An aging Baby Boomer population and favorable interest rates are the primary drivers behind the growth in the annuity market.
However, with expected rate cuts looming, the annuity market’s outlook for 2025 is more uncertain.
So, how will this impact your annuity payouts?
Below, we uncover notable annuity market states, trends to monitor, and other key industry factors.
Key Takeaways
- Total annuity sales hit a record $385 billion in 2023, marking a 23% increase from the previous year.
- Fixed-income annuities now dominate the market at $286 billion in sales, nearly triple the variable annuity segment.
- RILAs emerged as the fastest-growing product, reaching $62 billion in sales for 2024.
- An aging population of 73 million Americans reaching 65+ by 2030 is the number one annuity trend to watch.
U.S. Annuity Market Overview (Size & Growth)
The U.S. annuity market has experienced remarkable growth.
In the first half of 2024, total annuity sales reached a record $216.6 billion, a 20% increase from the previous year.
Projections suggest total annuity sales in 2025 to range between $364 billion and $410 billion.
Individual annuity business volume is expected to account for 40.1% of the life industry total in 2024, up from 27.4% in 2020.
Overall, the annuity market has grown by 70% since 2014.
Sources: LIMRA
Annual U.S. Annuity Sales By Year
The U.S. annuity market has consistently grown through the years. Total annuity sales reached $385 billion in 2023, marking a dramatic 23% increase from the previous year.
The market has shown particularly strong momentum in recent years, with total sales more than doubling from $190 billion in 2000 to current levels.
Here’s a more detailed breakdown of annual U.S. annuity sales from 2000 to 2023:
| Year | Total Sales | Variable Annuity | Fixed Income | YoY Growth |
|---|---|---|---|---|
| 2000 | $190 billion | $137 billion | $53 billion | – |
| 2001 | $185 billion | $111 billion | $74 billion | -2.63% |
| 2002 | $220 billion | $117 billion | $103 billion | 18.92% |
| 2003 | $218 billion | $129 billion | $89 billion | -0.91% |
| 2004 | $221 billion | $133 billion | $88 billion | 1.38% |
| 2005 | $217 billion | $137 billion | $80 billion | -1.81% |
| 2006 | $238 billion | $160 billion | $78 billion | 9.68% |
| 2007 | $257 billion | $184 billion | $73 billion | 7.98% |
| 2008 | $265 billion | $156 billion | $109 billion | 3.11% |
| 2009 | $239 billion | $128 billion | $111 billion | -9.81% |
| 2010 | $222 billion | $140 billion | $82 billion | -7.11% |
| 2011 | $238 billion | $156 billion | $82 billion | 7.21% |
| 2012 | $219 billion | $147 billion | $72 billion | -7.98% |
| 2013 | $230 billion | $146 billion | $84 billion | 5.02% |
| 2014 | $237 billion | $144 billion | $93 billion | 3.04% |
| 2015 | $236 billion | $141 billion | $95 billion | -0.42% |
| 2016 | $223 billion | $105 billion | $118 billion | -5.51% |
| 2017 | $203 billion | $96 billion | $107 billion | -8.97% |
| 2018 | $233 billion | $102 billion | $131 billion | 14.78% |
| 2019 | $242 billion | $108 billion | $134 billion | 3.86% |
| 2020 | $219 billion | $99 billion | $120 billion | -9.50% |
| 2021 | $254 billion | $125 billion | $129 billion | 15.98% |
| 2022 | $313 billion | $103 billion | $210 billion | 23.23% |
| 2023 | $385 billion | $99 billion | $286 billion | 23.00% |
Sources: iCapital
Future Outlook for Annuities
The aging population in the United States is a primary driver for demand in the annuity market.
The number of Americans 65 and older is projected to increase from 58 million in 2022 to 82 million by 2050, representing a 47% increase.
The aging population is creating substantial market opportunities. For instance, 12,000 Americans are reaching age 65 every day in 2025.
By 2030, all Baby Boomers will be 65 or older. Adults 65 and older will represent 8.6% of the labor force by 2032, up from 6.6% in 2022.
Outside of the aging population, other factors like market uncertainties, taxes, and rate changes are impacting the annuity market.
Due to these concerns, the market is seeing a shift in product popularity. For example, Registered Index-Linked Annuities (RILAs) reached record sales of $62 billion in 2024.
Similarly, Fixed-index annuities broke sales records for three consecutive years.
Meanwhile, Variable annuity sales are slowly increasing. They are projected to grow between 1% and 3% from 2024 to 2025.
Sources: Census, Pew Research Center, PRB
How Much Does a $1 Million Annuity Pay Per Month?
Monthly payments from a $1 million annuity would vary depending on several factors, including the type of annuity.
Here’s a breakdown with more detail:
Immediate Lifetime Annuity Payments
| Age | Male | Female | Joint Life |
|---|---|---|---|
| 60 | $5,715 | $5,504 | $5,049 |
| 65 | $6,288 | $5,993 | $5,414 |
| 70 | $7,105 | $6,694 | $5,927 |
| 75 | $8,337 | $7,731 | $6,652 |
| 80 | $10,242 | $9,389 | $7,812 |
Fixed Annuity Payments
A $1 million fixed annuity with a 5% annual interest rate would provide approximately:
- Monthly payment: $4,167
- Annual payment: $50,000
Deferred Annuity Payments
Using current rates for a 5-year deferred annuity at 5.95%:
- Initial investment: $1 million
- Value after 5 years: $1.33 million
- Monthly payment at age 65: $4,450
Factors like age, gender, annuity type, and joint life all determine an annuity payment amount. For instance, an 80-year-old male receives nearly 80% more than a 60-year-old male.
Men typically receive 5-10% higher payments than women of the same age due to shorter life expectancy.
Payments are 15-20% lower than single-life options to account for extended coverage of both spouses.
Immediate annuities offer higher initial payments than deferred annuities, but deferred annuities allow for growth before payments begin.
Sources: SmartAsset
Conclusion
The annuity market’s trajectory in 2025 reflects both opportunities and challenges as record-breaking sales meet potential headwinds from interest rate changes.
While fixed annuity sales may face pressure from expected rate cuts, the fundamental driver of market growth – an aging population seeking guaranteed retirement income – remains strong.
It will be interesting to see how annuities perform in 2025 and beyond.
