WINDSOR, CT – The annuity market exploded in 2024, with total sales reaching a record $434.1 billion—up 13% from 2023's already-record-breaking $385 billion—according to LIMRA's U.S. Individual Annuity Sales Survey. This marks the third consecutive year of record sales, with the three-year total surpassing $1.1 trillion.
For the first time ever, every quarter in 2024 exceeded $100 billion in annuity sales, demonstrating sustained, broad-based demand rather than a temporary spike. Nearly 80% of annuity carriers reported positive growth, and more than half experienced double-digit increases—an extraordinary market-wide phenomenon.
What's driving this unprecedented boom? A combination of demographic trends, economic conditions, and evolving investor preferences is creating perfect conditions for annuity sales. As Baby Boomers flood into retirement seeking guaranteed income, volatile equity markets push investors toward protection, and innovative products like registered index-linked annuities (RILAs) offer compelling alternatives to traditional investments.
For financial advisors and investors, understanding this shift is critical. Annuities are no longer niche products for ultra-conservative retirees—they've become mainstream retirement planning tools attracting diverse investor profiles.
Breaking Down the $434 Billion: Product Categories
The annuity market isn't monolithic—different product types serve different investor needs and behaved very differently in 2024.
Fixed Rate Deferred Annuities: $153.2 Billion
Market share: 35%
Fixed rate deferred (FRD) annuities offer guaranteed interest rates for specified periods, similar to CDs but with tax deferral. They dominated sales in 2022-2023 when interest rates surged above 5%, offering retirees attractive, safe returns.
2024 performance: FRD sales totaled $153.4 billion, down 7% from 2023's peak. The decline accelerated in Q4 2024, with sales dropping 50% year-over-year as interest rates began falling and investors shifted to products with greater growth potential.
Why the decline: As the Federal Reserve cut interest rates, newly issued FRD annuities offered lower crediting rates (4-4.5% instead of 5-6%), making them less attractive. Investors who locked in high rates in 2022-2023 were satisfied, but new buyers sought alternatives.
Future outlook: LIMRA forecasts FRD sales could fall 25% in 2025 as rates continue declining. However, sales are expected to stabilize above $115 billion—well above pre-2022 levels—as investors reinvest maturing contracts and conservative investors continue seeking guaranteed returns.
Fixed Indexed Annuities: $126.9 Billion (Record)
Market share: 29%
Fixed indexed annuities (FIAs) link returns to stock market index performance (typically S&P 500) but guarantee principal protection. They offer upside potential when markets rise, but zero floor protection when markets fall—you can't lose money due to market declines.
2024 performance: FIA sales reached $126.9 billion, setting a new record and surpassing $120 billion for the first time. Growth was 15% year-over-year, with particularly strong Q4 performance.
Why FIAs are booming:
Market uncertainty drives demand: In volatile market environments, investors value FIA's downside protection. During 2024's market volatility (including significant Q3 pullback and early 2025 concerns), FIAs offered peace of mind.
Interest rate environment: While falling rates hurt FRDs, they benefited FIAs. Lower rates make the stock market more attractive relative to fixed income, and FIAs let investors participate in equity upside without downside risk.
Product innovation: Carriers introduced FIAs with improved upside participation rates, shorter surrender periods, and enhanced income riders. These innovations made FIAs more attractive relative to both traditional fixed annuities and direct stock market investing.
Advisor adoption: More financial advisors are recommending FIAs as a "middle ground" between bonds (too low return) and stocks (too risky) for clients within 5-10 years of retirement.
Future outlook: LIMRA expects FIA sales to remain strong through 2025, potentially reaching $135-140 billion. The product type appeals to investors seeking equity participation without risk, a value proposition that remains compelling across market conditions.
Registered Index-Linked Annuities (RILAs): $65.6 Billion (Record)
Market share: 15%
RILAs (also called structured annuities or buffered annuities) are the fastest-growing annuity category. They offer stock market participation with partial downside protection—typically, the first 10-20% of market losses are absorbed by the carrier, but investors bear losses beyond that buffer.
2024 performance: RILA sales jumped 38% to $65.6 billion, marking the 10th consecutive record-breaking year. Q4 sales reached $17.7 billion, up 36% year-over-year.
Historic milestone: 2024 was the first year RILA sales surpassed traditional variable annuity sales, signaling a fundamental shift in investor preferences.
Why RILAs are exploding:
Better risk/reward than traditional variable annuities: RILAs offer similar equity exposure to variable annuities but with downside buffers. For investors concerned about market risk, the buffer provides meaningful protection.
