Are knowledge gaps limiting annuity recommendations?

By Kush Kotecha

The annuity industry is in the midst of a historic run. According to LIMRA, U.S. retail annuity sales surpassed $460 billion in 2025, marking the fourth consecutive year of record-breaking growth. One reason for this momentum is that we are moving through the heart of the “Peak 65” wave, the largest surge of Americans turning 65 in history. Many of these consumers are actively seeking solutions such as annuities to manage risk and provide guaranteed income they won’t outlive.

Annuities themselves have evolved just as dramatically. Product design has advanced, features have become more consumer friendly and the purchasing experience has improved. Carriers are increasingly helping financial professionals match solutions to client needs. Yet despite this momentum, we continue to see a disconnect between what annuities can do and how advisors sometimes use them.

To better understand that disconnect, Nationwide and Zeldis Research Associates recently conducted interviews with more than 500 advisors. Most told us they primarily position annuities as income or accumulation tools, while benefits like inflation mitigation, tax deferral and death benefit protection became secondary considerations. When annuities don’t appear to fit within these narrow dimensions, advisors told us they pivot to more familiar options such as certificates of deposit, brokerage accounts or bond funds.

Those choices can certainly be appropriate. However, framing annuities too narrowly can cause advisors to miss opportunities to solve more of their clients’ real‑world challenges with one flexible solution. It’s worth considering whether you might be overlooking ways to expand the role annuities can play for your clients — and whether knowledge gaps are limiting the products you feel comfortable recommending.

With that in mind, it’s worthwhile to consider three traditional financial solutions advisors told us they frequently rely on — and how annuities may serve as effective alternatives better aligned with certain client needs.

1. Brokerage accounts

Brokerage accounts offer flexibility, liquidity and familiarity, but they can’t provide the guarantees or income protection many clients now expect.

Variable annuities, by contrast, can deliver lifetime income without sacrificing market exposure, something a brokerage account alone cannot replicate. When a client’s primary concern is outliving their savings, guarantees shift from a “nice to have” to a core requirement.

Tax treatment is another important differentiator. In brokerage accounts, clients generally pay taxes on dividends, interest and realized capital gains annually, creating a drag on long-term performance. Assets held within a variable annuity can grow tax-deferred, making them a valuable tool for clients who have already maximized other tax-advantaged vehicles. For high earners, business owners or clients in peak accumulation years, that flexibility can be critical.

Today’s variable annuities also provide access to institutional‑grade investment options from leading asset managers. Clients can build diversified, professionally managed portfolios within a tax‑advantaged wrapper, combining growth potential with insurance-based protection. Brokerage accounts may offer breadth, but they can’t match that combination of curated investments and guarantees.

Brokerage accounts clearly have their place. But when client goals include guaranteed income security, growth potential and tax efficiency, variable annuities aren’t just an alternative — they also can be a strategic upgrade.

2. Certificates of deposit

CDs were another frequently cited alternative. They offer a simple way to take advantage of interest rates, diversify and reduce volatility — appealing qualities for risk-averse clients. However, today’s environment and the evolving needs of retirees and near-retirees demand a wider conversation that includes solutions such as fixed annuities.

CDs feel safe because they’re familiar and backed by the Federal Deposit Insurance Corp. up to statutory limits. Fixed annuities offer a different form of security: guarantees backed by the issuing insurance company, with additional protection through state guaranty associations. FDIC limits can require clients to spread assets across multiple institutions, adding complexity without necessarily improving outcomes. Fixed annuities allow clients to consolidate assets while maintaining principal protection.

Fixed annuities can also help mitigate reinvestment risk. When a CD matures, clients must decide where to reinvest, sometimes in an uncertain rate environment. A short-term CD may feel prudent today, but what happens if rates are lower tomorrow? Fixed annuities can lock in multiyear rates, reduce the need for frequent reinvestment decisions and protect clients from timing mistakes caused by rate anxiety. For clients who want to set money aside for three, five or even 10 years, that stability can be especially valuable.

Tax treatment is another often-overlooked difference. Clients generally pay taxes on CD interest each year or at maturity, even if they don’t spend those interest dollars. Fixed annuity interest grows tax-deferred, with taxes due only upon withdrawal. For clients in higher tax brackets, those who don’t need current income or preretirees in peak earning years, tax deferral can significantly improve net returns over time.

Fixed annuities will not be appropriate for every client, but for individuals seeking CD-like safety with better tax efficiency, longer guarantees and optional income features, fixed annuities deserve serious consideration. When a client asks for a CD, the most productive conversation may start by exploring what they want their money to accomplish — and whether a fixed annuity is the more effective vehicle.

3. Bond funds

For decades, bond funds have played a key role in client portfolios, serving as a source of income, diversification and risk moderation. But today’s environment calls for a more nuanced conversation about risk, income and client outcomes. In that context, fixed indexed annuities and registered index‑linked annuities deserve a serious look — not as bond replacements in every case but as potentially more effective solutions for certain objectives.

Interest rate and duration risk expose bond funds to negative returns, which clients can experience daily. Income-oriented investors may find these losses particularly difficult to tolerate. FIAs eliminate market-downside risk through principal protection, while RILAs allow advisors to define risk through buffers or floors.

Bond funds also offer limited return potential, particularly after fees and in rising-rate environments. Many clients are surprised by how little upside bonds deliver relative to the risk assumed. FIAs provide index‑linked growth potential without direct market exposure, typically with caps or participation rates. RILAs can provide even greater upside potential by allowing additional market participation in exchange for limited, predefined downside.

In the right situations, FIAs and RILAs can improve portfolio efficiency by shifting risk away from interest rates and toward equities while controlling losses. Bond funds still have a role but should no longer be the default “safe” allocation many assume. FIAs and RILAs give advisors more control over risk, clearer outcomes and better alignment with client behavior.

As record annuity sales converge with the Peak 65 wave, advisors have a rare opportunity to reshape how clients think about safety, income and risk. Brokerage accounts, CDs and bond funds will remain important tools, but they no longer need to do all the heavy lifting. By thoughtfully incorporating variable, fixed, fixed indexed and registered index‑linked annuities alongside those familiar solutions, advisors can build more resilient, tax-efficient portfolios, helping clients approach retirement with greater clarity, confidence and control.