Why age alone shouldn’t rule out annuities in retirement

Retirement today looks very different from what it did even one generation ago. Longer lifespans, unpredictable markets and rising costs for essentials such as health care have forced many retirees to reconsider how they generate income.

That is why annuities, once considered niche products, have become mainstream. In 2024, annuity sales reached $432 billion, underscoring the demand for guaranteed income in uncertain times.

The idea that age automatically disqualifies someone from considering an annuity is one of the most common myths. There is no federal law that sets an age cap. This leaves insurers to establish their own guidelines, often capping immediate annuity sales between ages 80 and 85. However buyers in their 70s and even early 80s still have access to a wide range of products. Some companies extend eligibility into the 90s, especially for certain deferred or variable annuities.

Pricing does change with age. Because their life expectancy is shorter, older buyers generally receive higher monthly payments. This can make an annuity appealing to someone in good health with a history of longevity in their family. The trade-off is fewer years to receive payments, which makes it essential to weigh the timing and type of product carefully when discussing annuities with your retired clients.

Why annuities matter for today’s retirees

Life expectancy continues to climb, with men at age 65 expected to live an additional 18 years and women closer to 21 more years. That means retirees in their 70s often still face a decade or more of financial needs to cover. Meanwhile, the average Social Security benefit sits around $1,976 a month in 2025. That amount rarely stretches far enough to handle both day-to-day living and unexpected expenses.

For many retirees, especially those without a pension, annuities serve as a way to close the gap. Social Security was never intended to cover all retirement costs, and although it provides stability, it often leaves shortfalls. Adding an annuity can diversify income streams, reduce reliance on market performance and provide peace of mind that money will not run out.

This diversification becomes particularly valuable during periods of inflation. Fixed incomes lose purchasing power when costs rise, but annuities with inflation riders or variable growth features can help offset the risk. Although riders come with additional costs, the security they provide is worth considering for those concerned about maintaining their lifestyle.

Trade-offs and timing considerations

Annuities aren’t flawless and may not be suitable for every retiree. The most common drawbacks include high fees, surrender charge and limited liquidity. For retirees in their 80s, these drawbacks weigh heavily because there’s less time to recover the up-front costs. In fact, many critics will caution that annuities may not make sense once someone is well into their 80s, unless they have needs.

Liquidity is one of the most significant sticking points. Investing in an annuity typically means locking away your money for a specified period, which can be restrictive if unexpected emergencies arise. We often recommend having enough in cash or other liquid investments to cover at least several years of expenses before committing funds to an annuity.

Health is another critical consideration. Although insurers may offer enhanced payouts to those with medical conditions, these rarely outweigh the risks associated with a shortened life-span. In such cases, the up-front investment may not deliver enough value to justify the purchase.

Guidance for financial professionals

For financial professionals with retired clients interested in annuities, the challenge lies in cutting through the myths and guiding them toward solutions that truly meet their needs. This means treating each retiree as an individual, not a sales opportunity.

Everyone has unique health factors, family circumstances and income goals. A 75-year-old in excellent health with a modest pension may benefit from a lifetime income annuity. At the same time, an 82-year-old with significant liquidity needs may be better served with a certificate of deposit ladder or bond portfolio.

The service-first mindset is essential. Financial professionals who ask questions such as “What risk are you trying to solve?,” “How much flexibility do you need?” or “How do you want your assets to support your heirs?” create conversations that move beyond the mechanics of a contract. This approach ensures the product fits while building trust and long-term loyalty.

Alternatives worth considering

Annuities are one of several income tools available, but they’re not the only choice. For retirees who can’t commit funds to a contract, other strategies exist.

» CD ladders or bond portfolios that provide steady payouts while preserving liquidity.

» Reverse mortgages for homeowners aged 62 and older who need supplemental cash flow.

» Part-time or freelance work that allows retirees to delay withdrawals from savings and maximize Social Security benefits.

These alternatives don’t offer the same level of lifetime guarantee as annuities, but they provide flexibility. A blended strategy in which a retiree secures a base level of guaranteed income and maintains some assets in more accessible forms often works best.

Putting the client first

The best retirement income strategies aren’t about products; they’re about people. Every retiree’s situation is different. Those of us who take the time to understand client goals — whether protecting a spouse, funding health care or leaving a legacy — will be best positioned to serve their needs. Perhaps the right question is not “Which annuity should I sell?” but rather “What problem am I solving for this person?”

That focus on service transforms the conversation. Instead of positioning annuities as a catch-all solution, we can demonstrate how the right product at the right time helps retirees live with more confidence and less financial stress.

Turning longevity into opportunity

Retirement is no longer a brief chapter in life. For many, it’s a 20-year or even 30-year journey. The fear of outliving savings is real, and Social Security alone is rarely enough to cover all costs in later years. Annuities, when chosen thoughtfully, can provide the income stability retirees crave.

Age alone should not disqualify someone from considering these products. Insurers allow purchases well into the 80s, and the higher payouts available at older ages can make them appealing for healthy retirees. The key lies in aligning the decision with personal health, goals and financial circumstances.

When we guide our clients with empathy and customized solutions, we can help retirees understand that the actual value of an annuity lies in the security it delivers. With careful planning, even those who think they’re “too old” for an annuity may find that the right product at the right moment can transform their retirement experience.