Annuity Sales Are at an All Time High, But Experts Warn Retirees Are Getting This Key Detail Wrong

Annuities are having a moment. U.S. annuity sales reached a record $464.1 billion in 2025, marking the fourth consecutive year of all-time highs as retiring baby boomers searched for guaranteed income and protection from market volatility. For many Americans building a retirement plan, the appeal is easy to understand: predictable income can feel reassuring when markets are uncertain.

But according to retirement experts, many retirees may be making a crucial mistake. Here's why.

Annuity sales keep breaking records

The annuity market has experienced extraordinary growth in recent years.

According to LIMRA, total U.S. annuity sales reached $464.1 billion in 2025, representing 93% of the total U.S. annuity market, and extending a streak of record-breaking annual sales. Rising interest rates, increased retirement concerns, and the desire for guaranteed income have all likely contributed to the surge.

For retirees facing the prospect of funding decades of living expenses, the promise of guaranteed income can be highly attractive. That's especially true as traditional pensions continue to become less common.

Experts say many people misunderstand the purpose

The biggest concern isn't the growth in annuity sales itself.

Instead, retirement specialists worry that many consumers are approaching annuities as investments rather than as insurance against outliving their savings. Experts increasingly view this misunderstanding as one of the biggest issues in the annuity marketplace.

That distinction matters because it often leads buyers toward products that may not best fit their needs.

The most efficient income annuities aren't the best sellers

When the goal is guaranteed lifetime income, two products often stand out.

Single premium immediate annuities, known as SPIAs, begin making payments almost immediately after purchase. Deferred income annuities, or DIAs, delay payments until a predetermined age.

Because these products focus primarily on income rather than growth features, they often provide the highest payout per dollar invested. Yet they represent a relatively small portion of overall annuity sales.

Investment-style annuities are driving much of the growth

The fastest-growing segments of the market look very different.

Registered index-linked annuities (RILAs) and fixed indexed annuities (FIAs) combine elements of investing and insurance. They typically offer some opportunity for market-linked growth while also providing varying degrees of downside protection.

These products can serve legitimate purposes. However, they're often purchased by people primarily focused on growth potential rather than maximizing future income. That's where the mismatch can occur.

Matching the product to the objective matters most

If you're planning for retirement, it's best to start with the financial concern you're trying to solve.

For example, if your primary concern is generating dependable income right now, an SPIA may be one of the most efficient tools available. If you're worried about outliving your money later in retirement, a DIA can create a future income stream that begins years down the road.

On the other hand, if your objective is preserving principal while still participating in some market gains over the next seven to ten years, an FIA or RILA may be a better fit.

The product should follow the goal, not the other way around.

Headline rates don't tell the whole story

Annuity advertisements may focus on attractive growth rates or participation rates. While those numbers can be important, they don't necessarily reveal whether a particular annuity solves the retirement challenge you're facing.

For example, a retiree seeking guaranteed income may end up sacrificing future payouts by choosing a product primarily designed for accumulation. Likewise, someone focused on growth may be disappointed if they buy an income-oriented product expecting market-like returns.

Understanding the purpose of each category can help avoid costly mismatches.

Bottom line

The record-setting growth in annuity sales shows that retirees are increasingly looking for ways to create stability in retirement. That's understandable in an environment where market volatility and longevity concerns remain top of mind.

The key lesson is that not all annuities are designed to accomplish the same objective. By identifying the specific problem you're trying to solve before selecting a product, you can make more informed decisions and potentially lower your financial stress throughout retirement.

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