Economic volatility and longer lifespans are reshaping retirement security in the United States. Traditional pensions have nearly disappeared, leaving many workers to manage savings on their own. This brief explores how annuities (i.e., insurance contracts that convert a lump sum or series of payments into guaranteed income) could help retirees avoid outliving their money, why adoption remains low and unequal, and what policy and design changes could make these tools more accessible. 

Why This Matters

When retirees run out of savings, the consequences ripple beyond families to the broader economy. Annuities can help by offering predictable income. But barriers like limited awareness keep adoption low—especially among families of color. Ownership is concentrated among wealthier families, leaving many without the hedge annuities offer. Understanding these gaps is critical for policymakers and plan sponsors to design solutions that ensure all workers can retire with dignity.

What We Found

• Annuities can provide stability but remain rare. Fixed annuities offer predictable income insulated from market swings, whereas variable and indexed annuities add growth potential while limiting downside risks. These features can help retirees manage longevity risk and maintain spending during downturns.
• Annuity holders typically have higher net worths. In 2022, the median net worth of annuity holders ages 50 and older was $938,300—more than twice that of nonholders ($353,500). Racial gaps are stark: families of color ages 50 and older with annuities held nearly five times the assets of families of color without annuities.
• Adoption has stalled and is lowest among families of color. Despite modest growth in the 1990s, annuity ownership peaked in 2004—coinciding with the decline of traditional pensions—and has remained limited since.
• Policy is evolving, but more action is needed. Recent reforms under the SECURE 2.0 Act aim to make annuities easier to include in retirement plans, but barriers such as high fees, complexity, and limited awareness persist. Future steps could include defaulting 401(k) assets into annuities, simplifying products, and improving communication for both employers and employees.

How We Did It 

We analyzed Survey of Consumer Finances data from 1989 to 2022 to examine annuity ownership trends, wealth disparities, and racial gaps. We also reviewed recent policy changes and industry practices affecting annuity accessibility.