Annuities: A Smart Decision

According to new U.S. Census Bureau data, the share of the nation’s population age 65 and older jumped from 12.4% in 2004 to 18.0% in 2024.

More than 11,000 Americans are turning 65 every day. And as America continues to age, more and more Americans are wisely looking to annuities for guaranteed income in retirement.

A study by retirement experts Mark Warshawsky and Gaobo Pang reaffirms that planning ahead and obtaining the stable, secure income from annuities is a smart decision that results in favorable outcomes for many retirees.

ACLI supported this research, which was published last month in the peer-reviewed Journal of Retirement. Some of the study’s key findings note that:

Retirees of all means will benefit from annuities. For anyone retiring with $250,000 and more in savings, a strategy featuring annuities along with regular withdrawals from liquid investments including cash savings outperforms other strategies. Those retiring with less than $250,000 benefit the most when they annuitize higher portions of their savings, if not all of it.

The popular “4% strategy,” where retirees withdraw 4% from their account every year, has substantial failure rates for older retirees. It also provides the lowest level of income.

Annuities help retirees maximize a steady flow of income, reduce the pressure on their remaining un-annuitized savings, and accommodate growth of their wealth.

Few employees today will have a traditional pension when they retire. So, it’s not surprising that Americans are increasingly turning to annuities. LIMRA sales data shows that annuity sales rose from $313 billion in 2022 to $432 billion last year.

Annuities from life insurers are the only product in the private marketplace that provide guaranteed lifetime income like a traditional pension. As more and more Americans approach retirement, it is essential that public policy continues to support savers’ access to annuities.

David Chavern

David Chavern is President and CEO of the American Council of Life Insurers (ACLI) whose mission is to provide financial certainty to Americans regardless of where and how they work, their life stage, or the economic status of their household. ACLI’s 275 member companies represent 93 percent of industry assets and provide financial security products and services to 90 million families.