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by Dave Levenson, President and CEO, LIMRA

Recent media coverage did not present a balanced view of annuity products. For many consumers in retirement or nearing retirement, annuities tend to be one of the most valuable products they can buy given the guarantees they provide. Most consumers want more of what annuities offer, not less.

Every retirement plan should answer one question: will my money last as long as I do? Outside of Social Security and traditional pensions, annuities are the only financial product built specifically to provide for guaranteed lifetime income. Importantly, LIMRA’s new Retirement Income Readiness Report finds just 25% of pre-retirees believe their guaranteed lifetime income — Social Security, pensions, and annuities — will cover their essential expenses in retirement. With roughly 11,000 Americans turning 65 every day and pensions disappearing, that gap will not close on its own. Stories that scare people away from guaranteed income, without providing both pros and cons, only makes the gap bigger. 

Consumers deserve an accurate picture of how annuities work.  And so, below, I provide a more balanced view by addressing some of the biggest misperceptions of annuity products.

Misperception #1: An annuity should keep pace with the stock market.

Comparing a guaranteed product to an all-stock index isn’t appropriate. Faulting a product that guarantees your principal because it trailed an all-stock portfolio during a bull market is like faulting your homeowners policy because your house didn’t burn down. The fair test is whether it provided the protection it promised and how the product compared with the safe alternatives the buyer would otherwise have chosen. Protection proves its worth when markets decline.  And markets do decline.

Misperception #2: Demand for annuity products is limited.

With the size of the baby boomer and Gen X population in the United States, demand for annuities is as great as ever.  2026 is on pace to be the sixth consecutive year of record sales. Why?  Nearly three in four pre-retirees (74% ) tell us they want to learn more about guaranteed lifetime income and only annuities can offer guaranteed lifetime income.  Certainly, those who own this protection feel the difference: 78% of people with a pension or annuity report high retirement preparedness compared with 50% of those without either.

Misperception #3: All annuities are the same.

There is no single “annuity.” Fixed-rate annuities lock in a guaranteed rate. Fixed indexed annuities offer market-linked growth with a floor against loss. Registered index-linked annuities offer more upside with a defined level of protection. Income annuities turn savings into a paycheck for life. Lumping all types of annuities together as a single annuity category makes for a interesting story — but it misleads the very people who most need clear information. 

Misperception #4: Buyers are on their own.

Most annuity consumers work with a financial professional before they buy, and our data shows that help makes a big difference. Pre-retirees who work with a financial professional are far more likely to feel highly prepared for retirement: 77%, compared with 47% of those who don’t. A good advisor helps clients turn savings into a monthly paycheck and makes sure that consumers understand what a product will and won’t do.

Summary

Every insurance and investment product comes with trade-offs and consumers deserve to understand these trade-offs plainly before they buy. Complexity is not a reason to avoid annuities; it is a reason for advisors to take the necessary time to explain how these products work.

The takeaway is this: if you’re approaching retirement, work with a financial professional and ask how much of your essential spending is covered by income you can’t outlive. If the answer is “not enough,” an annuity may be a good way to close that gap. Before you buy, know how your advisor works. Ask how they’re paid, which companies and what types of products they offer, and whether guaranteed lifetime income makes sense for you.  A good advisor will welcome those questions.

In summary, most consumers want guaranteed lifetime income. Our job as an industry is to accurately describe the pros and cons of the product so that consumers can make a purchase decision about annuities that’s right for them.