By Marc Gilman
Questions? Call (800) 927-9326 or email
Key Takeaways
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Annuity sales keep setting records. U.S. annuity sales reached $119.2 billion in a single quarter in 2025, up 8% year over year, according to LIMRA — driven by favorable interest rates and growing demand for guaranteed retirement income.
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The SECURE Act 2.0 opened a new door, allowing annuities to be included directly inside 401(k) plans — giving more savers access to this type of guaranteed income than ever before.
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Whether an annuity fits your plan depends on your specific situation, not on how popular the product is broadly. Five common situations tend to point toward “yes.”
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The real downsides are liquidity and cost — your money is tied up, an early withdrawal before 59½ triggers ordinary income tax plus a 10% federal penalty, and fees (surrender charges, mortality and expense risk fees, commissions, and rider costs) can add up.
Five Signs an Annuity Might Fit Your Plan
1. You’re Genuinely Worried About Running Out of Money
If concern about outliving your savings is affecting how you actually live in retirement — spending too little, losing sleep over it — that’s a real signal worth taking seriously. Guaranteed income annuities, whether immediate or deferred, are essentially the only financial products built specifically to solve this: converting a sum of money into income you cannot outlive, functioning much like a personal pension you construct yourself.
An immediate annuity is typically purchased with a lump sum, with payments beginning within about a year. A deferred annuity grows tax-deferred over a period you choose — anywhere from a few years to decades — before guaranteed income begins on a date you select.
2. You Want Safety, But Better Returns Than a Bank CD
Multi-year guaranteed annuities (MYGAs) function similarly to a CD, but because the insurer holds your money for longer, it can typically offer a more competitive guaranteed rate than a comparable bank CD — while your growth stays tax-deferred along the way. If you’re specifically looking for a higher-yielding alternative to CDs or bonds, without giving up a guaranteed interest rate and principal protection, this is the category built for that.
3. You’ve Already Maxed Out Your 401(k) and IRA
If you’re contributing the maximum allowed to your tax-advantaged accounts and still want to save more for retirement, an annuity offers a tax-smart way to keep going. Growth inside the annuity compounds tax-deferred, and if you fund it with after-tax dollars, those original contributions aren’t taxed again when withdrawn — only the growth is.
4. You Want Market Exposure Without Giving Up Principal Protection
A fixed indexed annuity (FIA) offers a middle path: exposure to market performance without direct downside risk to your principal. Returns typically land higher than other fixed-income options, though lower than what direct equity exposure could produce in a strong year. This tends to appeal most to people specifically in the preservation phase of retirement — past the point of wanting full market risk, but still interested in some upside participation as a way to manage the risk of a portfolio as they age.
5. Your Retirement Income Sources Aren’t Diversified
A commonly cited framework among retirement advisors structures expected retirement income in thirds: roughly one-third from Social Security, one-third from portfolio distributions, and one-third from guaranteed lifetime income. Without that guaranteed third, a retirement income plan can end up overly exposed to market fluctuations — the stock and bond portion of a portfolio moves with the market, while a guaranteed income layer adds real stability underneath it.
The Real Downsides
Your money is tied up. You’re funding the annuity now for a payout later, and if you need the money back before age 59½, the withdrawal is taxed as ordinary income — plus a 10% federal tax penalty on top of that.
Fees and commissions are real costs. Depending on the specific product, you may encounter surrender charges, mortality and expense risk fees, sales commissions, and administration fees — and adding optional riders on top can dilute your effective return further. Understanding exactly what you’re being charged, and why, is essential before signing anything.
Questions Worth Asking
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Is your concern about running out of money specific enough to act on, or a general worry that a broader plan review might address differently?
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Would a MYGA’s guaranteed rate genuinely beat what you’re currently earning on CDs or bonds, once you account for the tax deferral?
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Have you already maxed out your 401(k) and IRA contributions for the year?
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Looking at your current retirement income sources, roughly what share comes from guaranteed income versus market-exposed assets?
What To Do Next
If one or more of these situations sounds like where you are right now, let’s look at your specific numbers together and figure out whether — and which type of — annuity actually fits.
Questions? Call (800) 927-9326 or email
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Sources: Kiplinger, “Is An Annuity Your Missing Retirement Piece?” by Donna Fuscaldo (updated September 2025), including commentary from Ken Nuss, founder and CEO of AnnuityAdvantage, and Jeffrey Mellone, wealth advisor at TIAA; LIMRA, U.S. Individual Annuity Sales Survey (2025 data); SECURE Act 2.0 provisions on in-plan annuities.
This article is for general educational purposes and reflects information available as of the publication date. Annuity types, rates, fees, and tax treatment vary by product and carrier — always confirm current details directly with the issuing company. This is not a recommendation regarding any specific product, and is not tax or legal advice. Consult a licensed advisor for guidance specific to your situation.
