Retirement planning has changed. Pensions have largely disappeared from the private sector, Social Security alone rarely covers the full cost of living, and the stock market has shown, repeatedly, that it can lose a significant chunk of value in a single year.
With more than 4 million Americans turning 65 every year through 2029, a growing number of people are looking for ways to protect what they have saved while still generating income they can count on. Annuities have moved to the center of that conversation, and the numbers back it up.
Key Takeaways
- Fixed annuities from A-rated carriers are currently offering guaranteed rates up to 6.50%, outpacing most CDs and bonds.
- Total U.S. annuity sales hit a record $434.1 billion in 2024, signaling widespread demand for guaranteed retirement income.
- Annuities protect principal from market losses and can provide income that lasts for life, addressing the biggest fear retirees face.
Why Safety Matters More Than Ever in Retirement
In 2022, the S&P 500 dropped 19.4%, its worst annual performance since 2008. That same year, the traditional 60/40 portfolio, the standard model for balanced investing, fell harder than it did during the 2008 financial crisis.
Bond investors, who expected some shelter from the volatility, found little. The correlation between stocks and bonds hit multi-decade highs, leaving few places to hide.
Fast forward to 2025 and early 2026, and market anxiety has not eased. A single-day drop of 748 points in the Dow Jones Industrial Average rattled investors in early 2025. Global trade uncertainty, driven by tariff disputes and geopolitical instability, continues to introduce volatility.
For someone who is still working and has 20 years to ride out a downturn, a bad market year is painful but manageable. For someone in retirement drawing down a fixed portfolio, sequence-of-returns risk, that is, the danger of experiencing large losses early in retirement, can permanently damage income.
That backdrop explains one striking data point: 64% of Americans say they are more worried about running out of money in retirement than they are about dying. Outliving savings is the defining fear of the retirement years, and it is a legitimate one.
Women, who on average retire two years earlier than men and live longer, face this risk acutely. Statistically, women have saved 30% less than men by the time they reach retirement age, and only 22% have more than $100,000 in their retirement funds compared to 30% of men.
What an Annuity Actually Does
An annuity is a contract between a purchaser and an insurance company. The buyer makes a lump-sum payment or a series of payments, and the insurer agrees to deliver a stream of income, either immediately or at a future date. The income can last for a set number of years or for the rest of the buyer’s life, depending on the contract terms.
The key distinction from other retirement vehicles is that annuities are insurance products, not investments in the traditional sense. They are not directly exposed to market performance. With most types, the principal is protected. That separation from market risk is the core reason annuities have attracted so much attention during periods of volatility.
There are several main types, each suited to different situations:
| Type | How It Works | Best For |
|---|---|---|
| Fixed Annuity (MYGA) | Locks in a guaranteed interest rate for a set term (2–10 years). No market exposure. | Conservative savers who want guaranteed, predictable growth |
| Fixed Indexed Annuity (FIA) | Credits interest linked to an index like the S&P 500, subject to a cap. Principal is protected if the index falls. | Savers who want some growth potential with a floor of zero loss |
| Registered Index-Linked Annuity (RILA) | Offers higher upside potential than FIAs in exchange for limited downside exposure (a buffer, not full protection). | Investors comfortable with modest downside risk for more growth |
| Immediate Annuity (SPIA) | Payments begin within 30 days to one year of purchase. | Retirees who need income now |
| Deferred Income Annuity (DIA) | Payments begin at a future date, often 10 or more years out. | Pre-retirees planning for longevity protection later in life |
Where Annuity Rates Stand Right Now
For anyone evaluating fixed annuities today, the rate environment is notably favorable. As of April 2026, the top fixed annuity rates from A-rated carriers range from 5.65% to 6.50%, depending on term length.
The best 5-year MYGA rate sits at 6.30%, compared to the best 5-year CD rate of 4.05%. That is a 2.25 percentage point spread in favor of the annuity, and the advantage grows further when tax treatment is considered.
A CD issues a 1099-INT annually. Taxes are owed each year on the interest earned, even if the money stays in the account. A fixed annuity grows tax-deferred. On a $100,000 deposit held for three years in the 24% tax bracket, that deferral alone is worth approximately $1,200 to $1,500 more than a CD at the same rate, according to analysis from My Annuity Store.
Here is a current snapshot of fixed annuity rates by term as of April 2026:
| Term | Best Rate (A-Rated Carrier) | Best CD Rate (Comparison) |
|---|---|---|
| 3-Year | 5.65% (Farmers Safeguard) | ~4.30% |
| 5-Year | 5.65% (Knightshead Life) / 6.30% (B++ rated) | 4.05% |
| 7-Year | 6.50% (Knighthead Staysail Annuity) | ~4.00% |
5-year MYGA rates climbed sharply from historic lows in 2021 and have held above 6% since 2023. While there is some expectation that rates could drift lower if the Federal Reserve cuts aggressively in the second half of 2026, top MYGA yields remain in the 5.80% to 6.50% range as of this writing.
Locking in now means those rates are guaranteed for the full term, regardless of what happens to interest rates afterward.
For fixed indexed annuities, today’s best FIAs from leading A-rated carriers are offering cap rates between 8% and 12% on annual point-to-point strategies. If the index gains 15% in a given year and the cap is 10%, the contract credits 10%. If the index drops 20%, the contract credits 0%. The principal does not decrease.
