The role of annuities in a protection, growth, and income strategy.
The role of annuities within a financial architecture
For decades, the conversation about investments was dominated by one question:
How much can I earn?
But as wealth grows—and especially as we approach a stage where that wealth will need to start financing our lives—a different question arises:
How much of my money do I really need to expose to risk?
Not all capital has to fulfill the same function.
Part of it may be earmarked for growth. Another part for liquidity. Another part for opportunities. And another part may have a completely different purpose:
protect capital and generate predictability.
That's where annuities can find a place within a financial architecture.
What exactly is an annuity?
An annuity is a contract issued by an insurance company.
Depending on the type of contract, it can be designed to prioritize different objectives: preservation of principal, accumulation at a set rate, limited participation in the performance of an index, or income generation.
That's why simply talking about "annuities" can be complex.
A Fixed Annuity , a Fixed Indexed Annuity (FIA) , a Registered Index-Linked Annuity (RILA) or a Variable Annuity are not the same .
Each one assumes different risks and pursues different goals.
Why are they gaining ground?
There is a structural change taking place in the United States.
LIMRA notes that approximately 4.1 million Americans are reaching age 65 each year , while many are retiring without the traditional pensions that provided guaranteed income to previous generations. ( LIMRA )
This poses a significant problem.
During the accumulation stage, a market downturn can be unsettling.
But during the distribution stage, when we start withdrawing money to live on, a fall can have very different consequences.
Because it's no longer just about how much the portfolio performs.
It matters when those returns occur .
This is the well-known Sequence of Returns Risk : withdrawing capital during a downturn may force us to sell more assets to generate the same income, reducing the capital available to participate in an eventual recovery.
An annuity can allow you to separate a portion of your assets from that function.
Three different jobs for capital
Let's think about a person who has $2 million to invest.
The question shouldn't necessarily be:
“Where do I invest the $2 million?”
Could be:
“What work do I need each part of those $2 million to do?”
One side might seek growth and accept volatility.
Another could remain liquid for immediate needs.
And another portion could be allocated to capital preservation or income generation , depending on the objectives.
That change seems small, but it completely alters the conversation.
We are no longer choosing between “market or annuity”.
We are assigning different functions to different parts of the heritage .
What benefits can an annuity provide?
In a Fixed Annuity, for example, the insurer can credit a predetermined rate over a contractual period.
In a Fixed Indexed Annuity, the credited interest may be linked to the performance of one or more indices, subject to the rules of the contract — such as caps, participation rates or spreads — while the principal does not participate directly in the losses of the index.
And certain annuities may include options or riders designed to generate guaranteed income , even for life.
This allows for the design of a wealth layer where the primary objective is not to maximize returns.
Whether to increase certainty .
But protection does not mean absence of conditions
This is a fundamental distinction.
An annuity should not simply be presented as a “risk-free” investment.
Contracts may include surrender periods , limits on penalty-free withdrawals, market value adjustments on certain products, caps or participation rates, costs associated with certain riders, and other contractual conditions.
That's why the selection of the carrier, contract duration, liquidity needs, and the function that capital will fulfill are as important as the rate offered.
The right question is not “Are annuities a good thing?”
It would be similar to asking:
“Are investments a good thing?”
Depends.
For whom?
What money for?
For how long?
With what need for liquidity?
And what function do we need it to fulfill?
For someone who needs immediate access to all their capital, an annuity with a long surrender period might be inappropriate.
For someone looking to aggressively maximize long-term growth, there may be instruments more aligned with that goal.
But for someone who has already accumulated wealth and wants to allocate a portion to protection, predictability, or income , the conversation can be very different.
Because building wealth is not just about finding where to get the next percentage point of return.
Annuity sales reached historic levels again in 2026. The numbers reveal something interesting about how investors are thinking about risk.
It does not appear to be an isolated phenomenon.
In 2025, annuity sales in the United States reached a record $464.1 billion , marking the fourth consecutive year of all-time highs. ( LIMRA )
And 2026 began by maintaining exceptionally high levels.
According to LIMRA—one of the leading research organizations in the financial services and insurance industry—sales were:
Q1 2026: $107.4 billion Q2 2026: $121.2 billion First half: $228.7 billion
The second quarter marked the 11th consecutive quarter with over $100 billion in sales , and the first half of the year set a new record. ( LIMRA )
But the most interesting fact is not just how much money is coming in.
That's where it's headed .
There is no single “annuity”
The results for the second quarter show very different behaviors depending on the type of product.
Fixed -Rate Deferred Annuities generated approximately $41.8 billion in sales during Q2, a 17% increase over the previous quarter. ( LIMRA )
Registered Index-Linked Annuities (RILA) reached a record quarterly high of $23.3 billion , approximately 22% higher than a year earlier. For the first half of the year, they totaled $44.4 billion. ( LIMRA )
Fixed Indexed Annuities also grew compared to the first quarter; preliminary figures from LIMRA had placed its Q2 sales at around $30.7 billion. ( LIMRA )
And income annuities also showed growth: Single Premium Immediate Annuities reached approximately $4 billion in preliminary second-quarter estimates. ( LIMRA )
In other words, growth is not concentrated exclusively on a single strategy.
Investors are looking for different combinations of three things:
growth, protection and income.
A market that changed profoundly
Ten years ago, indexed products accounted for approximately 24% of total annuity sales .
In 2025, Fixed Indexed Annuities and RILAs together represented approximately 45% of the market . ( LIMRA )
That shows an interesting evolution.
The investor is no longer necessarily choosing only between:
security or growth.
The industry has developed products that attempt to occupy different positions between both extremes.
And the numbers show that there is demand for that space.
What is driving this growth?
There is no single explanation.
LIMRA identifies several factors: still attractive interest rates for certain strategies, economic and market volatility, product innovation, expansion of distribution channels, and an extraordinary demographic transformation. ( LIMRA )
We are going through what the industry calls Peak 65 .
More than 4 million Americans reach age 65 each year. Many reach that stage without a traditional pension. ( LIMRA )
That means a generation that spent decades wondering:
“How do I accumulate enough capital?”
He begins to ask himself another question:
“How do I turn that capital into a financially sustainable life?”
But record sales don't mean they're suitable for everyone. First, it's important to determine the function. Then the product.
Before analyzing an annuity, it is advisable to separate the assets into functions.
How much liquid do I need?
How much do I want to keep exposed to growth?
How much can I keep committed over several years?
How much income do I need to generate?
How much risk am I willing to accept?
And what part of my wealth do I want to protect from a market downturn?
Only then does it make sense to compare alternatives.
More and more investors are looking for a portion of their wealth to have a more predictable return.
And in a financial world where for decades we have mainly talked about how much we can earn, going back to talking about what we need to protect can be a healthy conversation.
Source: LIMRA US Individual Annuity Sales Survey. ( LIMRA ). US ANNUITY SALES 2025: $464.1B — annual record Q1 2026: $107.4B Q2 2026: $121.2B Q1 2026: $228.7B — first half record
Comments