Why Annuity Sales Just Hit a Record (and What That Actually Means for You)

A record nobody predicted a few years ago

In 2024, Americans bought a record $434.1 billion in annuities, a 13% jump over the prior year, according to LIMRA, the industry research group that tracks roughly 83% of the annuity market. That was the third straight record-setting year. Stack the last three years together and you get about $1.1 trillion in annuity sales.

To put the run in perspective, total sales were $310.6 billion in 2022 and $385.4 billion in 2023 before hitting $434.1 billion in 2024. For the first time ever, quarterly sales topped $100 billion in all four quarters of a single year. "This was a remarkable year for the U.S. annuity market," LIMRA's Bryan Hodgens noted, with nearly 80% of participating carriers reporting positive growth.

Numbers like these get thrown around in glossy brochures, so let's be clear about what this article is and is not. It is not a pitch. Annuities are one of the most over-sold products in all of financial services, and plenty of people have been steered into contracts that did not fit them. This is a plain-English tour of why sales are booming, how the main types actually work, what they cost, and when an annuity earns a place in a retirement plan versus when it does not.

Why sales keep breaking records

Three forces are doing most of the work. The first is interest rates. When the Federal Reserve pushed rates up, insurance companies could credit far more attractive rates on fixed and indexed contracts than they could during the near-zero years. A guaranteed rate that starts with a "5" gets attention from savers who spent a decade earning almost nothing in the bank.

The second is market volatility and the fear of loss. After watching both stocks and bonds fall in 2022, a lot of near-retirees decided they wanted a portion of their money that simply could not go down. Products that protect principal while offering some growth — fixed indexed annuities and RILAs — have been the fastest growers for exactly this reason.

The third is demographics. The baby boomers are moving through their peak retirement years, and the generation behind them is close behind. Roughly 4 million Americans are turning 65 each year in this stretch. Most of them do not have a traditional pension, so they are shopping for something that can turn a lump sum into a paycheck. If you want to see how much people have actually saved by this stage, our look at median retirement savings by age is a sobering companion piece. The demand for guaranteed income is real — the question is whether an annuity is the right tool to meet it.

Fixed annuities: the CD alternative

A fixed annuity (more precisely, a multi-year guaranteed annuity, or MYGA) is the simplest kind. You hand the insurer a lump sum, and it credits a guaranteed interest rate for a set number of years — often three, five, or seven. At the end of the term you can take your money, renew, or convert it to income. It behaves a lot like a bank CD, which is why fixed-rate deferred products were the single largest category, at $153.2 billion in 2024, even after cooling 7% from their 2023 peak.

The appeal is honesty and clarity. There is no index formula, no market exposure, and no menu of moving parts. You know the rate, you know the term, you know the number at the end. For a retiree who wants a slice of money that will not budge, that predictability has genuine value.

The honest downsides: the rate is fixed, so if rates rise you are stuck until the term ends, and pulling money out early triggers surrender charges. Unlike a bank CD, a fixed annuity is not FDIC-insured — the guarantee is only as strong as the insurance company behind it, backstopped by state guaranty associations up to state limits. That is why the financial strength rating of the carrier matters as much as the headline rate.

Fixed indexed annuities: growth with a floor

The fixed indexed annuity (FIA) was the growth story of 2024, up 32% to a record $126.9 billion. The pitch is seductive: your credited interest is tied to a market index like the S&P 500, but if the index falls, you do not lose principal. You get some of the upside with a hard floor under the downside.

The catch is in the word "some." Insurers limit your upside through caps, participation rates, and spreads. A cap might say you get index gains only up to, say, 8% in a year. A participation rate might credit you 60% of the index move. A spread subtracts a set percentage before crediting. And critically, index crediting almost always excludes dividends, which have historically been a meaningful chunk of stock market returns. So an FIA will not match the stock market in a strong year — it is not designed to.

Used honestly, an FIA is a middle-ground tool: more growth potential than a fixed annuity, more safety than being in the market. Used dishonestly, it gets sold with cherry-picked "back-tested" illustrations that imply market-like returns without the risk. That does not exist. If someone shows you a hypothetical that looks too good, ask to see the guaranteed column, and ask exactly how the cap or participation rate can be changed after year one. You can talk through the tradeoffs on our annuities and retirement income page.

RILA: the middle ground with a twist

The registered index-linked annuity (RILA), sometimes called a buffer or structured annuity, was the other breakout, rising 38% to $65.6 billion in 2024 — enough to surpass traditional variable annuities in sales for the first time ever. A RILA also links your return to an index, but instead of protecting all of your principal, it protects part of it in exchange for a higher potential cap.

