Who Purchases The Most Annuities?

Shawn Plummer

CEO, The Annuity Expert

Annuities, those financial products that promise regular income for a specified period or perhaps even a lifetime, have steadily gained popularity. Yet, one question remains: who purchases the most annuities? To answer this question, we delve into the types of people who buy annuity contracts, the percentages, and more.

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Who Purchases Annuity Contracts?

People who buy annuity contracts tend to fall into a particular demographic. It’s primarily those individuals nearing or in retirement – individuals who desire a reliable, predictable income stream. Annuities, particularly fixed-indexed annuities, provide a means to alleviate fears of outliving one’s savings.

Annuities are favored by those who have a low-risk tolerance and desire the comfort of a fixed income. They are less likely to gamble their retirement on the stock market’s volatile nature. This group, mostly comprised of baby boomers (those born between 1946 and 1964), values the safety and security that annuity contracts provide.

Who Purchases The Most Annuities

The Percentage of People Buying Annuities

Most people who buy annuities do so with retirement income stability in mind. According to a 2020 report by the Insurance Information Institute, about 34% of all U.S. households owned annuities.

The report also pointed out that ownership was higher among older households, peaking at 41% for households headed by someone aged 70 to 74. The shift towards purchasing annuities typically begins when people are in their 50s, once they seriously consider retirement planning.

Who Purchased The Most Annuities

Who Is Likely to Buy Annuities?

So, who buys annuities, and who is likely to buy them? The propensity to purchase an annuity seems to increase as individuals age, primarily due to these financial products’ income security. High net-worth individuals also tend to purchase annuities as a part of their wealth management strategy, aiming to secure a portion of their wealth against market volatility.

Additionally, individuals who lack a traditional pension but still desire the certainty of a regular income stream in retirement might also be more likely to purchase annuities. Teachers, non-profit employees, and others who participate in 403b plans also often purchase annuities due to the tax advantages they offer.

Who Purchases the Most Annuities?

Regarding who purchases the most annuities, older adults and retirees top the list. Given the nature of annuities as long-term financial instruments designed to provide steady income during retirement, it’s no surprise that individuals approaching or in retirement are the leading purchasers.

However, the type of annuity purchased can vary. While some prefer immediate annuities, which start paying out right away, others might favor deferred annuities or fixed-indexed annuities, which begin payouts at a future date and can offer the potential for growth tied to a market index.

Who Buys Annuities And Who Is Likely To Buy Them

The Ultimate Annuity Buyer: Unveiling the Mystery

Now, to the question at hand, who purchases the most annuities? The largest group of annuity buyers consists of older adults, typically those nearing retirement age or already in retirement. These individuals seek the guaranteed income stream that annuities provide, offering financial security during retirement.

The world of annuities can be complex, but understanding who the typical annuity buyer is and why they choose this financial product can shed light on whether it might be the right choice for your financial strategy.

Next Steps

In conclusion, annuities serve a unique role in the financial planning landscape. While not for everyone, they offer a safety net that appeals to a significant demographic: those in or near retirement. They are also attractive for high net-worth individuals looking to mitigate market risk and preserve wealth.

Who Is Likely To Buy An Annuity

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Are Annuity payments taxed?

Annuity payments are subject to income tax, but the rules depend on how the annuity was funded and what type of annuity it is.

What is a reasonable fee for an annuity?

Generally speaking, most financial experts agree that a 1.5% or less fee is considered reasonable for an annuity. However, it is essential to research and compare rates from different insurers before making final decisions.

Why do older people purchase annuities more than younger people?

Older people are likelier to purchase annuities because they seek financial security during retirement. Annuities guarantee regular payments over a certain period, making them an attractive option for retirees who want a steady income source in their golden years.

What is the best annuity option for an older person?

The best annuity option for an older person depends on their financial situation and specific needs.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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