Why 50% of Financial Advisors Are Putting Client Investments Into Annuities
Written by
Marc Guberti
Edited by
Zuri Anderson
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Annuities have been all the rage lately among financial advisors. Research from ProtectedIncome.org revealed that 50% of financial advisors are allocating more of their clients’ investments into annuities.
However, it’s not just financial advisors who are pouring money into annuities. The same research indicated that 64% of consumers would put their money into an annuity, while 36% would put it into the stock market.
These are some of the reasons why annuities are gaining momentum over stocks and other assets.
Market Volatility
Market volatility has been a critical factor that makes it easier to see why annuities have gotten so hot. Investors just went through some of the most volatile months the stock market has ever seen due to President Donald Trump’s tariff wars.
The S&P 500 dropped by more than 10% in a single week, and growth-oriented stocks did even worse. Artificial intelligence stocks, in particular, got hammered because of DeepSeek news and the tariffs.
While young investors can afford to wait out volatility, not everyone wants volatility in the first place. Furthermore, retirees need more stability with their nest eggs since they’re ready to withdraw each month.
That’s where annuities come into play. These financial products maintain steady valuations during market volatility and reward investors with steady cash flow. Even indexed annuities don’t lose money. These annuities have their interest rates tied to the stock market, so a bad year for stocks will result in lower gains for the annuity. However, this type of annuity won’t have its value go down if the stock market crashes.
Inflation
Inflation drives risk-averse investors to put their money into low-risk assets that can maintain or beat the rate of inflation. Annuities have elevated rates, which make it easier for these financial products to outperform inflation.
You can also get lifetime payments with an annuity. Your annuity’s rate stays the same, even if the Federal Reserve cuts interest rates multiple times this year. Inflation reduces your purchasing power if you leave your money in the bank, and for many people, annuities act as a viable solution to this problem.
The more persistent inflation is, the more attractive annuities will look for retirees. Bonds are also good for this purpose, but bonds eventually mature, and your next bond’s interest rate may not be as attractive as the current rate.
Rising Interest Rates
Higher interest rates allow investors to generate more cash flow from their annuities. Getting more mileage out of your money is always a welcome development, but since interest rates may not stay up forever, some people are rushing to buy annuities before any changes occur.
A Reuters poll projects that the Federal Reserve will cut rates twice this year: Once in September and yet again in the fourth quarter. The former of those predictions have become reality, per CNBC, and therefore those rate cuts will reduce how much future annuities generate for their investors. However, financial advisors and investors who buy annuities now still get the elevated rates.
Tax Advantages
The tax advantages you get from annuities separate them from bonds. While interest from an annuity is still treated as ordinary income, the money you put into an annuity is tax-deferred. Then, you don’t pay taxes on any interest you generate until you withdraw money from your annuity.
It’s just like traditional retirement accounts that defer taxes on contributions and gains until you withdraw money. Investors with high incomes can use these financial products to their advantage by making big contributions. Then, they can steadily withdraw money from their annuities when they are retired and aren’t generating an active income.
The tax advantages, high rates and zero volatility have made annuities more attractive to financial advisors and investors. These financial products become more desirable as investors get closer to retirement.
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