Demand for annuities: What’s driving it and what’s next

Annuities have long had a reputation as niche tools — relegated to a corner of the planning conversation, often misunderstood and occasionally oversold. But that perception has shifted. Annuities are seeing record demand, and not just from the usual suspects. This trend isn’t a blip — it’s a reflection of evolving priorities among investors, especially those nearing or entering retirement.

So what’s fueling the demand and what should advisors expect moving forward?

Investors want annuities' protection and predictability

Investors are recalibrating after a decade of equity-driven growth strategies. Persistent market volatility, inflation pressure and economic uncertainty are pushing people to rethink traditional asset allocation. The result? A surge in demand for diversification with downside protection. This is a space where annuities shine, particularly by mitigating sequence-of-returns risk, a major threat to retirement income stability.

Fixed annuities, for example, offer competitive yields, principal protection and guaranteed rates of return. These are features that outperform many intermediate-term bonds on a risk-adjusted basis in today’s low-yield environment. Meanwhile, enhanced roll-up and payout rates are attracting attention from investors looking for secure, tax-efficient growth in uncertain times.

The numbers back it up

Although only 12% of Americans currently own an annuity, the trajectory is clear. According to LIMRA, annuity sales grew 12% in 2024 — a reflection of investor appetite for income guarantees and longevity protection.

Interest in lifetime income is surging among preretirees and retirees. More than half of investors 55 and older say they want income they can't outlive, and many are now proactively seeking solutions that combine security, growth and legacy planning. Mass-affluent households are leading the charge within this group. They’re financially aware, retirement-focused and often underserved by traditional defined-benefit plans. In fact, only 24% of this cohort have a pension, and 27% have no designated retirement savings at all.

The Great Wealth Transfer is also a factor

We’re at the front end of a demographic shift that’s hard to ignore: an estimated $106 trillion in assets will move from baby boomers to their heirs in the coming decades. Many mass-affluent boomers are looking for guaranteed income options that can also serve legacy planning goals. Advisors who integrate annuities — especially those with long-term care benefits or used in conjunction with trusts — can uniquely position themselves to meet both income and wealth transfer needs, creating comprehensive solutions that resonate deeply with clients.

Technology is driving transparency and adoption

Annuities have historically been viewed as complex and opaque, but that’s changing fast. Today’s digital tools make it easier than ever for both advisors and clients to understand, compare and manage annuity products.

Modern platforms now offer features such as real-time pricing updates, alerts for key contract milestones (such as surrender periods), and intuitive dashboards that track performance and income projections. Some even use artificial intelligence to help match client needs with product features — streamlining what used to be a time-consuming process.

This shift toward transparency and ease of use is helping to demystify annuities. Advisors can now integrate them more seamlessly into holistic financial plans, while clients gain greater confidence in how these products support their long-term goals.

What’s next: Rates, resets and continued demand

The current rate environment has been a major tailwind for annuity sales. And while the Federal Reserve already implemented several cuts in 2024 — with more expected later this year — the demand for annuities is unlikely to fall off a cliff. That’s because the core appeal of these products remains intact: predictable income, principal protection and insulation from market noise.

We may have seen the peak of this sales cycle, but that doesn't mean we’re headed into decline. Fixed and fixed indexed annuities, in particular, remain well-positioned for the second half of 2025. Their ability to balance upside participation with downside protection continues to resonate with clients, especially those navigating retirement in an unpredictable economic landscape.

The demand for annuities isn’t a fad. It’s a recalibration. As more advisors focus on outcomes over alpha, and as more investors seek retirement stability over accumulation, annuities will remain a powerful and increasingly mainstream tool in the planning toolkit.

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Jack Elder is head of advanced planning at CBS Brokerage. Contact him at [email protected].