Here is the key idea. A RILA offers either a buffer or a floor. A 10% buffer means the insurer absorbs the first 10% of losses and you take anything beyond that; a 10% floor means you absorb the first 10% and the insurer covers the rest. Because you accept some downside, the insurer can offer you a more generous cap on the upside than a fixed indexed annuity typically can.

Because a RILA can lose money, it is a registered security regulated by the SEC and FINRA, not just an insurance product. That extra oversight is a feature, not a nuisance — it means more disclosure. The honest tradeoff: a RILA can grow more than an FIA in good years, but it is not principal-protected, so it belongs to people who genuinely understand they can end a term with less than they started.

Income annuities and SPIAs: buying yourself a pension

If the other products are about accumulation, the income annuity is about the paycheck. With a single premium immediate annuity (SPIA), you give an insurer a lump sum and it begins sending you guaranteed payments — for a set number of years, or for the rest of your life, no matter how long you live. A deferred income annuity (DIA) does the same thing but starts payments years down the road. SPIA sales were $13.6 billion in 2024 and DIAs $4.9 billion; smaller categories, but arguably the purest form of what an annuity was invented to do.

This is the version economists tend to like. It directly solves longevity risk — the danger of outliving your money — by turning a pile of savings into a stream you cannot outlast. Because payments can be pooled across many buyers, a lifetime income annuity can often pay more than you would safely draw from the same lump sum on your own.

The tradeoffs are real and permanent. In the basic version you give up access to the lump sum — once annuitized, that money is gone as a balance and belongs to the income stream. A plain life-only SPIA also stops at death, so many buyers add a period-certain or cash-refund feature to protect heirs, which lowers the payment. Timing matters too: because payouts rise the longer you delay claiming Social Security, coordinating an annuity with your Social Security claiming decision often matters more than the annuity itself.

Variable annuities: growth with market risk and higher fees

The variable annuity (VA) is the oldest of the growth-oriented contracts. Your money goes into "subaccounts" that work much like mutual funds, so your account value rises and falls with the market. Traditional VA sales grew 18% to $60.9 billion in 2024, a rebound year, though the category has been eclipsed by RILAs.

The upside is real market participation and tax deferral inside the contract. The downside is cost and complexity. Variable annuities are famous for layered fees: mortgage-and-expense (M&E) charges, administrative fees, the underlying fund expenses, and — if you add a guaranteed-income or death-benefit rider — another charge on top. It is entirely possible to pay 2% to 3%-plus per year all-in, which is a heavy drag on returns over time.

The SEC's Investor.gov materials are blunt about this: variable annuities are complex, and you should understand every fee, expense, and rider before you buy. They can make sense for a specific investor who has maxed out other tax-advantaged accounts and wants a guaranteed-income rider, but they are also a product where high commissions have historically driven sales that did not serve the buyer. If you already own one, it is worth having the fees and riders read line by line before assuming it should stay or go.

How an annuity builds an income "floor"

Strip away the product names and here is the concept that actually matters. A sound retirement income plan usually has a floor — guaranteed dollars that arrive every month no matter what markets do — and a growth layer that stays invested for the long haul. The floor covers your non-negotiable expenses: housing, food, utilities, insurance, the bills that do not care whether the market is up or down.

For most retirees, Social Security is the first and best floor. It is inflation-adjusted and guaranteed by the federal government, which is why deciding when to claim it is one of the highest-value decisions you will make. An income annuity can then fill the gap between what Social Security covers and what your essential expenses actually cost — no more, no less.

The value of a floor is not just mathematical, it is behavioral. When the essentials are covered by guaranteed income, retirees are far less likely to panic-sell their investments in a downturn, because the light bill is not riding on the market. That freedom to leave the growth money alone is often worth more over 25 years of retirement than any single crediting rate. You can sketch out how big your own gap is using our retirement tools before deciding whether an annuity is even needed to fill it.

The costs and fine print to watch

This is where honest advice earns its keep. The single most important number in most annuity contracts is the surrender charge. As the SEC's Investor.gov glossary explains, this is a fee for pulling money out during the surrender period, which commonly runs six to ten years. It typically starts high — say 7% or more — and steps down by roughly a point a year until it disappears. Most contracts let you withdraw about 10% a year penalty-free, but take more and the charge bites. If there is any chance you will need the money soon, the surrender schedule alone can rule a product out.

