Annuities are at an all-time high in 2025, and rightfully so. This growth is because annuities continue their rise toward providing the meaningful income that Americans require during retirement. Over $432 billion in U.S. annuity sales were recorded in 2024. In 2025 alone, over $105 billion worth of annuities were sold in the very first quarter, making it the sixth quarter in a row crossing the $100 billion mark.
What’s Driving the Growth?
- Economic volatility and inflation worries: Ongoing market swings and stubborn inflation sticking at ~2.3% (April 2025) have put retirees on the horizon seeking guaranteed incomes that pass the inflation risk test.
- Rising interest rates: Fed rates have hovered between 4.25–4.5%, and that has put insurers in a position to offer as well or better annuity terms. Fixed-index and deferred annuities have benefited the most from this trend.
- The “Peak-65” demographic tide: Some 4.2 million Americans will turn the age of 65 in 2025, also entering retirement, which would, in turn, raise the demand for income-oriented financial products such as annuities.
Fixed Index & Deferred Annuities: What Makes Them Popular?
Fixed Index Annuities (FIAs)
- Principal protected: You retain your initial investment unless in a downturn.
- Gain potential: You earn based on index performance (e.g., S&P 500), often limited by caps and participation rates.
- Tax‑deferred growth: Anything gained is reinvested without taxes until withdrawal.
Deferred Income Annuities (DIAs) / Fixed‑rate Deferred (FRD)
- Take a lump sum or a payment plan, then when it comes time, start receiving payments either after a period of time, me, or for a fixed amount or number of years.
- Provide step-up income guarantees, which would be suitable for financing future projected costs.
Pros & Cons at a Glance
| ✅ Pros | ⚠️ Cons |
|---|---|
| Guaranteed income for life: Ideal for peace of mind | Complexity: Terms can include caps, spreads, surrender fees |
| Protection from market dips: FIAs shield principal | Limited liquidity: Penalties for early withdrawals |
| Tax-deferred earnings: Save more over time | Capped returns: You may lag behind market gains |
| High payouts in current rates: Today’s annuities are attractive | Fees & commissions: Ranging from 0.3%–3%, plus riders |
What It Means for You
- Diversify your retirement income: Use annuities in conjunction with Social Security, stocks and bonds, and cash to create a comfortable, risk-managed income plan.
- Lock-in today’s rates: The longer you wait, the smaller it looks; when you buy an annuity, you are buying a long-term income stream, with rates currently the highest guaranteed payouts you will get.
- Get help: Annuities are complex. Consider hiring a fiduciary advisor to help you analyze caps, participation rates, fees, and insurance-company strengths.
Final Takeaway
The annuities market witnessed meteoric growth in 2025 on account of the perfect storm caused due to the aging population, economic uncertainties, and robust returns. There is a foundation to be built for any individual floating toward retirement or in retirement, along with peace of mind through fixed-indexed annuities or deferred income annuities, which might protect the income against market and lifespan risks.
📌 Tip: Annuities are not generally meant for all. Carefully analyze the contract terms, caps, fees, and your anticipated future income before proceeding. Take advice from a trusted advisor about custom-tailoring the solution.
