Annuities in Retirement: Navigating Age, Health, and Income Needs in 2024

Retirement income strategies have evolved significantly due to longer lifespans, market volatility, and rising essential costs such as healthcare. Annuities have gained popularity, with sales reaching $432 billion in 2024, reflecting strong demand for guaranteed income amid financial uncertainty. Federal regulations do not impose age limits on annuity purchases, leaving insurers to set their own guidelines, typically capping immediate annuities at ages 80 to 85, though some deferred or variable products extend to older clients. Older buyers generally receive higher payouts due to shorter life expectancy, but fewer payment years require careful consideration of timing and product type. Life expectancy trends show retirees often face a decade or more of financial needs post-65, while Social Security benefits average $1,976 monthly in 2025—typically insufficient for all expenses. Annuities help bridge income gaps by diversifying revenue streams, lessening market dependency, and providing income stability. Inflation protection features in some annuities, such as inflation riders or variable growth, offer additional safeguards against rising costs despite added fees. However, annuities involve drawbacks such as high fees, surrender charges, and illiquidity, which can be especially burdensome for those in their 80s with shorter time horizons. Financial professionals advise retaining ample liquid assets to cover emergencies before purchasing annuities. Health status also impacts annuity suitability; enhanced payouts for medical conditions rarely compensate for reduced lifespan and investment recoupment. Financial advisors play a crucial role in dispelling misconceptions about annuities and tailoring solutions based on individual health, liquidity needs, family circumstances, and income objectives. Alternative income options include CD ladders, bond portfolios, reverse mortgages, and part-time work, which offer flexibility though without lifetime guarantees. A blended strategy that combines guaranteed and liquid income sources often best suits retirees. The key to effective retirement planning lies in prioritizing client-specific problems rather than product-driven sales. Annuities are not universally optimal but can provide valuable income security if aligned with a client’s goals and health. With an empathetic, service-focused approach, advisors can help retirees navigate options and alleviate financial stress over a potentially 20- to 30-year retirement period. Ultimately, age should not exclude annuities in retirement income planning; thoughtful selection based on personalized circumstances enhances retirees’ confidence and security.