Learn how the market, economy, and demographics are shaping the annuity industry.
The annuity industry is having a moment. After years of mixed opinions and confusion around how they work, annuities surged in popularity in recent years, with total U.S. sales reaching a record-high $434.1 billion in 2024—a 13% increase from 2023.1
This trend has continued through 2025, fueled by a wave of aging Americans seeking stability in an uncertain economic environment. Let’s explore the specific factors contributing to this sustained interest, the challenges still facing the industry, and what the future may hold for annuities as a modern retirement tool.
Key Takeaways
- Annuities are insurance contracts that can provide guaranteed income, with different types offering varying levels of risk, return, and flexibility.
- Annuities have grown more popular in recent years due to factors like stock market volatility, high interest rates, and sticky inflation.
- Key challenges for the annuity industry in 2025 include declining interest rates, as well as product complexity and liquidity restrictions.
- Despite headwinds, long-term demand is expected to remain strong as Americans retire in record numbers and technology makes annuities more consumer-friendly.
Understanding Annuities
Annuities are financial contracts you can purchase from insurance companies that provide a steady stream of payments, typically for retirement. In exchange for a lump sum or a series of contributions, annuities can offer guaranteed income, either for a set number of years or for the rest of your life.
That guaranteed income stream is an annuity’s primary appeal, acting as a form of insurance against outliving your retirement savings—a growing concern in 2025. Around 64% of Americans say they’re more worried about running out of money in retirement than they are about dying.2
The two main ways annuities differ are in the timing and predictability of their payments. Here are the primary options:
- Immediate vs. deferred annuities: Immediate annuities generally begin payouts between a month and a year after purchase.3 Deferred annuities delay your income payments for a longer period, allowing your savings to grow tax-deferred in the meantime.4
- Fixed vs. variable vs. indexed annuities: Fixed annuities offer guaranteed returns and predictable payments. Variable annuity payments are tied to the performance of underlying investments, offering higher potential returns but with more risk. Indexed annuities strike a balance, offering returns linked to a market index—like the S&P 500—with downside protection.
Market Growth and Trends
The American annuity market has experienced a resurgence in recent years. From 2022 to 2024, total U.S. annuity sales exceeded $1.1 trillion, marking three straight years of record-breaking growth.6 In 2024 alone, annuity sales reached $434.1 billion—a 13% year-over-year increase—according to the LIMRA U.S. Individual Sales Survey, which covers 92% of the market.1
Although 2025 may see a modest pullback, the industry outlook remains strong. LIMRA projects annuity sales between $364–$410 billion this year, with the dip largely tied to declining short-term interest rates. The organization expects sales to stabilize in the following years, with forecasts of $340–$398 billion in 2026 and $326–$395 billion in 2027.
One of the primary factors behind this is America’s aging population. Between 2023 and 2027, the number of Americans aged 65 and older is projected to increase by 7.5 million. LIMRA expects that demographic shift—combined with increased sales from fixed-rate deferred annuities exiting their contingent deferred sales charge (CDSC) periods—to drive demand.6
Product and Market Leaders
While total annuity sales have grown significantly in recent years, much of the increase has been concentrated in specific products. In 2023, fixed-rate deferred annuities (FRDs) were the primary growth driver.7 LIMRA expects annual FRD sales to remain above $120 billion in 2025, double the sales recorded prior to 2022.1
However, as interest rates began to fall in 2024, investors increasingly turned to products offering greater growth potential, like fixed indexed annuities (FIAs) and registered index-linked annuities (RILAs). Both categories grew in 2024, with FIA sales rising 32% to $126.9 billion and RILAs climbing 38% to $65.6 billion.1
The competitive landscape is similarly concentrated, with the top 20 providers accounting for roughly 73% of the total industry sales in 2024. Here are the top five brands, which were responsible for around 30% of all sales:8
- Athene Annuity & Life: $35,984,848,000
- Corebridge Financial: $26,644,472,000
- Massachusetts Mutual Life: $24,018,149,000
- Equitable Financial: $22,461,027,000
- Allianz Life of North America: $22,087,389,000
“Each major annuity provider brings unique strengths,” said Jordan Gilberti, CFP, founder of Sage Wealth Group. “Some focus on innovative product features, while others emphasize customer service and financial stability. Understanding these differences is crucial for matching clients with the right annuity solutions.”
“Two of my preferred insurance companies today are MassMutual and Midland National,” said Zack Swad, CFP, CWS, founder of Swad Wealth Management. “Both have strong financial strength ratings from AM Best, long-standing reputations, and offer competitive annuity products tailored for fee-only advisors. Their offerings tend to be transparent and fairly easy to understand.”
Factors Driving Popularity
Market Volatility
Persistent market swings have made many retirees and near-retirees uneasy about relying too heavily on stocks. In 2022, the S&P 500 fell 19.4%—its worst annual performance since 2008.9 That downturn marked an inflection point, as many investors began turning to annuities for a more stable and predictable source of retirement income.
Fast forward to 2025, and the volatility hasn’t subsided. Global trade tensions, fueled by fear over the Trump administration’s tariff proposals, continue to rattle the markets. A series of sharp selloffs in early 2025, including a 748-point single-day drop in the Dow Jones Industrial Average (DJIA), have only deepened investor anxiety.10
“The shift towards annuities reflects a broader desire for financial security,” said Gilberti. “As people live longer and face uncertain markets/economic conditions, the appeal of a reliable income stream becomes more pronounced.”
