Why More Retirees Are Choosing Annuities in 2025

Most Americans have heard of annuities — but according to LIMRA, only 1 in 4 actually know what they are. And it’s no surprise. Annuities aren’t taught in school, and Wall Street advisors often overlook them because they don’t generate the same fees as risk-based investments.

But here at Retirement Income School™, we do things differently.

If you’re approaching retirement or already there, and want predictable, guaranteed income — it’s time to understand what annuities are really about.

What Is an Annuity, Really?

At its core, an annuity is a contract with an insurance company that turns your savings into a stream of income — often guaranteed for life. You can fund it with a lump sum or a series of payments, and it will eventually pay you consistent income, no matter what the markets do.

Annuities have been around since ancient Rome. Citizens made lump sum payments to receive a guaranteed annual income — a system called annua. Fast forward to the Great Depression, and annuities became a way for Americans to create financial security during uncertain times.

Sound familiar?

Today’s annuities have evolved into powerful financial tools that can protect your savings from market losses and ensure you don’t run out of money in retirement.

Annuities and the Income Floor

If you’ve watched or read other lessons from me, you know how important it is to build your income floor — that reliable monthly income you can count on to cover your essential expenses in retirement.

Annuities are a key strategy in building that floor. Combined with Social Security, pensions (if you have one), and possibly income from whole life insurance, annuities help close the income gap.

They offer:

• Guaranteed lifetime income

• Protection against market volatility

• Tax-deferred growth (in many cases)

• Long-term care features in some contracts

Why Annuities Are Booming in 2025

Right now, annuities are having a moment — and for good reason:

• Interest rates are higher, making annuity payouts more attractive

• Market volatility is increasing, which makes safety a top priority

• Retirees are seeking certainty, not speculation

In fact, LIMRA reported that annuity sales hit $385 billion in 2023 — and they’ve grown 98% from 2020 to 2024. More retirees than ever are exploring annuities for the stability they offer.

Understanding Rates, Fees, and Income Riders

Annuities aren’t all the same — and neither are their earnings.

• Fixed annuities offer a guaranteed interest rate, similar to a CD but usually higher

• Fixed indexed annuities (FIAs) are linked to an index like the S&P 500, giving you the potential for growth without market losses

• Growth is determined by cap rates (maximum credited interest) and participation rates (how much of the index gain you receive)

• Even in a down year, you’re guaranteed not to lose money — the worst-case return is 0%

When it comes to fees:

• Many annuities have no annual fees unless you add an income rider

• Income riders typically cost around 0.95%–1.25% annually — and in return, they guarantee income you can’t outlive

Unlike traditional investments, you’re paying for peace of mind, not performance guesswork.

Comparing Income: Annuities vs. Safe Withdrawal

Let’s compare:

• If you withdrew 4% from a $200,000 IRA, you’d get about $8,000/year

• With a properly designed annuity, the same $200,000 could generate $20,850/year in guaranteed lifetime income after a 5-year deferral

That’s not a prediction — it’s a contractual guarantee. And in some cases, annuities even include income doublers for long-term care events.

How Safe Is My Annuity Money?

Many people ask, “What if the insurance company goes under?”

Here’s what you need to know:

• I only work with A-rated or better carriers that have long-standing financial strength

• Insurance companies are required by law to keep large cash reserves

• Unlike banks, they don’t operate on fractional reserves

• Each state has a guaranty association, protecting policyholders (often up to $250,000–$500,000 per insurer)

When you choose the right annuity — with the right guidance — your income is protected with multiple layers of safety.

Final Thoughts

Annuities aren’t a magic solution — but when used correctly, they offer one of the most powerful ways to create safe, predictable income for life.

They help you build your income floor, eliminate market guesswork, and give you peace of mind that your retirement savings will last — no matter how long you live.

Ready to Retire Financially Relaxed?

My goal is to help you eliminate the fear of running out of money, avoid costly mistakes, and retire with confidence and security. When you have safe, predictable income in place, you’re free to actually enjoy retirement — not just worry your way through it.

👉 Learn more at the Retirement Income School™
📞 Want to talk? Schedule a Retirement Income Q&A Call — I’d love to support you.

This is your chance to learn what you wish school had taught you so you can learn how to keep your money safe and make it last, so you can enjoy retirement!

DISCLAIMER

The information in this podcast is provided for general educational purposes only and does not constitute financial, legal, or tax advice. Retirement Income School™ and Dr. Amanda Barrientez do not provide individual investment recommendations. Always consult with a licensed advisor or tax professional before implementing any strategy discussed.