U.S. Annuity Sales Hit Record $432B in 2024 Amid Rate-Driven Demand

The U.S. annuity industry has shown significant growth over the past three years, with 2024 annuity sales reaching a record $432.4 billion, driven by rising interest rates, demographic shifts, and enhanced demand for income security. Federal Reserve interest rate hikes made fixed-rate deferred annuities (FRDAs) particularly attractive due to their competitive yields compared to traditional savings vehicles. Market volatility in 2022 also prompted investors to seek stability through guaranteed income products, further fueling annuity demand, especially among the aging baby boomer population seeking reliable retirement income.

Registered index-linked annuities (RILAs) and fixed indexed annuities (FIAs) experienced robust sales growth, with RILA sales up 33% to $65.2 billion and FIA sales increasing 31% to $125.5 billion in 2024. These products appeal to investors looking for market participation combined with downside protection, contributing to the diversification of the annuity market.

Looking ahead to 2025, the annuity market faces potential softening due to expected interest rate cuts that may reduce the appeal of FRDAs. LIMRA projects total annuity sales to decline to between $364 billion and $410 billion, with FRDA sales possibly dropping 15% to 25%. Despite this, RILAs and FIAs are expected to maintain or slightly exceed their 2024 sales levels, reflecting continued investor interest in products that balance growth and risk mitigation.

Industry professionals and financial advisors will need to adapt strategies to meet evolving client needs. Emphasis may shift toward product diversification favoring RILAs and FIAs, increased client education on product benefits and limitations, timing strategies to lock in favorable rates before potential decreases, and leveraging technological tools to improve client engagement and operational efficiency.

The evolving interest rate environment and demographic trends position the annuity sector at a critical point where education, insight, and adaptability will be key for sustaining success amid shifting market conditions. While the rapid growth of recent years may moderate, strategic focus on resilient annuity segments and client-centric approaches remain vital.