Then come the riders. A guaranteed lifetime withdrawal benefit or an enhanced death benefit can be genuinely useful, but each one usually carries an annual fee — often 1% or more — that quietly reduces your growth every single year. Riders are frequently the most oversold part of the contract, so the question to ask is simple: what does this specific rider do for me, and what does it cost me each year to keep it?

Finally, watch how the growth engine can change. On indexed products, insurers can often lower caps or participation rates after the first contract year. A great first-year rate means little if the insurer can cut it in year two. Ask for the guaranteed minimums in writing, and compare the strength ratings of the carriers, because your guarantee is only as good as the company standing behind it.

When an annuity fits — and when it does not

An annuity tends to fit when a few things are true at once: you have a real gap between guaranteed income and essential expenses; you value certainty over squeezing out the last point of return; you have other liquid savings for emergencies, so you are not locking up money you will need; and you can hold the contract past the surrender period. For a healthy person worried about outliving their money, a plain lifetime income annuity can be one of the most efficient tools available.

An annuity usually does not fit when the opposite is true. If you might need the lump sum in the next several years, the surrender charges make it a poor holding place. If your Social Security and any pension already cover your essentials, you may not need to buy a second floor at all. If the whole reason you are being shown the product is a big illustration of hypothetical gains, be skeptical — that is a sales angle, not a plan. And never put all of your savings into any single annuity; these are tools for a portion of a portfolio, not the whole thing.

The deciding factor is usually not the product, it is the fit. That is why it is worth having someone who is not paid by commission look at your full picture first. If you want a straight, no-pressure read on whether an annuity belongs in your plan, reach out for a conversation before you sign anything.

The free-look period: your built-in safety net

Even after you sign, you are not locked in immediately. Nearly every annuity comes with a free-look period — a window, typically 10 days or more depending on your state, during which you can cancel the contract and get your money back, generally without surrender charges. The SEC's Investor.gov glossary describes it as exactly that: a chance to terminate without penalty and receive a refund.

Use it. The free-look period is your opportunity to read the actual contract — not the brochure, not the illustration, the contract — with a clear head and, ideally, a second set of eyes. Check the surrender schedule, the rider fees, the crediting method, and whether the numbers the agent quoted are truly guaranteed or merely "current." Free-look periods are set state by state, so confirm the exact length Indiana requires on the contract you are being shown.

If anything in the paperwork does not match what you were told, that mismatch is your answer. A product worth owning will still be worth owning after ten days of scrutiny. Anyone pressuring you to skip the review or "not overthink it" is telling you something important about whose interest is being served.

How annuities are taxed

Taxes are one of the genuine advantages of an annuity, but they come with rules worth understanding up front. Money inside an annuity grows tax-deferred — you owe nothing on the gains each year while they compound, only when you take money out. That deferral can be valuable, especially for savers who have already maxed out their IRA and 401(k) contributions.

The catch is how withdrawals are taxed. Growth pulled from a deferred annuity is taxed as ordinary income, not at the lower long-term capital-gains rate you might get on stocks. For a non-qualified annuity (bought with after-tax dollars), the IRS applies a last-in, first-out rule, so your taxable earnings come out first before your tax-free return of principal. Withdraw before age 59½ and a 10% federal penalty may apply on top of the tax.

Two more wrinkles. When you annuitize a non-qualified contract into lifetime payments, an exclusion ratio lets part of each payment come back tax-free as a return of your principal, spread over your life expectancy. And a qualified annuity held inside an IRA is taxed like the IRA — fully taxable on withdrawal — which means buying one inside an IRA does not add any tax deferral you did not already have. That single point trips up a lot of buyers, and it is a good reason to run the tax picture past your advisor and tax professional before you commit.

Building a MYGA ladder instead of one big bet

A multi-year guaranteed annuity, or MYGA, is the plainest annuity there is: hand an insurer a lump sum, lock a guaranteed rate for a set number of years, and collect a known number at the end. Because it looks and feels like a bank CD, the temptation is to put everything into whichever contract shows the highest rate. But a single MYGA has the same weakness as a single CD — if you commit all of it to one seven-year contract and rates climb next year, you are stuck watching from the sidelines, and if you need cash before the term ends, a surrender charge takes a bite.

The fix that seasoned savers borrow from the bond world is a ladder: split the money across several MYGAs with staggered end dates so a piece matures every couple of years. Say you have $200,000 you want kept safe. Rather than one lump, you might build the rungs below. Each year or two a contract comes due, and you decide fresh — spend it, or roll it into a new MYGA at whatever rates then exist. You are never fully locked in and never fully exposed to a single rate.

