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Looking Ahead: U.S. Individual Annuity Market Forecast 2023-2027

Looking Ahead: U.S.
Individual Annuity
Market Forecast 2023-2027


Todd M. Giesing
Assistant Vice President, Annuity Research

May 2023

Last year was a breakout year for the individual annuity market, with sales far exceeding the previous long-standing record levels set back in 2008. Surging interest rates and equity market volatility caused many consumers to seek stability in fixed annuities in 2022. Total U.S. individual annuity sales hit a record high of $312.8 billion in 2022, a 23 percent increase over 2021 and 18 percent higher than the previous record of $265 billion set in 2008. With the unique economic circumstances driving investors to protection-based solutions, it is likely that some advisors who previously did not utilize annuity solutions started using them last year.

The start of 2022 was an all-time high for the S&P 500, but rocky roads hit equity markets, and it remained that way throughout the year. Also, global tensions combined with rising inflation kept investors weary. The unique economic scenarios vaulted individual annuity sales past record levels. This environment made safety a key theme in 2022, as investors had limited options for it. Equity markets experienced a year of turmoil; combined with rising interest rates, bond valuations suffered, as well. Products like fixed-rate deferred and indexed annuities hit record levels, as investors sought safe investments with attractive returns given the rise in interest rates throughout the year.

2023 Individual Annuity Sales

In 2023, we expect similar scenarios to last year. Volatility in the equity markets will cause investors to shy away from traditional variable annuities. With scenarios indicating a peak in interest rates, there is no expectation for significant growth in products with a guaranteed living benefit. Without drastic tax law changes, it is unlikely traditional variable annuity products will be utilized for tax deferral beyond what we experienced in 2022.  

Our research finds that conditions will still be ripe for protection-based annuity solutions in 2023. Expectations are for fixed indexed annuities (FIA) to continue to reach new record levels as investors seek solutions with a balance of protection and growth. Most of the growth projected in the FIA market will be in products without a guaranteed living benefit.

Table 1 — Annuity Sales Forecasts by Product Type, 2023–2027
(Dollars in billions)

#6_LookAhead_Table 1.jpg

(A) = Actual, (F) = Forecast. Green cells = Up from prior year, Yellow cells = Flat from prior year, Orange cells = Down from prior year.

Even as we anticipate rates to begin descending in 2023, fixed-rate deferred annuities will continue to be strong. Expectations are for historic sales, but it will be a challenge to replicate the banner year in 2022. As rates start to decline, we likely will see a burst in sales as investors look to lock in the best rates available. Sales will slowly decline but have the possibility to be north of $100 billion for the second consecutive year.

Income annuities experienced a significant pop at the end of 2022, and if the message from the Federal Reserve starts to shift from rate hikes to a pattern of holding rates, we will likely see investors jumping to lock in favorable payout rates at or near their peak. This will provide a strong start to the year, with sales tapering off as interest rates retreat.

Overall, 2023 has the potential to keep the momentum from 2022. While economic conditions will shift, demographic changes will also aid individual annuity sales. The U.S. population aged 65 or over is expected to grow by more than 8.3 million from 2022 to 2027, according to Oxford Economics. This creates a favorable environment for the sale of individual annuities. LIMRA is anticipating overall individual annuity sales in 2023 to be in line with 2022, creating opportunities for companies seeking to maintain or grow their sales.

Snapshot of 2024 -2027

According to our research, next year is expected to begin the reversal of economic conditions that will favor certain annuity product lines, yet start to hamper growth on others. Interest rates are expected to continue to decline in 2024, with the benchmark 10-year Treasury slipping below 3 percent for the first time since early 2022. Equity markets are anticipated to end their long slide and enter a pattern of modest growth.

Entering 2025, the economic expectations are similar to those for 2024, with equity markets continuing a pattern of slow growth and interest rates leveling out. Investors will likely be seeking growth opportunities, and income solutions should continue to garner more demand, as there will be 5 million more Americans over the age of 65 than at the end of 2022.  

Looking out to 2026, economic conditions are expected to remain consistent, with steady increases in equity markets, combined with level interest rates. By the end of 2026, there will be nearly 7 million more Americans aged 65 and older than just four years prior.

Nearly identical economic conditions in 2027 are expected, with modest growth in the equity markets combined with minimal fluctuations in interest rates.

Figure 1 — Total Individual Annuity Sales, 2018–2022 and Projected Sales, 2023–2027
(Dollars in billions)

#6_LookAhead_Fig .jpg

F = Forecast

Overall, our research indicates that we can expect to see continued momentum in the individual annuity market as we move forward. Insurance companies and distribution firms can look to enhance the experiences for both advisors and customers through technology and process improvements, so as to continue to grow the base of advisors utilizing annuity solutions for their clients.