Annuities central to a health-focused retirement strategy

For many years, retirement planning was largely framed around market performance — how to save enough, invest prudently and withstand economic cycles. Although these considerations remain critical, they no longer tell the full story. One of the most significant threats to retirement security today is not found on a stock chart, but in the growing financial impact of health-related risk.

Americans are living longer than ever, often with chronic conditions that require ongoing care and rising out-of-pocket expenses. As longevity increases, so does the likelihood that health issues will shape not only retirement lifestyles, but also financial outcomes. This shift is changing how individuals, advisors and insurers think about income, protection and long-term planning — and it is reshaping the role annuities play along the way.

Health risk is becoming a central financial planning issue

Health-related costs are among the most volatile and least anticipated elements of retirement. According to “The Growing Influence of Health Risks on Retirement Security,” a research paper by Chris Heye, a fellow at the LIMRA Retirement Income Institute, physical decline, cognitive impairment and unexpected medical events can lead to increased expenses and continuous pressure on income during retirement. These risks also tend to manifest when retirees are least able to adapt financially.

Unlike market fluctuations, health-related disruptions often coincide with diminished earning capacity and reduced ability to manage investments actively. When health declines, flexibility narrows — and predictable income becomes more valuable. As a result, retirement security today is increasingly defined by resilience: the capacity to reliably meet essential expenses despite changes in health or independence.

This reality is forcing a reevaluation of what effective retirement planning looks like and which tools are best positioned to support it.

Annuities gain traction as retirement risks become more complex

The annuity market’s continued growth underscores this shift in perspective. According to LIMRA’s U.S. Individual Annuity Sales Survey, which represents 93% of the total U.S. annuity market, total U.S. annuity sales reached $464.1 billion in 2025, extending a multiyear trend of record-setting demand. Although interest rates have certainly contributed, consumer motivation goes far beyond rate-driven decisions.

As individuals approach retirement, concerns are expanding beyond market downturns to include health care costs, longevity and the sustainability of income over time. Guaranteed income can help retirees maintain stability during periods when health-related expenses rise or when personal circumstances become less predictable.

In this context, annuities are being reconsidered not as supplemental products, but as core components of a more comprehensive approach to retirement risk management.

Annuities in today’s retirement landscape

Today’s annuities bear little resemblance to the products many consumers remember. Innovation has expanded their functionality, making them more flexible, transparent and suited to a wide range of planning needs throughout retirement.

Registered index-linked annuities, for example, allow investors to participate in market growth while managing downside risk through defined buffers or floors. For individuals who want to continue growing assets while remaining mindful of future health needs, this balance can be especially appealing. The steady rise in RILA adoption reflects demand for solutions that manage uncertainty without sacrificing opportunity.

Income-focused annuities have evolved as well. Features such as optional income riders, partial liquidity and varying levels of principal protection acknowledge that retirement is not static — and that health-related needs may require both income certainty and access to funds.

Protecting financial security when health and independence shift

The LIMRA Retirement Income Institute research paper by Chris Heye makes clear that health challenges often reduce a retiree’s ability to make financial adjustments. When unexpected medical needs arise, retirees may be forced to draw on assets sooner than planned or liquidate investments at unfavorable times.

In these scenarios, guaranteed income can act as a stabilizing force — helping cover housing, food and health care expenses regardless of market conditions or personal health changes. Predictable income streams can also reduce stress and complexity during periods when decision-making
capacity may be compromised.

This dynamic is particularly relevant for populations that strongly value protection but may lack familiarity with available income solutions. Research consistently shows that women nearing retirement place a high priority on financial security, yet often report a lower understanding of how annuities work within a broader retirement strategy.

Expanding the conversation around retirement security

As retirement challenges grow more nuanced, annuities are taking on a broader and more visible role. They are no longer defined solely by when income begins, but by how effectively they help retirees navigate uncertainty across decades of life.

For financial professionals, this evolution presents an opportunity to shift conversations toward holistic risk management — in which health, longevity and income stability are integrated rather than addressed in isolation. When positioned with clarity and purpose, annuities can help retirees move forward with greater confidence, even as the future becomes harder to predict.

In a retirement landscape increasingly shaped by health-related risk, annuities are evolving to meet the needs of today’s retirees — providing not just income, but also reassurance when it matters most.

Bryan Hodgens is head of LIMRA research. Contact him at [email protected].