A growing number of Americans are shifting their retirement-income strategy away from depending solely on Social Security or a traditional 401(k) toward securing a guaranteed lifetime income through an annuity.
SAN ANTONIO, TX, December 08, 2025 /24-7PressRelease/ -- A growing number of Americans are shifting their retirement-income strategy away from depending solely on Social Security or a traditional 401(k) toward securing a guaranteed lifetime income through an annuity. According to recent industry data, U.S. individual annuity considerations in 2023 jumped by 21.5 percent over the prior year, reaching approximately $347.7 billion.
Key factors behind this trend include 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.
Many retirees are opting to sell larger homes and move into smaller residences, thereby unlocking home equity and redirecting those proceeds toward retirement income solutions. That shift becomes especially meaningful at a time when nearly half of retirees express worry over having insufficient guaranteed lifetime income. By converting equity into an annuity, retirees can transform that one-time event (selling a home) into a predictable paycheck for life.
An annuity works this way: you pay a premium (either with a lump-sum or via periodic payments), and in return the insurance company agrees to make regular payments to you for life (and if selected, for the lifetime of your spouse). In many cases those payments begin immediately (an immediate annuity) or at a later date (a deferred annuity). Because these payments are backed by the insurance carrier's portfolio and mortality pooling, they deliver predictability.
According to Gary Jensen, CFP® and Chief Analyst at Annuityverse, "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. 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. This foundation of income along with other assets in a diversified portfolio can provide both lifetime income guarantees along with the flexibility to course correct when life throws you a curveball."
Tax-advantages can also apply. While withdrawals from a distressed 401(k) or drawing down savings may trigger ordinary income tax and potential penalties, certain annuity structures allow tax-deferral of interest accumulation until payout. That means earnings grow in a tax-deferred manner until you begin receiving payments, reducing tax drag during accumulation. And when income begins, it's taxed at your ordinary rate—but because the principal is typically composed of after-tax dollars, a portion of each payment may be treated as a tax-free return-of-principal, depending on contract type.
Furthermore, an annuity can pay you for the rest of your life. When properly structured, income continues until death so the "longevity risk" (the risk you'll live longer than expected and run out of money) is transferred to the insurer. As interest rates have risen in recent years and market volatility has increased, more retirees are drawn to this "floor" of guaranteed income to cover basic retirement essentials. One market-study notes that fixed-rate deferred annuities saw exceptional growth in 2023, and fixed-indexed annuities also rose markedly.
As for interest mechanics: in a fixed annuity you may receive a stated interest crediting rate (for example, 3-5 percent) that compounds annually during the accumulation phase. At the payout phase, the insurer calculates your periodic payment based on your accumulated principal, credited interest, your selected payout option (single-life or joint-life), and prevailing actuarial and interest-rate assumptions. In a fixed-indexed annuity, your credited interest may be tied to the performance of a market index (for example, S&P 500®) with a cap and floor (so you may capture some upside but not the full index, and you're protected from loss). Once payouts begin, the insurer uses that accumulated value and converts it into a stream of payments—often by dividing the value by a mortality-factor table and interest factor. The higher the interest rates and the longer the payout period, the larger the periodic payment you receive.
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