The honest tradeoffs are worth naming. Laddering deliberately gives up the very top rate on part of your money in exchange for flexibility, so it earns a touch less than going all-in on the longest term would in a flat market. A MYGA is not FDIC-insured like a CD — the guarantee rests on the insurer's balance sheet and, secondarily, your state guaranty association, so compare carrier strength ratings, not just headline rates. And the renewal rate on each rung is unknowable today; you are managing that uncertainty, not erasing it. Used for the safe slice of a retirement plan, though, a ladder turns a rigid product into a flexible one. You can sketch the rungs that fit your timeline with our retirement tools or talk them through on our annuities and retirement income page.

Caps, participation rates and spreads: one index, three different results

The single most confusing thing about a fixed indexed annuity is that two contracts can track the exact same index — the S&P 500, say — and credit you wildly different amounts. The reason is the crediting method, and there are three common levers. Most contracts measure the index once at the start of a term and once at the end (an "annual point-to-point"), then apply one of these formulas to the gain.

Walk through a single good year to see how much the lever matters. Suppose the index rises 10% over the term. A cap sets a ceiling: with an 8% cap you get 8% and forfeit the last two points. A participation rate gives you a slice: at 60% participation you earn 6% of that 10% move. A spread (sometimes called a margin or asset fee) subtracts a fixed amount first: with a 2% spread you keep 8%. Same index, same year, three answers — and some contracts stack more than one lever, applying a participation rate and then a spread.

Two caveats keep this honest. First, index crediting almost always excludes dividends, which have historically been a meaningful part of stock-market returns, so an FIA is not designed to match the market in a strong year — it trades that upside for a hard floor of zero in a bad one. Second, and more important, insurers can usually reset the cap, participation rate or spread after the first year, within guaranteed minimums spelled out in the contract. A generous first-year rate means little if it can be cut in year two. Ask for those guaranteed minimums in writing, and ask exactly how and when the crediting terms can change. The regulator's plain-language primer on annuities from FINRA is a useful second opinion before you sign.

The income rider: what the "benefit base" really is

Many fixed indexed and variable annuities are sold with a guaranteed lifetime withdrawal benefit (GLWB) rider — an add-on that promises a set income for life even if the account value later runs to zero. It is genuinely useful for solving longevity risk, but it is also the most misunderstood feature in the whole contract, because it runs on two separate numbers that are easy to confuse.

One number is your real account value — actual money you could withdraw or cash out. The other is the benefit base, a bookkeeping figure used only to calculate your future income. Many riders "roll up" that benefit base by a fixed rate each year you wait to turn income on. Picture $100,000 with a 7% simple roll-up: after 10 years of deferral the benefit base is $170,000, even though your actual account value may be quite different. When you switch income on, the insurer multiplies that base by a payout percentage that rises with your age — perhaps 5% at 65 or 5.5% at 70. Applied to a $170,000 base at 5.5%, that is about $9,350 a year for life, and it keeps coming even if the account value eventually empties.

Here is what the brochure often glosses over. The benefit base is not money you can walk away with — you cannot cash out $170,000; it exists only to size the lifetime payments. The roll-up generally stops the moment you start taking income, so it rewards waiting, not spending. And the rider carries an annual fee, frequently around 1%, that is often charged against the larger benefit base rather than the account value, quietly draining the real money every year. Ask three questions: is the roll-up simple or compound, is the rider fee charged on the account value or the benefit base, and what is the actual guaranteed dollar income if I turn it on at the age I plan to retire. Because payout percentages climb with age, coordinating the start date with your Social Security claiming decision usually matters more than chasing the highest roll-up rate.

The 1035 exchange: trading an old contract without a tax bill

If you already own an annuity or a cash-value life insurance policy that no longer fits — a stale rate, a weak carrier, fees you have finally read — you are not trapped with only two options of keeping it or cashing out and owing tax on the gains. Section 1035 of the tax code lets you swap one insurance contract for another of like kind and carry the gains over tax-free. The catch that trips people up: the money must move directly between the insurance companies. If a check is made out to you, even briefly, the whole gain can become taxable.

The rules run one direction. You can exchange an annuity for another annuity, and a life insurance policy for an annuity, tax-free. You cannot go the other way — an annuity into life insurance is not allowed under 1035. A useful exception dates to the Pension Protection Act: since 2010 you can exchange a non-qualified annuity or life policy directly into a qualified long-term-care policy tax-free, which can turn an idle annuity's taxable gains into LTC benefits that come out tax-free. The owner and annuitant generally must match across the old and new contracts for any of this to qualify.

