Facts About Annuities in America: Stats & Insights

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APA:Khan, U. (2025, February 1). Facts About Annuities in America: Stats & Insights. RetirementLiving.com. Accessed February 19, 2025, from https://www.retirementliving.com/best-annuities/facts-about-annuities
Chicago:Khan, Usama. “Facts About Annuities in America: Stats & Insights.” RetirementLiving.com. Last updated February 1, 2025. https://www.retirementliving.com/best-annuities/facts-about-annuities.
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Life insurers paid out a record $104 billion in annuity benefits in 2023, marking a 9% rise from the previous year, according to the American Council of Life Insurers. 

Strong employment rates and thriving equity markets are two of the factors contributing to the rates of annuity sales.

Here’s a clear and concise look at key facts about annuities in America.

Types of Annuities and Associated Trends

There are different types of annuities, each with distinct features and levels of popularity. Let’s break down the recent performance and trends of some annuity products:

  • Fixed-Rate Deferred Annuities: These saw exceptional growth in 2023. Sales reached $164.9 billion, up 46% from the $113 billion recorded in 2022. The fourth quarter alone brought in $58.5 billion, a 52% increase from the same period in 2022—the highest ever for this category.
  • Fixed Indexed Annuities (FIAs): FIAs hit $95.6 billion in sales in 2023, rising 20% from 2022. In the fourth quarter, sales climbed to $24.6 billion, reflecting a 10% growth compared to the previous year. These annuities are gaining traction for their balance of security and potential market-linked growth.
  • Income Annuities: Rising interest rates became a cause for the popularity of income annuities. Single Premium Immediate Annuities (SPIAs) saw a 43% increase in 2023, reaching $13.2 billion. The fourth quarter alone accounted for $3.5 billion, a 9% jump from 2022. Similarly, Deferred Income Annuities (DIAs) experienced remarkable growth. Fourth-quarter sales reached $1.3 billion, up 81%, and total annual sales nearly doubled to $4.1 billion.
  • Traditional Variable Annuities (VAs): While other categories flourished, VAs struggled in 2023. Total sales fell 17% to $51.4 billion, marking the lowest annual figure ever recorded. The fourth quarter followed suit, with sales down 3% year-over-year to $12.3 billion, despite strong equity market performance.

How do Annuities Work?

Annuities are financial products designed to provide a steady income in exchange for your premium payments. Your annuity’s value is based on the premiums you pay, minus charges, plus any credited interest. This determines the benefits you’ll receive over time.

In the United States, retirement annuities remain a significant part of financial planning.

By the second quarter of 2023, total retirement annuity assets had climbed to $2.29 trillion, up from $2.16 trillion in 2022.

Here are the different features of annuity payments:

Charges That Affect Your Annuity

Different types of charges can influence your annuity’s growth and the rate of return it provides. It’s essential to understand these costs upfront:

  • Percentage of Premium Charge: Often called a “load,” this charge is deducted from each premium payment before interest is applied. The percentage may reduce after a certain number of years or when premiums reach a set threshold.
  • Contract Fee: A flat fee charged either once or annually which is commonly used to cover administrative expenses.
  • Market Value Adjustment (MVA): Some annuity contracts have this adjustment. It can increase or decrease your account value or death benefit value based on changes in interest rates.
  • Transaction Fee: A fixed charge is applied to specific actions like premium payments, withdrawals, or transfers.
  • Surrender Charge: This is a penalty for withdrawing money before the surrender period, usually expressed as a percentage. These charges often decrease over time and may be waived under certain conditions, like a drop in declared interest rates.
  • Underlying fund expenses: Along with what is paid to the issuer, there is an additional fee for underlying mutual fund investments.

Phases of Annuities

Understanding the two key phases—accumulation and payout—is crucial to making the most of this financial tool.

The Accumulation Phase

This is the phase where you contribute money to your annuity. Payments can be made as a lump sum or through regular contributions, depending on the contract.

  • Your annuity income may be allocated across various investment options, including accounts offering guaranteed interest rates for stability.
  • Variable annuities often combine these fixed-rate accounts with market-linked investments, giving your contributions growth potential.

The Payout Phase

This phase begins when you start receiving income from your annuity.

  • Payments include the money you contributed, plus any investment gains or interest earned during the accumulation phase.
  • You can choose between a lump sum payment or periodic payments (typically monthly), depending on your financial goals and needs.

The Role of Annuities in Retirement Income

Annuities play a critical role in guaranteeing financial stability for the retirement. They provide a steady future income, helping retirees manage expenses and protect their savings over a long period of time. 

As of the second quarter of 2023, the total value of retirement annuity assets in the U.S. reached $2.29 trillion, up from $2.16 trillion the year before.

Why Annuities Matter for Retirees

For those retiring with less than $250,000 in retirement savings, annuitizing a larger portion or even all of their savings can make a significant difference. 

Research shows that annuities:

  • Provide a guaranteed income, reducing financial uncertainty.
  • Preserve remaining wealth, as they reduce reliance on other savings.
  • Allow room for wealth growth by giving a consistent cash flow in retirement accounts.