Inflation Concerns
After a decade of relatively stable prices, inflation began to accelerate in 2021, peaking at roughly 9.1% in June 2022. Based on the Consumer Price Index (CPI), the inflation rate didn’t drop back below 5% until April 2023.
Inflation has since cooled, reaching a rate of 2.3% in April 2025, but remains stubbornly above the Federal Reserve’s long-term 2% target.11 For many, annuities offer a potential hedge against inflation. Specifically, inflation-protected annuities (IPA) index their payments to the inflation rate, guaranteeing a rate of return that keeps up with rising prices, though there may be a cap.
Raising Interest Rates
Interest rates rose rapidly from 2022 through 2023. The Federal Reserve raised the federal funds target rate from near zero to a range of 5.25% to 5.50%, where it remained until September 2024. While rates have since dipped slightly, the target rate still sits at a range of 4.25% to 4.5%—well above the historically low levels of the 2010s.12
This rate environment has enabled insurers to offer higher yields on fixed annuities, increasing their appeal. For example, annuity rates in the Thrift Savings Plan (TSP) climbed from 1.95% in January 2022 to 5.2% by December 2023. As of June 2025, they remain elevated at 4.825%.13
“I believe the uptick in demand is largely due to rising interest rates,” said Swad. “These have made annuities more attractive than they’ve been in over a decade.”
Tip
In the private market, annuity rates can be even more competitive. As of June 9, 2025, New York Life’s guaranteed lifetime income annuity offers returns as high as 7.36% for 65-year-old individuals.14
Technological Advancements
Technology is steadily modernizing the annuity industry, improving transparency, streamlining operations, and enhancing the customer experience. Providers are now using artificial intelligence (AI) to personalize annuity recommendations, automate underwriting, and provide better support through chatbots.
Blockchain is also emerging as a powerful tool for building trust in long-term financial contracts. By recording annuity agreements on a decentralized digital ledger, providers ensure contract terms are unchangeable and fully transparent to both parties. Smart contracts—like those powered by Ethereum—can also streamline payouts by automatically executing them in line with predefined terms.
Aging Population
As mentioned previously, demographics are a major force behind the expected long-term growth in the annuity market. The 7.5 million net increase in Americans aged 65 and older over the next several years is expected to create sustained demand for retirement income products like annuities.6
Fast Fact
In 2025, an average of more than 11,200 Americans are projected to turn 65 every day, adding up to roughly $4.1 million per year.15
This milestone has been dubbed America’s “Peak 65 Zone”—the biggest wave of new retirees in U.S. history. It sets a record that will hold for roughly 20 years, until the millennial generation starts reaching retirement age.16
Challenges and Considerations
Despite growing demand, the annuity market isn’t without its share of headwinds in 2025. Chief among them is the decline in interest rates compared to 2023, which has already reduced the appeal of fixed-rate products. The Federal Reserve appears to be in a holding pattern for now, but additional cuts later this year could further dampen annuity yields.
More fundamentally, the annuity industry continues to grapple with the issue of its own complexity. While newer products often offer greater transparency, the category as a whole has long been associated with layered fees, intricate terms, and confusing payout structures. These can overwhelm consumers and make product comparisons difficult.
Fast Fact
According to the 2024 Policygenius Annuities Literacy Survey, only 19% of American adults could correctly define an annuity. Just 5% knew both what it was and when it might be useful.17
Liquidity restrictions are another common concern. Many annuities come with surrender charges or penalties for withdrawing your money before payments begin. Even if you’re looking for guaranteed income, the idea of giving up control of your principal can be an intimidating prospect.
“Some annuities are difficult to understand and come with long surrender periods that tie up funds,” said Swad. “For people who value liquidity and flexibility, that can be a dealbreaker.”
What Is the Best Age To Buy an Annuity?
Many advisors suggest that the best age to buy an annuity is between 50 and 70, when you’re approaching retirement and seeking income stability. However, the ideal timing depends on various factors, including your financial circumstances, risk tolerance, and longevity prospects.
How Do Annuities Fit Into a Diversified Retirement Portfolio?
Annuities can provide a reliable income stream, helping reduce the risk of outliving your savings. They can help complement riskier assets like stocks, especially if you want additional guaranteed income beyond what you expect from Social Security or pensions.
What Are the Potential Risks Associated With Investing in Annuities?
Annuities can come with high fees, limited liquidity, and potentially lower returns than other investments. Some types, like variable annuities, can even expose you to market losses. Since they’re backed by an insurance company, there’s also a risk of loss if the provider becomes insolvent, making financial strength ratings key considerations.
The Bottom Line
Annuities have seen a resurgence in popularity over recent years, driven by increased demand for reliable income streams in retirement. Market volatility, elevated interest rates, and persistent inflation have all contributed to the trend.
Declining interest rates may lessen demand in 2025, but the long-term outlook for the industry remains strong. America’s aging population means there will be more retirees seeking financial security, and continued innovation—such as through AI and blockchain technologies—could make annuities increasingly accessible and appealing to them.
