U.S. Annuity Considerations Surge 21.5% in 2023 as Americans Seek Guaranteed Retirement Income

U.S. individual annuity considerations surged by 21.5 percent in 2023, reaching approximately $347.7 billion, according to industry data. This growth reflects a fundamental change in how Americans approach retirement income, moving away from sole reliance on Social Security or traditional 401(k) plans toward guaranteed lifetime income through insurance products. Several key factors drive this trend, including escalating concern about market volatility, fear of outliving savings, and waning confidence in Social Security's long-term sustainability. As more Americans downsize their homes and free up equity, they are increasingly directing that capital into annuities as a foundational piece of retirement planning. This shift becomes especially meaningful when nearly half of retirees express worry over having insufficient guaranteed lifetime income.

"Recent layoffs in the US can be a stark reminder that retirement is not always on your own terms, and may arrive earlier than expected," said Gary Jensen, CFP® and Chief Analyst at Annuityverse. "While no one can be fully prepared, advance planning is key to prevent a late-career layoff from derailing financial security. Part of a solid plan can mean owning a deferred income annuity - ideally funded in your 50's - to provide an income baseline along with Social Security." Annuities function by converting a premium payment into regular lifetime payments backed by the insurance carrier's portfolio and mortality pooling. This structure transfers "longevity risk"—the risk of outliving one's savings—to the insurer. As interest rates have risen in recent years and market volatility has increased, more retirees are drawn to this guaranteed income floor to cover basic retirement essentials.

Tax advantages also contribute to annuities' appeal. While withdrawals from distressed 401(k) plans or savings drawdowns may trigger ordinary income tax and potential penalties, certain annuity structures allow tax-deferral of interest accumulation until payout. Earnings grow tax-deferred until payments begin, and when income starts, a portion of each payment may be treated as tax-free return-of-principal depending on contract type. Market data shows fixed-rate deferred annuities experienced exceptional growth in 2023, with fixed-indexed annuities also rising markedly. In fixed annuities, investors receive a stated interest crediting rate during accumulation, while fixed-indexed annuities tie credited interest to market index performance with caps and floors that protect against loss while capturing some upside potential.

This trend represents a significant rethinking of retirement security, with Americans increasingly seeking predictable income streams that cannot be outlived. By converting home equity or other assets into lifetime payments, retirees create financial stability in an uncertain economic landscape where traditional retirement pillars show signs of strain. The movement toward annuities underscores a broader societal shift as individuals take greater personal responsibility for ensuring their financial well-being in later years, moving beyond traditional savings vehicles to products offering contractual guarantees against market downturns and longevity.