate | 9 yr | $10,000 | 0% | |
| Liberty Bankers Life | Heritage Premier 9 | 5.45% | 9 yr | $10,000 | Interest Only | |
| Liberty Bankers Life | Heritage Premier Plus 9 | 5.35% | 9 yr | $10,000 | Interest Only | |
| Liberty Bankers Life | Heritage Classic 9 | 5.25% | 9 yr | $10,000 | 10% | |
| Securian Financial | SecureOption Choice 9 | 5.20% | 9 yr | $500,000 | 10% | |
| Clear Spring Life | Preserve MYGA 9 | 5.10% | 9 yr | $100,000 | 10% | |
| Oxford Life Insurance Company | Multi-Select 9 | 5.10% | 9 yr | $20,000 | 10% | |
| Pacific Guardian Life | Diamond Head 9 | 5.00% | 9 yr | $10,000 | 10% |
10-Year MYGA Rates
| Carrier | Product | AM Best | Rate | Term | Min Premium | Free Withdrawal |
|---|---|---|---|---|---|---|
| Oceanview Life and Annuity | Harbourview 10 | 5.55%Top Rate | 10 yr | $70,000 | 10% | |
| Axonic Insurance | Waypoint 10 MYGA | 5.50% | 10 yr | $100,000 | 10% | |
| Royal Neighbors of America | MYGA 10 Year | 5.30% | 10 yr | $100,000 | Interest Only | |
| Oxford Life Insurance Company | Multi-Select 10 | 5.15% | 10 yr | $20,000 | 10% | |
| American National Insurance Company | Palladium MYG Annuity 10 | 5.10% | 10 yr | $250,000 | 10% | |
| Clear Spring Life | Preserve MYGA 10 | 5.10% | 10 yr | $100,000 | 10% | |
| Reliance Standard Life | Reliance Guarantee - 10 | 5.10% | 10 yr | $20,000 | 10% | |
| Pacific Guardian Life | Diamond Head 10 | 5.00% | 10 yr | $10,000 | 10% |
Rates shown are for informational purposes only and subject to change without notice. Only carriers rated A− or better by AM Best are included. Products marked SI use simple interest — the effective compound yield is lower than the stated rate. Minimum premiums shown are for non-qualified (after-tax) funds. Always verify current rates with a licensed annuity broker before purchasing.
Key Takeaways
- Illinois does not tax retirement income from IRAs, 401(k)s, and qualified pension plans — qualified annuity distributions may be fully exempt from Illinois income tax
- The Illinois Life and Health Insurance Guaranty Association protects up to $250,000 in annuity present value per person, per insurer
- Illinois’ flat income tax rate is 4.95% — applies to non-qualified annuity gains if the retirement income exemption does not apply
- Illinois law requires a minimum 10-day free-look period for annuity contracts
- Illinois has no estate tax on estates under $4 million (state-level exemption)
Are Fixed Annuities a Good Investment in Illinois?
Illinois’ retirement income exemption is the key fact every annuity buyer in the state needs to know. Illinois does not tax distributions from qualified retirement plans — meaning if you fund your annuity through an IRA rollover or 401(k) rollover, your withdrawals may be entirely free of Illinois state income tax. On a $50,000 annual withdrawal, that’s $2,475 per year you keep instead of sending to Springfield.
Consider this: Frank, age 68, lives in Naperville and rolls $200,000 from his IRA into a 5-year MYGA at 5.00%. At maturity he has approximately $255,256. When he begins drawing down the account, Illinois treats all distributions from his IRA-funded annuity as exempt retirement income — zero Illinois income tax. Compare that to a neighbor in Wisconsin paying 5.3% on the same income: $13,507 more in state taxes over a moderate drawdown period. Illinois’ exemption is genuinely valuable.
Note: The Illinois retirement income exemption applies to distributions from qualified plans (IRAs, 401(k)s, pension plans). Non-qualified annuities (funded with after-tax money) are taxed differently — only the gain is subject to Illinois’ 4.95% rate; the principal is returned tax-free via the exclusion ratio.
Illinois Guaranty Association: How Your Annuity Is Protected
The Illinois Life and Health Insurance Guaranty Association (ILHIGA) protects Illinois policyholders if a licensed insurer becomes insolvent. Coverage activates automatically — no enrollment and no extra fees required.
| Coverage Type | Illinois Protection Limit |
|---|---|
| Annuity present value | $250,000 per person, per insurer |
| Life insurance death benefit | $300,000 per person, per insurer |
| Life insurance cash value | $100,000 per person, per insurer |
| Multiple policies at same insurer | Combined subject to limits above |
For annuity portfolios over $250,000, spread across two or more A-rated carriers to keep each position fully within coverage limits.
