Annuities have been the hottest retail investment product by far over the last five years. Can the trend continue?
When LIMRA reported that U.S. annuity sales doubled from $219 billion in 2020 to $434 billion in 2024, many in the industry were stunned by the scale and speed of the growth.
Bryan Hodgens, head of LIMRA Research, and Jason Fichtner, executive director of the Retirement Income Institute at the Alliance for Lifetime Income, tackled the issue this week in a wide-ranging online discussion. Their conclusion: a second doubling is possible, but it will require a combination of favorable economic conditions, shifting demographics, advisor adoption, and a reframing of how consumers think about annuities.
Hodgens pointed to rising interest rates as the most influential factor behind the last five years of growth. The 10-year Treasury, which hovered around 0.5% in March 2020, averaged 4.2% in 2024. That created a surge in demand for fixed-rate deferred annuities, whose sales more than tripled during the period. Volatility in equity markets also nudged investors toward products offering downside protection, spurring record sales of registered index-linked annuities (RILAs) and fixed index annuities.
Fichtner emphasized that demographic pressures could prove an even bigger driver going forward. The U.S. is now entering the “peak 65” years, with more than 11,000 baby boomers turning 65 every day between 2024 and 2027. By the end of the decade, for the first time, there will be more Americans over age 65 than under 18.
On the advisor side, demand from clients is changing the conversation. LIMRA found four in 10 advisors report increased client inquiries about annuities. Two-thirds say they are adjusting recommendations to address concerns about inflation, market volatility, and longevity risk.