Record Sales Tell a Clear Story
Annuity sales in the U.S. reached $434.1 billion in 2024, a record high. From 2022 through 2024, total annuity sales exceeded $1.1 trillion. That growth was not driven by any single product. Fixed-rate deferred annuities were the primary growth driver in 2023.
As rates began to shift in 2024, investors moved toward fixed indexed annuities, which saw sales rise 32% to $126.9 billion, and registered index-linked annuities, which climbed 38% to $65.6 billion.
LIMRA, the insurance industry research organization, projects total annuity sales to exceed $400 billion in 2025, and first-quarter 2025 figures came in at $105.4 billion, only 1% below the record set in the same quarter of 2024. The interest is not slowing down.
The demographic driver is straightforward. More than 4 million Americans will reach age 65 every year through 2029, and a larger share of them will retire without a pension than any previous generation.
In 2024, only half of pre-retirees believed they had enough guaranteed lifetime income to cover basic living expenses, down from 58% in 2017. Over half of pre-retirees and retirees surveyed said they would be interested in converting a portion of their assets to an annuity, according to LIMRA research.
How Annuities Compare to Other “Safe” Options
When evaluating the safest retirement investments, three categories usually come up: fixed annuities, CDs, and U.S. Treasury bonds. Each protects principal and provides predictable income, but they differ in meaningful ways.
| Feature | Fixed Annuity (MYGA) | CD | Treasury Bond |
|---|---|---|---|
| Current Rate Range | 5.65% – 6.50% | 4.05% – 4.65% | 4.2% – 4.5% (10-year) |
| Tax Treatment | Tax-deferred growth | Taxed annually | Taxed annually (federal) |
| Guaranteed Income for Life | Yes (with annuitization) | No | No |
| Principal Protection | Yes | Yes (FDIC up to $250K) | Yes (U.S. government backed) |
| Probate | Bypasses probate via beneficiary designation | Subject to probate | Subject to probate |
| Market Exposure | None (fixed) / Limited (FIA) | None | Indirect (price fluctuates with rates) |
One area where CDs hold an advantage is FDIC insurance, which guarantees deposits up to $250,000 per institution. Annuities are backed by the financial strength of the issuing insurance company, not a federal guarantee.
This is why evaluating an insurer’s AM Best rating matters. Most financial professionals recommend sticking with carriers rated A- or higher for long-term annuity contracts. State guaranty associations provide an additional layer of protection if an insurer fails, though coverage limits vary by state.
The Longevity Problem Annuities Are Built to Solve
A 65-year-old woman today has a life expectancy that extends to roughly age 87, and a meaningful probability of reaching 95 or beyond. A $500,000 retirement portfolio, even invested conservatively, can be depleted if withdrawals are too high or if markets perform poorly during the early retirement years.
No CD, bond, or savings account guarantees income for an indefinite period. An annuity with a lifetime income rider does.
This longevity protection is the feature that separates annuities most clearly from other conservative options. The income does not stop when the account balance reaches zero. The insurer continues payments as long as the contract holder is alive. For retirees who are worried about outliving their assets, that guarantee carries real value that a rate comparison alone does not capture.
Immediate annuities also provide this benefit for those who are already retired and need income now. Payouts from income annuities are significantly higher today than they were before 2022, up double digits compared to pre-pandemic levels, because they are tied to prevailing interest rates.
Things to Know Before Buying
Annuities are not appropriate for every situation or every person. A few practical considerations:
- Most fixed annuities impose surrender charges if funds are withdrawn before the term ends. Typical contracts allow penalty-free withdrawals of interest earned or 10% to 15% of the contract value per year, but the remainder is subject to surrender fees during the holding period.
- Withdrawals made before age 59½ are subject to a 10% IRS penalty on gains, in addition to ordinary income taxes. Annuities are designed as long-term retirement vehicles.
- Variable annuities, which tie returns to underlying investment subaccounts, carry market risk and are a separate product from fixed and indexed annuities. They may carry higher fees and do not offer the same principal protection.
- The strength of the guarantee is only as good as the issuing company. Look for AM Best ratings of A- or higher when comparing products.
- Shopping across multiple carriers matters. Independent agents have access to the full market, while platform-specific brokerages like Fidelity typically feature only a curated set of insurers. Rate differences of 0.50% to 0.75% on equivalent quality products are common when comparing full-market options against restricted platforms.
Who Benefits Most from an Annuity
Annuities tend to be a strong fit for people who have accumulated assets and are within 10 to 15 years of retirement or already retired. Those without pension income, which is now most private-sector workers, have no other source of guaranteed lifetime income outside of Social Security. An annuity can fill that gap.
They also work well as part of a broader strategy. Holding a portion of retirement assets in an annuity for guaranteed income allows the rest of the portfolio to be invested more aggressively in equities, knowing that essential expenses are covered regardless of market conditions.
This approach gives retirees the flexibility to leave growth-oriented investments alone during downturns rather than being forced to sell at a loss to meet living expenses.
For conservative savers who have been keeping money in CDs or savings accounts, the current rate environment makes multi-year guaranteed annuities a logical comparison. The rates are higher, the tax treatment is more favorable for long-term accumulation, and annuities add a path to lifetime income that CDs simply cannot offer.
Conclusion
For retirees and near-retirees looking for a combination of capital protection, competitive guaranteed returns, and income that cannot be outlived, annuities are one of the most direct answers available in today’s market.
Rates remain near multi-decade highs, sales records confirm broad demand, and the product itself is built to address the risks that matter most in retirement: market loss, depleted savings, and an uncertain lifespan.