Key Takeaways
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Only about 11%–12% of retirement-age households own annuities, and even fewer rely on them as a primary income source.
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Sales are rising as more Americans near retirement and look for ways to lock in guaranteed income.
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Annuities can provide steady income, but fees, complexity, and limited flexibility are key trade-offs to consider.
How Many Retirees Actually Use Annuities for Income? Fewer Than You Might Expect
More than 11,000 Americans turn 65 each day, and many nearing retirement are looking for sources of guaranteed income—helping drive a surge in annuity sales.
But despite the growing interest, only about 11%–12% of retirement-age households own an annuity—and even fewer rely on one as a primary income source.
Across age groups, about 6.3 million U.S. households own at least one annuity, a financial product sold by insurers that provides a steady income stream. That represents roughly 4.8% of all 131.3 million U.S. households, according to a 2024 analysis conducted on behalf of the U.S. Department of Labor’s Employee Benefits Security Administration.
Unsurprisingly, annuity ownership is heavily concentrated among older households, with two-thirds of annuity-owning households age 65 or older.
2 out of 3 Annuity Owners Are 65 or Older
In addition, only about a third of retirees use annuities or similar guaranteed lifetime income products as a primary source of income, according to the Employee Benefit Research Institute.
Taken together, the data suggests that while annuities are gaining attention, they’re typically used as a supplemental income source rather than a central one in most retirement plans.
Why This Matters
Annuities are gaining attention, but most retirees still don’t rely on them, and critics point to trade-offs like cost and complexity. Knowing how they’re typically used can help you decide if they belong in your retirement plan.
How Annuities Stack Up Against Social Security and Other Income Sources
Retirees in the U.S. typically rely on a mix of income sources. Social Security forms the foundation for many, offering guaranteed monthly benefits that are adjusted for inflation. Withdrawals from IRAs and 401(k)s provide flexibility, allowing retirees to draw from their savings as needed, though those funds can be depleted over time and are subject to market risk. Pensions, while less common than in the past, also provide steady lifetime income from an employer.
Annuities are designed to fill a similar role—but in a different way. They are purchased from an insurance company, often with a lump sum, and can provide a predictable income stream, sometimes for life. Unlike retirement accounts tied to the market, annuities prioritize stability over growth.
That predictability can be appealing, especially for covering essential expenses. But it also comes with trade-offs. Annuities typically don’t keep pace with market returns, and unless specified in the contract, they may not include protection against inflation.
Still, for some retirees, annuities can complement other income sources rather than replace them. “Many consumers are balancing out coverage of essential and non-essential needs,” says Keith Golembiewski, assistant vice president for annuity research at LIMRA. “Annuities can clearly fit alongside other income streams and assets like Social Security and retirement accounts.”
Some buyers are also drawn to features such as death benefit riders or the ability to use annuities for accumulation or legacy planning, he says.
A Common Annuity Strategy
Many retirees use annuities to cover essential expenses like housing or healthcare, while relying on Social Security, savings, or investments for more flexible spending.
Why Some Experts Urge Caution With Annuities
The same features that make annuities appealing—guaranteed income and stability—can also limit their upside. Returns are typically lower than what investors might earn in the market, and once you commit funds, access to that money can be restricted.
Annuities can also be complex and costly. Fees may include administrative charges, investment management costs, and optional rider fees, and the details vary widely by contract. Like other retirement income sources, annuities also come with tax considerations. (Read more about annuity fees.)
Because of these trade-offs, annuities aren’t a fit for every retiree. They’re often sold through annuity distributors and financial professionals, which can add another layer of complexity to the decision-making process.
For those considering an annuity, experts generally recommend consulting with a financial advisor to weigh the costs, features, and long-term implications carefully—as well as how the annuity would fit into your broader retirement planning.
While annuities can provide a steady income for life, that security often comes at the cost of flexibility and higher potential returns.
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