At what age should you not buy an annuity? Here's what experts think

Adding an annuity to your status portfolio could beryllium a bully move, but not astatine each age. Getty Images

As Americans unrecorded longer and look increasing concerns astir outliving their savings, annuities are becoming a fashionable mode to make dependable status income. Annuity income surpassed $432 cardinal successful 2024, according to information from LIMRA, drafting galore retirees to the committedness of guaranteed payments for life.

But portion these products tin supply stable, reliable income successful retirement, the timing of erstwhile you bargain 1 tin find whether it's a astute oregon counterproductive fiscal move. And, the considerations alteration arsenic you determination done antithetic stages of your aureate years, arsenic definite beingness circumstances and different factors can marque annuities little attractive.

So, astatine what constituent does it not marque sense to bargain an annuity? Below, fiscal advisors and status specialists explicate erstwhile property and circumstances should power your decision, and what different income strategies it could marque consciousness to consider.

Compare your annuity options and find the close acceptable for your portfolio here.

At what property should you not bargain an annuity? What experts think

"Generally, we don't urge annuities to radical nether property 50 [because] determination are taxation penalties for withdrawals earlier property 59 ½," says Jonathan Viscounte, CFP, CLU, ChFC, a fiscal planner astatine Prudential Advisors. "[And] galore times, young radical person assorted needs that travel up earlier they scope status age." Younger investors besides person decades to thrust retired marketplace volatility and payment from perchance higher returns successful stocks and different maturation investments.

On the different extremity of the spectrum, security companies often halt selling annuities to seniors aft property 90 to 95, according to Leah Brandt, managing spouse of AnnuityPath, an online annuity assets and brokerage. 

"The security companies cognize the likelihood of decease happening earlier they marque a instrumentality connected the argumentation is high," Brandt says. 

Age limits aside, though, different considerations travel into play. Here are a fewer different times erstwhile an annuity whitethorn not marque sense.

Learn much astir however an annuity could assistance you conscionable your status goals now.

When annuities don't marque consciousness for older adults

Annuities travel with assorted costs, including administrative fees and surrender charges. For adults implicit 80, these expenses go much problematic due to the fact that there's little clip for the guaranteed income to offset the costs.

Experts accidental annuities whitethorn not marque consciousness successful these scenarios:

• You person your basal needs covered. Viscounte says if you tin screen your indispensable expenses with Social Security and pensions, and tin comfortably retreat 3% to 5% from your remaining savings for discretionary spending, paying fees to warrant income whitethorn not beryllium worthy it.
• You request currency for emergencies oregon privation concern flexibility. "When you enactment wealth into an annuity, you mostly suffer the liquidity of that money," says Mary Stork, elder vice president and wide manager astatine USAA Retirement and Investment Solutions. Surrender charges tin beryllium high if you request to entree funds early.
• You person large wellness issues. Brandt highlights that income annuities aren't perfect for radical with wellness problems, adjacent though immoderate companies connection higher payouts based connected aesculapian conditions. "In my experience, the accrued income isn't worthy it," she notes.

Before committing, inquire yourself 3 questions to find whether annuity payments are worthy the trade-offs:

• What hazard are you trying to solve? Viscounte recommends identifying the interest driving your involvement (e.g., marketplace risk, outliving your savings).
• How overmuch liquidity volition you lose? Brandt advises keeping nary much than 50% to 60% of your assets (excluding your home) successful annuities.
• What are the taxation implications for your heirs? "You'll person a taxation deferral successful [a non-qualified] annuity portion you're living, Viscounte points out. "[But] yet your heirs volition wage taxes connected the maturation erstwhile you're not." In a regular investment, connected the different hand, they'll person a measurement up successful the outgo ground and debar paying taxes connected growth.

Alternative strategies for generating income successful retirement

If annuities don't acceptable your needs, Stork points to alternate strategies that tin connection much flexibility and make status income:

• Certificate of deposit (CD) ladders oregon enslaved portfolios: This involves staggering maturity dates crossed antithetic periods, giving you regular income portion maintaining immoderate liquidity. You tin entree portions of your wealth arsenic each CD oregon enslaved matures.
• Home equity oregon reverse mortgages: For homeowners 62 and older, tapping into location equity tin supply income during marketplace downturns.
• Part-time work: Continuing to work, adjacent part-time oregon freelance, provides income portion allowing you to hold drafting from status savings.

The bottommost line

While annuities tin supply invaluable guaranteed beingness income, timing is crucial. Buying excessively aboriginal means missing retired connected maturation potential, portion buying excessively precocious often means paying precocious fees for benefits you whitethorn not afloat enjoy.

Before purchasing an annuity, measure your health, income and liquidity requirements. Then, see consulting a fiscal advisor who tin measure your circumstances. They'll assistance you find whether an annuity genuinely addresses your status concerns oregon if different strategies mightiness enactment better.