Appeal to sophisticated investors: RILAs attract wealthier, more financially savvy investors who understand the trade-offs (lower upside caps in exchange for downside buffers) and value customization.
Product proliferation: The number of RILA products available has exploded from fewer than 10 a decade ago to over 50 today. Increased competition drives innovation and better features.
Channel expansion: More broker-dealers, RIAs, and wirehouses are offering RILAs. As distribution expands, sales grow.
Fee compression: RILA fees have decreased as the market matures, making them more competitive with direct investing.
Example of RILA structure:
- Investment linked to S&P 500
- 15% downside buffer (carrier absorbs first 15% of losses)
- 8% upside cap (you earn up to 8% if market rises more)
- If market is down 10%, you lose 0% (protected by buffer)
- If market is down 25%, you lose 10% (15% buffer, you bear remaining 10%)
- If market is up 15%, you earn 8% (capped)
Future outlook: LIMRA projects RILA sales will continue growing, potentially reaching $75-85 billion in 2025. The product is expected to increasingly cannibalize traditional variable annuity sales as investors prefer buffered exposure.
Traditional Variable Annuities: $60.9 Billion
Market share: 14%
Traditional variable annuities invest in underlying mutual fund-like subaccounts with direct market exposure (no buffers or caps). They've been the traditional choice for investors seeking equity growth with tax deferral.
2024 performance: Variable annuity sales totaled $60.9 billion, relatively flat year-over-year. This marks the first year RILAs surpassed variable annuities, a symbolic shift.
Challenges: Variable annuities face competition from RILAs (offering similar exposure with more protection) and from direct investing in low-cost ETFs (lower fees, more liquidity). Without significant product innovation, variable annuities may see continued slow decline.
Remaining strengths: Living benefit riders (guaranteed minimum income, withdrawal, or accumulation benefits) remain attractive for some investors. Carriers offering competitive riders and low-cost institutional share classes continue competing effectively.
Income Annuities (Immediate and Deferred): $27.3 Billion
Market share: 6%
Income annuities convert a lump sum into guaranteed lifetime income payments, either immediately (SPIA - Single Premium Immediate Annuity) or starting in the future (DIA - Deferred Income Annuity, also called longevity annuities).
2024 performance: Income annuity sales totaled $27.3 billion, up 4% from 2023. Growth was modest but steady.
Why income annuities remain relevant:
Longevity insurance: As life expectancies increase (average 65-year-old can expect to live to 85+), outliving assets becomes a primary retirement risk. Income annuities eliminate this risk by providing payments for life.
Pension replacement: With defined benefit pensions nearly extinct in the private sector, retirees seek guaranteed income to replace pension-like payments. Income annuities serve this role.
Retirement income strategies: Financial advisors increasingly incorporate income annuities into comprehensive retirement income plans, typically allocating 10-30% of retirement assets to create a guaranteed income floor.
Challenge: Lower interest rates in late 2024 reduced payout rates, making income annuities less attractive. A 65-year-old male investing $100,000 in an immediate annuity might receive $600/month at current rates vs. $650/month when rates were higher.
Future outlook: Income annuity sales are expected to remain stable at $25-30 billion annually, supported by demographic trends and longevity concerns despite interest rate sensitivity.
Why Annuity Sales Are Booming: The Five Drivers
1. Demographics: Baby Boomers Hit Peak Retirement
10,000 Americans turn 65 every day, a pace that will continue through 2030 as Baby Boomers (born 1946-1964) reach retirement age.
7.5 million additional Americans aged 65+ by 2027 compared to 2024 levels. This expanding retirement-age population creates enormous demand for retirement income products.
Wealth concentration: Baby Boomers control approximately $78 trillion in wealth—the largest intergenerational wealth accumulation in history. As they transition from accumulation to decumulation (spending down assets), they seek products that guarantee income and protect principal.
Longevity concerns: Increased life expectancy means retirement could last 20-30+ years. Retirees worry about outliving their assets, making guaranteed lifetime income products highly attractive.
Pension decline: Only 12% of private sector workers have access to defined benefit pensions, down from 38% in 1980. Annuities fill the income guarantee gap left by pension disappearance.
2. Economic Conditions: Volatile Markets and Inflation Concerns
Market volatility drives protection demand: The S&P 500 experienced significant volatility in 2024-2025, with multiple 10%+ corrections. When markets swing wildly, investors near retirement become more risk-averse and seek principal protection.
