LIMRA published final 2025 figures in 2026. Total U.S. retail annuity sales reached $464.1 billion, up 7%, the fourth consecutive record year.
Bryan Hodgens, senior vice president and head of LIMRA research, attributed it to conditions rather than salesmanship: “Favorable economic conditions, expanded distribution, and growing investor demand for protected lifetime income have propelled the annuity market in recent years.”
An annuity is a contract with an insurance company. You give the carrier money, and in exchange the carrier promises something: a rate of interest, a floor under losses, or income that keeps arriving for as long as you live. Which promise you are buying is the entire question, and the four main product types make four different ones.
How every deferred annuity is structured
The NAIC’s Buyer’s Guide to Deferred Annuities describes the shape: annuities “have an accumulation period and a payout period. During the accumulation period, the value of your annuity changes based on the type of annuity. During the payout period, the annuity makes income payments to you.”
Three features apply across almost all of them.
The free look. The guide describes it as “a set number of days (usually 10 to 30 days) to change your mind about buying an annuity after you receive it.” If the contract does not match what you were told, this is the window.
Surrender charges. The carrier applies “a charge if you take part or all of the money out of your annuity during a set period of time. The charge is a percentage of the amount you take out.” Schedules commonly run five to ten years and step down annually. Most contracts allow a free withdrawal of around 10% a year without the charge.
A market value adjustment. Many contracts add one. “An MVA could increase or decrease your annuity’s account value, cash surrender value, and/or death benefit value if you withdraw money from your account.” It moves with interest rates, and in a rising-rate period it moves against you.
And one tax rule applies to all of them: “You also may have to pay a 10% tax penalty if you withdraw money before you’re age 59½.”
Fixed-rate deferred annuities
The simplest contract. The carrier credits a stated rate for a stated term, often three, five or seven years. It is the insurance equivalent of a certificate of deposit, with tax deferral instead of federal deposit insurance.
This was the largest category in 2025 at $165.3 billion. What it buys is certainty: you know the rate and you know the term. What it does not do is keep pace when rates rise mid-term, and that is what the market value adjustment is doing in the contract.
Fixed indexed annuities
Sales of $127.9 billion in 2025. Interest is credited according to the movement of an index, subject to a cap or a participation rate, with a floor of zero.
The mechanics mirror indexed universal life. You are not invested in the index and cannot lose account value to a market fall. In exchange, your upside is limited by a cap the carrier sets and can change, and the index calculation almost always excludes dividends.
The trade is real and reasonable for the right buyer. It is also the product where the gap between how it is sold and how it works tends to be widest, so the cap, the participation rate, the crediting method and the carrier’s right to change them are the four things to read before signing.
Registered index-linked annuities
The fastest growing category. Sales of $79.5 billion in 2025, up 20%.
A RILA sits between an indexed and a variable annuity. You accept a defined amount of downside, often the first 10% or 20% of a loss, in exchange for a much higher cap on the upside than a fixed indexed annuity offers.
It is a registered product, which means a prospectus and a different regulatory regime. Keith Golembiewski, assistant vice president and head of LIMRA Annuity Research, expects the growth to continue: “With broader distribution penetration, LIMRA expects the RILA market will continue to grow.”
Traditional variable annuities, where the account is invested in subaccounts with no floor at all, accounted for $63.1 billion in 2025, up 8%.
Income annuities
The oldest form and the smallest by sales. A single premium immediate annuity converts a lump sum into payments that begin at once and continue for a stated period or for life. Sales reached $14.4 billion in 2025, up 6%. Deferred income annuities, where the payments begin at a chosen future date, came to $4.8 billion, down 3%.
These are the only products in the category that do the thing annuities are supposed to be for. You are buying income you cannot outlive, and the cost is that the money is gone as a lump sum. There is no account value to withdraw and, depending on the option chosen, nothing left for heirs.
Options exist to soften that. A period certain guarantees payments for a minimum number of years even if you die early. A joint and survivor option continues payments to a spouse. Both reduce the monthly amount, which is the honest trade.
The small size of this category next to $293 billion of fixed-rate and indexed sales says something about what people are actually buying. Most annuity money is going into accumulation products, not into guaranteed income.
How annuities are taxed
Growth inside the contract is tax deferred. Nothing is reported while it accumulates.
On withdrawal from a non-qualified annuity, gains come out first and are taxed as ordinary income, not at capital gains rates. Your basis, being the after-tax money you put in, comes out afterwards tax free. Before age 59 and a half, the 10% penalty applies on top.
On annuitization, each payment is split between a return of basis and taxable gain according to an exclusion ratio, so only part of each payment is taxable until basis is exhausted.
A death benefit from an annuity is not treated like a life insurance death benefit. The gain is income to the beneficiary. This surprises people who assume the two products work the same way at death, and it is one reason a large annuity balance is often not the best asset to leave behind.
Questions to ask about any annuity being offered
- What is the surrender charge schedule, year by year, and how long does it run?
- Is there a market value adjustment, and what does it do if rates rise?
- What is the free look period on this contract?
- If it is indexed: what is the current cap, what is the guaranteed minimum cap, and does the index calculation include dividends?
- If there is an income rider: what does it cost annually, and is the benefit base the same as the account value? It usually is not.
- What is my liquidity? How much can I take out each year without a charge?
- What happens to this money when I die?
- What is the carrier’s financial strength rating?
That last one carries more weight here than in life insurance. An annuity is a promise to pay you for decades, and the promise is only as good as the company behind it.
Where they fit
An annuity is a reasonable instrument for money that has a job: income in retirement, a floor under a portion of a portfolio, or a rate locked for a defined period. It is a poor instrument for money you may need, for money you already hold in a tax-advantaged account and are considering moving into another tax-deferred wrapper, or for anybody who cannot live with the surrender schedule.
Apex writes annuities alongside term, whole life, indexed universal life and final expense across the more than 20 carriers we hold, and we will show you the surrender schedule before the application. Talk to a member of our team.
Nothing here is tax or investment advice. Annuity contracts vary by carrier and state. No contract is bound until a carrier issues it in writing.