U.S. Annuity Market Hits Record Sales Amid Aging Population and Market Volatility
The U.S. annuity market has reached record sales, achieving $434.1 billion in 2024—a 13% increase over 2023—as retirees increasingly seek stable income amid economic uncertainty. This growth, continuing into 2025, is driven primarily by demographic shifts with a projected 7.5 million rise in Americans aged 65 and over by 2027, pushing demand for retirement income products like annuities.
Annuities, provided by insurance companies, offer guaranteed income streams through contracts that pay either a fixed or variable amount, starting immediately or deferred. The surge in demand notably favors fixed-rate deferred annuities (FRDs), which grew 46% in 2023, while fixed indexed annuities (FIAs) and registered index-linked annuities (RILAs) gained traction as interest rates began to fall in 2024.
Market volatility, including significant stock index declines, has amplified investor appetite for guaranteed income, further enhancing the appeal of annuities as a counterbalance to riskier assets. Inflationary pressures, with rates peaking near 9.1% in 2022 and moderating to 2.3% in 2025 but remaining above the Fed’s 2% target, have increased interest in inflation-protected annuities that adjust payments based on inflation indices. Rising interest rates from 2022 through 2023 enabled insurers to offer higher yields, notably boosting fixed annuity attractiveness; however, slight rate declines in 2025 are expected to temper growth temporarily. Leading providers, concentrated among the top 20 firms, command approximately 73% of sales, with firms like MassMutual and Midland National noted for strong financial ratings and competitive, transparent products.
Technological advances such as AI-driven personalization and blockchain-based contract verification are modernizing the industry, improving transparency and operational efficiency. Despite growth, challenges persist including product complexity, consumer misunderstanding—only 19% of adults correctly define annuities—and liquidity constraints like surrender charges.
These factors may inhibit broader adoption despite demographic tailwinds. Advisors generally recommend purchasing annuities between ages 50 and 70, tailored to individual risk tolerance, longevity, and financial goals. While interest rate declines may temporarily reduce demand, long-term forecasts remain positive as the "Peak 65 Zone" ushers in the largest retirement cohort in U.S. history, sustaining annuity market interest. Continued innovation and evolving product offerings are expected to enhance annuities’ role as a strategic retirement income solution amid fluctuating economic conditions.