Income Strategies
Annuities Are More Popular Than Ever — and Most People Still Don't Understand Them
With pensions nearly extinct in the private sector, Americans are rediscovering what annuities actually are: a personal pension you build for yourself.
KC
Kris Cowles
The Retirement Income Guru
⏱ 9 min read
Something remarkable is happening in the retirement income world. Americans are buying annuities at a record-breaking pace — and the numbers are staggering.
In 2024, total annuity sales reached $434 billion, up 13% from 2023, according to LIMRA, the insurance industry's leading research organization. That's more than double the sales recorded just five years earlier. And LIMRA projects sales will exceed $400 billion again in 2025, driven by what they call "Peak 65" — a demographic wave where more than 4 million Americans turn 65 every year through 2029.
So what's driving this? The answer is simple, and it comes down to one word: pensions. Or more precisely, the disappearance of them.
$434B
Annuity sales in 2024 — a record high
4%
Private sector workers with only a DB pension today
60%
Had a pension in the early 1980s
4M+
Americans turning 65 every year through 2029
The Pension: An Endangered Species
A generation ago, retirement looked different. You worked for the same company for 30 years, and when you retired, they sent you a check every month for the rest of your life. That was a defined benefit pension — a true lifetime income guarantee. You couldn't outlive it. Markets didn't affect it. It was simply there, every month, until you weren't.
According to the Bureau of Labor Statistics, only 15% of private sector workers today have access to a defined benefit pension plan. In the early 1980s, that number was closer to 60%. The percentage of private sector workers whose only retirement account is a traditional pension has collapsed to just 4%.
The pension didn't disappear because it was a bad product for workers. It disappeared because it was expensive and unpredictable for employers. Companies didn't want to carry the liability of guaranteeing lifetime income for thousands of retirees. So they shifted to 401(k) plans — shifting the investment risk squarely onto the employee.
The result? Millions of Americans approaching retirement today have no guaranteed lifetime income source other than Social Security. According to the National Institute on Retirement Security, only about 7% of older Americans receive income from all three traditional sources — Social Security, a pension, and personal savings.
⚠️
LIMRA research shows that in 2024, just half of pre-retirees believed they had enough guaranteed lifetime income to cover basic living expenses — down from 58% in 2017. The gap between what people need and what they have is growing, not shrinking.
Why Annuity Sales Are Exploding
People are figuring out something important: if the company pension is gone, you can build your own. That's exactly what an annuity does.
U.S. Annuity Sales Growth — The Record Run
Total annual annuity sales in billions · Source: LIMRA research 2020–2025
Source: LIMRA U.S. Individual Annuity Sales Survey. 2025 figure represents LIMRA projection. The dramatic rise reflects both favorable interest rates and growing awareness of guaranteed income needs as pension coverage declines.
The Misconceptions That Have Held Annuities Back
For years, annuities had a reputation problem — and some of it was earned. Certain products were genuinely complex, loaded with fees, and sold by people who benefited more than their clients did. That history has created a set of misconceptions that still circulate today, often preventing people from considering a product that might genuinely serve them well.
Let's address them directly.
This applies to some types — particularly complex variable annuities with multiple riders. But a simple fixed immediate annuity or a fixed-rate deferred annuity (MYGA) has no ongoing investment management fees. You're not paying for investment performance — you're buying a guarantee.
RealityFee structures vary enormously by product type. Simple income annuities are among the most straightforward financial products available. Always ask for a full fee disclosure before purchasing any annuity.
This can be true for a basic single-life annuity — but most people don't purchase that structure. Joint-and-survivor annuities continue payments to a spouse. Period-certain guarantees ensure payments continue to heirs if you die early. Return-of-premium riders protect the principal. The "keep your money" concern is largely addressable through contract structure.
RealityModern annuity contracts offer many options to protect beneficiaries. These protections do reduce the monthly payout, but the tradeoff is often well worth it for married couples.