Inflation concerns persist: Despite Federal Reserve efforts, inflation remains above target. Retirees on fixed incomes worry about purchasing power erosion. Many annuities now offer inflation protection riders or cost-of-living adjustments.
Interest rate environment (though declining, still elevated): While rates fell from 2023 peaks, they remain above the near-zero rates of 2010-2021. This makes fixed-income-oriented annuities more attractive than they were during the ultra-low-rate era.
Bond market challenges: Traditional retiree portfolios heavily allocated to bonds face duration risk (losses when rates rise) and reinvestment risk (lower yields when rates fall). Annuities provide alternative fixed-income exposure without these risks.
3. Product Innovation: Annuities Aren't Your Grandparents' Annuities
The annuity industry has dramatically improved products over the past decade:
Lower fees: Competition and regulatory pressure have reduced fees. Many FIAs have zero annual fees. RILAs and variable annuities now offer low-cost institutional share classes.
Shorter surrender periods: Surrender periods (the time during which withdrawals incur penalties) have shortened from 10-15 years to 5-7 years for many products, improving liquidity.
Enhanced income riders: Living benefit riders that guarantee lifetime withdrawal percentages (e.g., 5% annually) provide income flexibility while maintaining death benefit value for heirs.
Improved participation rates and caps: Carriers offer more attractive upside participation in indexed products. Cap rates of 8-10% and participation rates of 50-100% are now common.
Customization: Modern annuities offer numerous options—income timing, death benefit structures, investment allocations—allowing tailored solutions for individual needs.
Technology integration: Digital platforms make purchasing, managing, and monitoring annuities easier. Some carriers offer entirely online application and servicing.
4. Distribution Expansion: More Advisors Recommending Annuities
RIA adoption: Registered Investment Advisors (RIAs), who historically avoided commission-based products, are increasingly offering fee-based annuities. This expands annuity distribution to a large, growing advisor channel.
Fiduciary rule accommodations: Department of Labor fiduciary rules made annuities more acceptable by improving disclosure and fee structures. Advisors confident they can recommend annuities in clients' best interests are more willing to do so.
Wirehouses and broker-dealers: Major firms like Merrill Lynch, Morgan Stanley, UBS, and Wells Fargo have robust annuity platforms, making products accessible to millions of investors.
Direct-to-consumer growth: Some carriers sell annuities direct-to-consumer online, reducing or eliminating commissions and lowering costs.
Education and awareness: Industry education efforts have increased advisor and consumer understanding of annuities, dispelling myths (e.g., "annuities are always expensive and illiquid") and highlighting appropriate use cases.
5. Tax Advantages and Retirement Savings Shifts
Tax deferral: Annuities offer tax-deferred growth (gains aren't taxed until withdrawn), making them attractive for high-income earners who've maxed out 401(k) and IRA contributions.
No contribution limits: Unlike qualified plans, non-qualified annuities have no annual contribution limits. Investors can invest unlimited amounts.
IRA rollovers: Retirees rolling 401(k) balances into IRAs (IRA rollovers exceeded $500 billion annually in recent years) often invest a portion in annuities within the IRA for guaranteed income.
Secure Act 2.0: The 2022 Secure Act 2.0 included provisions encouraging annuity use in 401(k) plans, such as simplified disclosure and portability rules. This may increase workplace annuity availability in coming years.
Who's Buying Annuities?
Pre-Retirees (Ages 55-65)
Primary buyers of deferred annuities (FRDs, FIAs, RILAs). These investors are accumulating assets for retirement and seeking protection from market downturns that could derail retirement plans.
Typical use case: Allocate 20-30% of portfolio to deferred annuities to ensure a portion of assets grows safely, with remaining portfolio in stocks for higher growth potential.
Product preferences: FIAs and RILAs popular for equity participation with downside protection. FRDs attractive for ultra-conservative investors prioritizing guaranteed rates.
New Retirees (Ages 65-75)
Primary buyers of income annuities (SPIAs, DIAs) and variable/FIA annuities with income riders.
Typical use case: Convert portion of retirement savings to guaranteed lifetime income to cover essential expenses (housing, healthcare, food). Social Security plus annuity income creates a pension-like income floor.
Product preferences: Income annuities for maximum guaranteed income per dollar invested. FIAs with income riders for guaranteed withdrawal benefits while maintaining death benefit for heirs.
Asset allocation: Commonly invest $200,000-$400,000 in income-producing annuities from $1M+ retirement portfolios, with remaining assets in diversified investments.