Illinois Life and Health Insurance Guaranty Association
Website: ilhiga.org
How Illinois Taxes Annuity Income
Illinois taxes income at a flat 4.95% rate — but the retirement income exemption is critical. Qualified annuity distributions (from IRA or 401(k)-funded annuities) are generally exempt. Non-qualified annuity gains face the 4.95% rate, but principal is returned tax-free.
| Annuity Type | Illinois Tax Treatment | State Rate |
|---|---|---|
| Qualified (IRA / 401(k) rollover) | Distributions typically exempt under Illinois retirement income exclusion | 0% (if qualifying) |
| Non-qualified (after-tax funds) | Only gains taxed; principal returned tax-free via exclusion ratio | 4.95% on gains |
| Pension annuity (qualifying plan) | Exempt from Illinois income tax | 0% |
| 1035 Exchange | No Illinois tax triggered on the exchange itself | N/A |
Illinois has a state estate tax with an exemption of $4 million (lower than the federal exemption). Estates over $4 million may face Illinois estate tax rates of up to 16%. For most retirees, this does not apply — but high-net-worth buyers should consult an estate planning attorney.
Illinois Department of Insurance
The Illinois Department of Insurance (IDOI) licenses and regulates all insurance carriers and agents operating in Illinois. Before purchasing an annuity, verify both the carrier’s license and your agent’s license through IDOI’s online lookup. Consumer complaints and assistance are handled through IDOI’s Consumer Assistance division.
| Contact | Details |
|---|---|
| Agency | Illinois Department of Insurance (IDOI) |
| Consumer assistance | 1-866-445-5364 |
| Website | insurance.illinois.gov |
| License verification | IDOI license lookup |
Tips for Buying an Annuity in Illinois
- Confirm your annuity qualifies for the retirement income exemption: If your annuity is funded through an IRA rollover or qualified plan, distributions are generally exempt from Illinois income tax. Verify with a CPA before assuming this — the rules have nuances.
- Non-qualified buyers still get the exclusion ratio: Even for after-tax-funded annuities, Illinois only taxes the gain — not your original premium. The exclusion ratio applies at the state level just as at the federal level.
- Work with an independent broker: Illinois has a large independent insurance market in Chicago, the suburbs, and downstate. Independent brokers compare 20+ carriers to find your best rate.
- Don’t exceed $250,000 per carrier: For portfolios over $250,000, use two or more A-rated carriers to stay within guaranty protection limits.
- Large estates should plan around Illinois’ $4M exemption: Illinois has a lower estate tax exemption than the federal government. If your total estate exceeds $4 million, consult an estate attorney — annuity beneficiary designations can be an effective planning tool.
Frequently Asked Questions
Does Illinois tax annuity income?
It depends on how the annuity was funded. Illinois does not tax distributions from qualified retirement plans (IRAs, 401(k)s) — so IRA-funded annuity withdrawals are generally exempt from Illinois income tax. Non-qualified annuity gains face Illinois’ 4.95% flat rate, but your principal is returned tax-free via the exclusion ratio.
What is the best annuity rate in Illinois today?
The best MYGA rates available to Illinois residents from A-rated carriers range from approximately 4.50%–5.50% depending on the term as of early 2026. See the live rate table above for current figures updated daily from AnnuityRateWatch.
How much does the Illinois Guaranty Association cover?
The Illinois Life and Health Insurance Guaranty Association protects up to $250,000 in annuity present value per person, per insurance company. For investments over $250,000, spread across multiple A-rated carriers.
What is the free-look period for annuities in Illinois?
Illinois requires a minimum 10-day free-look period for annuity contracts. During this window you can return the contract for a full refund of your premium. Many carriers offer 20–30 days voluntarily.
Does Illinois have an estate tax?
Yes. Illinois has a state estate tax with a $4 million exemption — lower than the federal $13.61 million threshold. Estates over $4 million may face Illinois estate tax rates up to 16%. This affects a minority of retirees, but high-net-worth buyers should plan accordingly.
Who regulates annuities in Illinois?
The Illinois Department of Insurance (IDOI) licenses and regulates all insurance carriers and agents in Illinois. Verify licenses and file complaints at insurance.illinois.gov or by calling 1-866-445-5364.
Can I do a 1035 exchange into a new annuity in Illinois?
Yes. Illinois follows federal 1035 exchange rules — you can transfer from one annuity (or qualifying life insurance policy) to a new annuity without triggering immediate taxes. Illinois does not impose any additional state tax on a valid 1035 exchange.