A fixed annuity without an inflation adjustment is correct — fixed payments lose purchasing power over time. But inflation-adjusted annuities exist. And many advisors recommend using a portion of a portfolio for inflation protection while using the annuity to cover essential expenses, rather than expecting any single product to do everything.
RealityInflation riders are available on many annuity products. The best strategy often combines a fixed annuity for baseline income certainty with a growth-oriented portfolio for inflation protection.
Some annuities are genuinely complex — variable annuities with stacked riders can be difficult to evaluate. But the concept underlying a simple income annuity is straightforward: you give a lump sum to an insurance company, they guarantee you a monthly income for life. That's it.
RealityStart with the simplest version — a fixed immediate annuity (SPIA) or a multi-year guaranteed annuity (MYGA). These are among the most transparent financial products available.
Think of It as Your Personal Pension
Here is perhaps the clearest way to understand what an income annuity actually is: it is a pension plan you build for yourself. The mechanics are nearly identical.
🏛️ Traditional Employer Pension
You contribute through years of work
Employer guarantees monthly income for life
Payments begin at a set retirement age
Income continues regardless of market conditions
Spouse protection available through survivor benefit
You cannot outlive it
Risk is carried by the employer/fund
💼 Your Personal Annuity
You contribute a lump sum from savings
Insurance company guarantees monthly income for life
Payments begin at your chosen start date
Income continues regardless of market conditions
Spouse protection available through joint-life option
You cannot outlive it
Risk is carried by the insurance company
The primary difference is how they're funded — your employer funded your pension through years of service; you fund your personal annuity with a lump sum from savings, a 401(k) rollover, or an IRA. The outcome, however, is functionally the same: a guaranteed monthly paycheck for life that you cannot outlive, regardless of what markets do.
"The question isn't whether annuities are good or bad. The question is: do you have enough guaranteed income to cover your essential living expenses in retirement? If the answer is no — and for most Americans without a pension, it is — then an annuity deserves a serious conversation."
— Kris Cowles, The Retirement Income Guru
Not All Annuities Are the Same
One of the reasons annuities have such a mixed reputation is that the word "annuity" covers a wide range of products with very different characteristics. Here's a brief plain-English overview:
Fixed Immediate Annuity (SPIA): You pay a lump sum, payments begin immediately, usually within 30 days. Simplest form. Most transparent. Best for retirees who need income right now.
Deferred Income Annuity (DIA): You pay now, income starts later — often 5, 10, or even 20 years in the future. Useful for longevity insurance — protecting against the risk of living very long.
Multi-Year Guaranteed Annuity (MYGA): Similar to a CD but with insurance company backing. Your money grows at a fixed rate for a set period. No immediate income, but a safe place to grow assets before converting to income.
Fixed Indexed Annuity (FIA): Returns are linked to a market index (like the S&P 500) but with a floor — you can't lose principal due to market declines. More complex, with various riders and caps.
Variable Annuity: Investment-based, with subaccounts similar to mutual funds. Most complex, highest fees, most potential for growth — and most potential for loss. Usually not the right choice for retirees seeking income certainty.
📋
For most retirees seeking guaranteed income, the conversation begins with fixed immediate annuities, deferred income annuities, and MYGAs. These are the products most comparable to a pension. Variable annuities and complex FIAs with multiple riders require much more careful evaluation.
The Bottom Line
The pension isn't coming back. Only 15% of private sector workers have access to a defined benefit plan today, and that number continues to decline. For most Americans, Social Security alone is not enough to cover essential retirement expenses — and a 401(k) alone doesn't provide the income certainty that the essential expenses category demands.
An annuity is not a perfect product. But for what it does — providing guaranteed, lifetime income you cannot outlive — nothing else does it better. That's why sales hit $434 billion in 2024, and why the number will likely keep rising as 4 million Americans turn 65 every year through the rest of this decade.
Is a personal pension right for your retirement?
Book a free 30-minute consultation and we'll walk through your income sources, your essential expenses, and whether an annuity makes sense in your plan.
Book a Free Consultation