Annuities have seen a surge in popularity lately—sales rose 13% in 2024 to a record $434 billion, according to research firm Limra. With economic uncertainty and more people focused on creating secure retirement income, it’s no wonder annuities are in the spotlight.
But are they the right move for everyone?
GenWealth Financial Advisors’ Co-Founder, John Shrewsbury, recently broke it down in a candid conversation about what annuities are—and what they aren’t.
What Is an Annuity?
An annuity is a contract between you and an insurance company. In exchange for a lump sum or a series of payments, the company promises to provide a regular, predictable stream of income—typically in retirement.
“Think of it like creating your own pension,” John says. “It’s a way to make sure your essential expenses—like groceries, your electric bill, and your mortgage—are covered by guaranteed income.”
If you’re close to retirement or already retired and looking to create steady income you can’t outlive, an annuity may be a fit.
The Pros: Stability, Security, and Income for Life
Annuities shine when it comes to reliability. Many retirees have Social Security as a baseline income, but pensions are increasingly rare—only about 12% of Americans have one.
That leaves a gap for many. “If you’re missing a piece of guaranteed income in your plan, that’s when an annuity may make sense,” John explains. “It can turn part of your savings into income you can count on for the rest of your life.”
Some modern annuities also offer protection from market loss during your accumulation years, like Registered Index Linked Annuities (RILAs), which can buffer downside risk while giving you growth potential.
The Cons: Not a One-Size-Fits-All Solution
However, annuities come with trade-offs.
If you’re under age 59½ and need access to your money, an annuity likely isn’t for you. Early withdrawals can come with steep penalties—similar to tapping into a traditional IRA too early.
Plus, annuities are not liquid. “You don’t put money into an annuity to use it for something else later,” John warns. “You’re committing that money to income in retirement.”
Fees, contract terms, and payout options vary widely by product—and that’s why getting advice matters.
Ask the Right Questions
Before you buy, John recommends asking:
- Do I have a gap in retirement income?
- What are the fees and administrative costs?
- What happens if I die early—does my spouse get anything?
- Is the annuity structured to fit my unique goals?
And perhaps most importantly, ask whether the person recommending the annuity is looking at your full financial picture—or just trying to make a sale.
“If the pitch doesn’t match your situation, that’s a red flag,” John says. “You want a professional who acts like a financial doctor, not a salesperson.”
Final Thought
An annuity can be a powerful income tool, but only when it’s part of a bigger retirement strategy.
At GenWealth, we believe in personalized planning. If you’re wondering whether an annuity is right for you, schedule a meeting with one of our advisors. We’ll help you understand your options and design a plan that fits your goals, not a commission.
Disclaimer: Annuities are insurance contracts that may carry fees, charges, and restrictions. You should consider the contract carefully before purchasing. Guarantees are based on the claims paying ability of the issuing insurance company.