Older Retirees and Retirees Concerned About Longevity (Ages 75+)
Buyers of deferred income annuities (longevity annuities) that begin payments at advanced ages (80, 85, 90).
Typical use case: Purchase DIA at age 70 that begins paying at age 85 to insure against longevity risk. If they live to 85+, the annuity provides substantial income when other assets may be depleted.
Product preferences: Longevity annuities (DIAs with long deferral periods) and immediate annuities for current income needs.
High-Net-Worth Investors
Increasingly using annuities for:
Estate planning: Annuities can provide guaranteed death benefits to heirs, bypass probate, and create wealth transfer strategies.
Tax management: Non-qualified annuities defer capital gains and income taxes, useful for investors in high tax brackets with concentrated positions.
Divorce settlements: Annuities provide guaranteed income streams in divorce settlements, protecting payees from investment risk and payor's financial problems.
RILAs for diversification: Wealthy investors use RILAs to gain market exposure with downside buffers in a tax-deferred vehicle, complementing traditional portfolio allocations.
Are Annuities Right for You? Understanding the Trade-offs
Despite record sales, annuities aren't suitable for everyone. Understanding pros, cons, and ideal use cases is critical.
When Annuities Make Sense
You're approaching or in retirement and need reliable income to supplement Social Security.
You're concerned about market volatility and want to protect a portion of assets from potential losses.
You're worried about outliving your money and want guaranteed lifetime income regardless of how long you live.
You've maxed out other retirement accounts and want additional tax-deferred growth.
You have a pension-sized gap in your retirement income plan (e.g., essential expenses exceed Social Security benefits).
You want to simplify retirement income and avoid actively managing investment withdrawals.
When Annuities May Not Be Ideal
You need liquidity: Most annuities have surrender periods (5-10 years) during which early withdrawals incur penalties. If you may need access to funds, annuities can be problematic.
You're young (under 50): Tax-deferred growth is less valuable when you have decades until retirement, and annuity fees can erode returns. Maximize 401(k), IRA, and HSA contributions first.
You have limited assets: If you have under $100,000 in retirement savings, prioritizing liquid emergency funds and diversified investments may be wiser than illiquid annuities.
You're in poor health: Life expectancy significantly affects annuity value. If you have serious health issues and shorter life expectancy, annuities providing lifetime income may not pay back your investment.
You prioritize leaving large estates: Income annuities that pay for life provide no death benefit (or limited death benefits). If maximizing inheritance is your primary goal, other strategies may be better.
Annuity Costs and Fees to Understand
Surrender charges: Penalties for early withdrawal during surrender period (typically declining over time, e.g., 7% year 1, 6% year 2, declining to 0% after 7 years).
Mortality and expense charges (variable annuities): Annual charges of 1-1.5% to cover insurance costs and carrier profit.
Administrative fees: Annual policy fees of $25-50.
Investment management fees (variable annuities): Expense ratios of underlying subaccounts, typically 0.5-2%.
Rider fees (optional): Charges for living benefit riders (guaranteed income, death benefits), typically 0.5-1.5% annually.
Good news: FRDs and FIAs typically have no annual fees (carrier profits from spread between what they earn on investments and what they credit to your account). RILAs often have minimal fees.
Tax Treatment
Qualified annuities (purchased within IRAs): Taxed as ordinary income upon withdrawal, same as any IRA distribution.
Non-qualified annuities (purchased with after-tax money):
- Earnings taxed as ordinary income when withdrawn (not capital gains)
- Principal (your investment) withdrawn tax-free
- Withdrawals before age 59½ may incur 10% penalty on earnings
- Annuity death benefits taxed as ordinary income to beneficiaries (no step-up in basis)
Tax efficiency consideration: Annuities make more sense in accumulation phase (deferring taxes on gains) than distribution phase. For retirees already drawing income, tax-deferred growth is less valuable.
How to Evaluate and Purchase an Annuity
Step 1: Define Your Goal
What do you want the annuity to do?
- Provide guaranteed lifetime income?
- Protect principal while allowing market participation?
- Defer taxes on investment gains?
- Guarantee legacy for heirs?
Your goal determines the product type:
- Guaranteed income → Income annuities (SPIA, DIA) or deferred annuities with income riders
- Principal protection with growth → FIAs or RILAs
- Tax deferral with market growth → Variable annuities
- High guaranteed rates → FRDs
Step 2: Determine How Much to Invest
Rule of thumb: Don't allocate more than 30-40% of your retirement portfolio to annuities. Maintain sufficient liquid assets for emergencies and unexpected expenses.