Retiree Satisfaction with Annuities

A study by the TIAA-CRE Institute highlights that 19% of retirees annuitize their savings, particularly those with significant Defined Contribution (DC) plans and IRA accumulations (over $200,000) but little pension income. 

Among those who purchased payout annuities:

  • 57% of annuitants were very satisfied with their decision.
  • Another 32% were somewhat satisfied, reflecting the financial strength annuities bring.
  • Only 6% expressed dissatisfaction, emphasizing the broad appeal of annuities for retirement planning.

Benefits of Annuities for Retirees

Annuities offer retirees a reliable financial foundation by providing guaranteed income, peace of mind, and added social security. 

As traditional pensions decline, annuities are becoming an increasingly popular choice for retirement planning.

Financial Security and Peace of Mind

Annuities contribute to a sense of stability for retirees:

  • 97% of annuity owners say their annuities reduce anxiety about their income stream
  • 93% agree that annuities help them worry less about everyday expenses.

Protection Against Fraud and Bad Decisions

Annuities also act as a safeguard against financial vulnerabilities:

  • 84% of annuity owners feel their annuities protect them from poor investment decisions or scams.
  • This layer of security is especially crucial for older adults who may find it harder to navigate complex financial matters as they age.

Annuities are becoming critical in retirement planning in the U.S., with adoption rates steadily rising in recent years. The industry has shown remarkable growth, both in terms of demand and overall market size.

From 2018 to 2023, the number of businesses in the Life Insurance & Annuities sector grew by an average of 6.6% annually. This consistent expansion highlights the increasing reliance on annuity insurance companies as a financial tool for retirement income.

Annuities have become the largest segment for life and annuity insurance providers in the U.S. In 2023, gross annuity premiums reached nearly $500 billion, significantly outpacing life insurance premiums of $214 billion

This shift reflects retirees’ growing preference for guaranteed income solutions over traditional insurance and investment options.

Size of the Annuity Market in America

The annuity market in the U.S. has seen remarkable growth, reaching record levels in recent years. The previous sales record for annuities was set in 2008 at $265 billion

The 2022 total surpassed this by nearly 17%, signaling a growing reliance on annuities in financial planning. 

In 2022, annuity sales totaled $310.6 billion, according to the Life Insurance Marketing and Research Association. 

This marked a 22% increase compared to $254.9 billion in 2021, reflecting the rising demand for stable retirement income solutions.

Breakdown of Sales by Type

  • Fixed annuities accounted for the majority, with sales hitting $208 billion in 2022.
  • Variable annuities contributed $102.6 billion, showing their continued appeal despite market fluctuations.

Per Capita Perspective

With a U.S. population of approximately 334.7 million in 2023, annuity purchases in 2022 averaged $927.91 per citizen

This underscores the significant role annuities play in retirement planning across the nation.

Annuity Withdrawal Benefits

Annuities with Guaranteed Lifetime Withdrawal Benefits (GLWB) offer retirees a structured and reliable way to access their savings while maintaining a steady lifetime income. 

These benefits are particularly appealing for those looking to secure financial stability in later years.

The withdrawal rate depends on the annuitant’s age when withdrawals begin:

  • At 65 years old, the typical withdrawal rate is 5%.
  • At 70 years old, the rate often increases slightly to 5.25%.

Withdrawals are calculated based on a separate benefit base, which may grow over time with guaranteed returns.

FAQs

What is a TDA?

A Tax-Deferred Annuity (TDA) is a 403(b) retirement savings plan that lets you set aside extra income for retirement. You can contribute either pre-tax dollars, which lowers your taxable income now, or Roth after-tax dollars, which allows tax-free withdrawals later.

What is the free-look period for annuities in California?

If you’re a senior in California, you have a 30-day free-look period to review your annuity. During this time, you can return the contract for a full refund if it doesn’t meet your needs. After this period, but before income payments begin, some annuities may offer a return-of-premium liquidity feature for added flexibility.

Do annuities have sales charges?

Yes, annuities often include Contingent Deferred Sales Charges (CDSC) to cover costs like commissions and marketing. These charges apply if you terminate your contract before the end of the surrender charge period, and they’re deducted from your annuity’s cash value.

Bottom Line

Annuities have become a cornerstone of retirement planning in the U.S., offering retirees steady income and financial peace of mind. In 2023, life insurers paid out a record $104 billion in annuity benefits, reflecting a 9% increase from the previous year. This surge aligns with strong employment rates and thriving equity markets, underscoring the growing reliance on annuities.

Fixed-indexed annuities reached $95.6 billion in sales in 2023, marking a 20% rise from 2022. By mid-2023, total retirement annuity assets climbed to $2.29 trillion, up from $2.16 trillion in 2022. 

Annuities also provide significant emotional security, with 97% of annuity owners reporting reduced anxiety about their income stream. In 2022 alone, annuity sales totaled $310.6 billion, breaking previous records and emphasizing their importance in retirement planning.

These figures highlight the increasing role of annuities in ensuring financial stability and stress-free retirement for millions of Americans.

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