A 1035 exchange is a tool, not a reflex, and the honest reasons not to do one are just as important. Moving into a new contract almost always restarts the surrender-charge clock, locking your money up for another six to ten years. Your old contract may hold a guarantee worth keeping — a high lifetime withdrawal rate or a generous death benefit that today's products cannot match. And the exchange only defers the gain; it does not erase it, so you carry the old cost basis forward. Because a replacement is one of the classic patterns behind an unsuitable sale, an exchange deserves a line-by-line comparison of what you give up against what you gain — ideally by someone not paid a fresh commission to make the swap. If you are weighing one, reach out for a straight read before you sign the transfer paperwork.

How to read an annuity illustration and find the fees

Most annuities are sold off an illustration — a multi-page projection of how the contract might perform. It is where good products and oversold ones look nearly identical, so knowing how to read one is the best defense a buyer has. The first move is to ignore the big, hopeful number on the front and find the two columns that matter: the guaranteed column and the non-guaranteed (or "current," or "hypothetical") column. Everything the agent is excited about lives in the non-guaranteed column, which the insurer is free to not deliver. Read the guaranteed column first and decide whether you would still be satisfied if that is all you ever get.

Next, hunt for the fees, because on many contracts they are disclosed but not advertised. Four show up most often, and each is a yearly drag on your money. The SEC's Investor.gov guidance is blunt that these can stack into a heavy annual cost, especially on variable annuities.

Finally, translate the surrender schedule into plain terms: on a 7% first-year charge, pulling $20,000 out early could cost $1,400. Ask the agent to point to the exact page and line for each fee, ask whether the crediting rate or cap can be lowered after year one, and ask what the guaranteed income is in real dollars — not as a roll-up percentage. A product worth owning survives that scrutiny. Anyone hurrying you past it during the free-look period is telling you whose interest the illustration was built to serve.

Frequently asked questions

Are annuities a good investment?

An annuity is less an investment than an insurance product — you are buying a guarantee, usually of income or of principal. Whether it is "good" depends entirely on fit. For someone who needs guaranteed income to cover essential expenses and worries about outliving their savings, a straightforward income annuity can be excellent. For someone who has plenty of guaranteed income already, or who might need the money soon, it can be a poor and expensive choice. The product is neither good nor bad on its own; the fit is what matters.

Are annuities safe? Is my money FDIC-insured?

No. Unlike a bank CD, annuities are not FDIC-insured. The guarantee is backed by the issuing insurance company, with a secondary safety net from state guaranty associations up to state-specific limits. That is why the financial strength rating of the carrier is so important — you are relying on that company to keep its promise for potentially decades, so a strong balance sheet matters as much as an attractive rate.

Why did annuity sales hit a record in 2024?

LIMRA reported a record $434.1 billion in 2024, driven by three forces: higher interest rates that let insurers credit more attractive rates, market volatility that pushed near-retirees toward products that protect principal, and the wave of baby boomers reaching retirement without traditional pensions and shopping for guaranteed income. It was the third straight record year, with roughly $1.1 trillion sold across 2022 through 2024.

What is the difference between a fixed indexed annuity and a RILA?

A fixed indexed annuity protects all of your principal — you cannot lose money to market declines — in exchange for a capped share of index gains. A registered index-linked annuity (RILA) protects only part of your principal through a buffer or floor, so you accept some downside risk in exchange for a typically higher potential cap on the upside. FIAs are for growth with a hard floor; RILAs are for more upside with limited, defined risk.

Can I get out of an annuity after I buy it?

Yes, within limits. Every annuity has a free-look period — often 10 days or more, depending on your state — during which you can cancel and get a refund, generally without penalty. After that, withdrawals during the surrender period (commonly six to ten years) trigger surrender charges, though most contracts allow roughly 10% a year penalty-free. Always use the free-look window to read the actual contract before that window closes.

How are annuity withdrawals taxed?

Annuities grow tax-deferred, and withdrawals of earnings are taxed as ordinary income rather than at capital-gains rates. For a non-qualified annuity bought with after-tax money, earnings come out first (last-in, first-out) and are taxable, then your principal returns tax-free. Withdrawals before age 59½ may face a 10% federal penalty. Annuitized non-qualified payments use an exclusion ratio so part of each payment is a tax-free return of principal. Always confirm your specifics with a tax professional.