Income planning approach: Calculate your essential expenses (housing, food, healthcare, utilities). Subtract Social Security. The gap is how much guaranteed income you need. Determine how much principal is required to generate that income (divide annual income needed by payout rate, typically 5-7% for immediate annuities).
Example: You need $30,000 annual income beyond Social Security. At 6% payout rate, you'd invest $500,000 in an immediate annuity.
Step 3: Compare Carriers and Products
Carrier financial strength: Only purchase annuities from highly rated insurance companies (A+ or better from AM Best, AA or better from S&P). Annuities are only as secure as the issuing carrier.
Product features: Compare participation rates, caps, surrender periods, fees, and rider options across similar products from multiple carriers.
Payout rates (for income annuities): Rates vary significantly between carriers. A difference of 0.5% in payout rate equals 10% more lifetime income.
Use independent resources:
- ImmediateAnnuities.com for income annuity comparisons
- Annuity.org for educational resources
- Blueprint Income, Hueler Income Solutions for online quotes
Step 4: Work with a Qualified Advisor
Fee-only or fee-based advisors: Avoid commission-only agents who may steer you toward high-commission products. Fee-based advisors can recommend commission-based annuities but must disclose compensation.
Fiduciary standard: Work with advisors held to a fiduciary standard (required to act in your best interest), such as RIAs or CFP® professionals.
Get multiple opinions: Consult 2-3 advisors to compare recommendations. If all suggest similar strategies, you've likely identified an appropriate approach.
Step 5: Understand Before You Buy
Read the prospectus or disclosure documents thoroughly. Ask questions about:
- How is interest credited (for FRDs, FIAs)?
- What are participation rates, caps, and spreads (for FIAs, RILAs)?
- What fees will I pay annually?
- What is the surrender schedule?
- How do optional riders work and what do they cost?
- What happens if I need to access funds early?
- What happens when I die (death benefits)?
Free-look period: You typically have 10-30 days after purchase to review the contract and cancel for a full refund if you change your mind. Use this time to review carefully.
The Future of Annuities: What's Ahead for 2025-2027
LIMRA projects annuity sales will remain very strong through 2027, though not at the record-breaking pace of 2022-2024.
2025 forecast: $364-410 billion. Declining FRD sales offset by growing FIA and RILA sales.
2026-2027 forecast: $300-350 billion annually. Stabilization at elevated levels as demographic trends continue supporting demand.
Growth drivers continuing:
- Baby Boomer retirements (peak impact through 2030)
- Guaranteed income demand amid Social Security concerns
- Market volatility driving protection demand
- Product innovation making annuities more attractive and accessible
Headwinds:
- Lower interest rates reduce FRD and income annuity attractiveness
- Fee compression squeezes carrier profitability, potentially reducing product innovation
- Increased scrutiny from regulators and consumer advocates
Bottom line: Annuities have shifted from niche products to mainstream retirement tools. The trend is sustainable, driven by demographics and evolving investor preferences rather than temporary market conditions.
Key Takeaways
Annuity sales hit $434 billion in 2024, the third consecutive record, driven by demographics, market volatility, product innovation, and guaranteed income demand.
Fixed indexed annuities led growth, reaching $127 billion as investors sought equity participation with principal protection.
RILAs are the fastest-growing category, surging 38% and surpassing variable annuities for the first time. Their buffered market exposure appeals to sophisticated investors.
Baby Boomer retirements fuel sustained demand, with 10,000 Americans turning 65 daily through 2030. This demographic wave supports continued strong sales.
Annuities aren't one-size-fits-all. Success requires matching the right product to your specific goals, understanding trade-offs (liquidity, fees, tax treatment), and working with qualified advisors.
Consider annuities as part of a comprehensive retirement plan, not a complete solution. Allocating 20-40% of assets to annuities for guaranteed income, with the remainder in diversified investments, balances security and growth.
The annuity boom reflects a fundamental shift in retirement planning. As Americans take responsibility for managing longevity risk without pensions, annuities fill a critical role—providing the certainty and guaranteed income previous generations received from employer pensions and higher Social Security benefits.
Exploring annuity options for your retirement? With dozens of product types, hundreds of carriers, and complex trade-offs between growth potential, protection, and income guarantees, choosing the right annuity requires expertise. Working with qualified advisors ensures you select products aligned with your goals and avoid costly mistakes.
Sources: LIMRA, Investment News, CoreGroup USA, LinkedIn (LIMRA data), Insurance News Net