When to buy an annuity: 18–34, 35–49, 50–64, 65+
Knowing when to buy an annuity isn’t just about your age. The decision also depends on how close you are to retirement, how much risk you’re comfortable taking, the level of income security you want for the future, and your overall financial goals.
Let’s look at the types of annuities that may make sense at different stages of life and how timing impacts guaranteed income and principal protection. Plus, learn why annuities can be more relevant as you close in on retirement.
Can you buy an annuity at any age?
In most cases, you have to be at least 18 years old to buy an annuity. While annuities are often viewed as a retirement tool, they can support your financial goals at every age.
Different types of annuities have different purposes and strategies that can align with different time periods of your life and financial strategies. Minimum and maximum annuity age limits
There’s no legal minimum or maximum annuity age limit, but insurance companies set their own rules. These guidelines help determine who can purchase a contract and when payments begin:
- Minimum age restrictions: Most annuities require you to be at least 18 to participate. Depending on the company and contract the minimum age may be even higher.
- Maximum age restrictions: Upper age limits vary by annuity type and insurance carrier guidelines. Annuities companies typically have a max issue age between 75 and 95.
- Tax-advantaged annuities: Withdrawing money before age 59-½ can trigger a 10% IRS penalty, which cuts into your savings. Non-qualified annuities can avoid this penalty on principal, but early withdrawals can still reduce long-term growth. Some contracts let you take limited annual withdrawals without surrender charges.
What is the best age to buy an annuity?
The best age to purchase an annuity is based on your financial goals, retirement needs, and risk tolerance. Thankfully, annuities offer many benefits, including various options based on the contract and product type. There’s many different annuity solutions available in today’s market.
18–34
Between the ages of 18 and 34, an annuity probably isn’t top of mind. Most people in this range are focused on building savings, paying down debt, and investing for growth through retirement accounts like a 401(k) or IRA.
Still, buying an annuity at 20 or 30 can make sense in certain situations. If you want long-term security and steady growth without risking your principal, you might consider a non-tax-deferred fixed annuity. It can let you make periodic deposits and withdraw funds each year, penalty-free – up to a stated limit. Withdrawals over this limit will be subject to a surrender charge penalty and would generally not be recommended if liquidity is a priority.
For short-term savers who want guaranteed growth without locking up their money until retirement age, the Gainbridge FastBreak™ annuity can be a strong fit. It offers a fixed rate, full principal protection, and access your money – to the stated limit - without the IRS 59-½ penalty since it’s not a tax-deferred product. Since this annuity is not a tax-deferred annuity, you will not pay a 10% federal excise tax on any interest you withdraw before you reach age 59 ½. Withdrawals above the 10% free withdrawal amount are subject to a withdrawal charge and/or market value adjustment.
35–49
When you’re in your 30s and 40s, annuities still may not be your main focus. People in this range often concentrate on growing retirement accounts, managing family expenses, and planning for major milestones like buying a home.
Although wealth-building is typically the biggest priority for this age group, buying an annuity around age 40 can strengthen your retirement plan and increase future income potential. It can protect part of your portfolio and lay the groundwork for guaranteed retirement income. Fixed annuities and fixed indexed annuities in particular can be good options for moderate growth and downside protection.
50–64
Your 50s and early 60s are when annuities may start to make financial sense. At this stage, retirement may stop feeling theoretical and become a real part of your near future. Many people shift from simply growing their savings to protecting what they’ve built.
When you buy an annuity at age 50 or above, you’re typically close enough to retirement to see the value of income security, but far enough away to give the annuity time to grow. Deferred annuities, fixed annuities, and fixed indexed annuities can be solid options for pre-retirees who want future income they can’t outlive. They lock in guaranteed retirement income and help shield your principal from market swings.
65+
Once you reach 65 and enter retirement, annuities can be a practical tool. This is when most people typically focus on preserving wealth, securing steady income, and protecting their principal from market ups and downs.
Annuities can provide guaranteed income month after month, helping cover essential expenses like housing, healthcare, and daily living costs. Immediate annuities can be a great fit for retirees because they start paying out right away and offer a consistent, pension-like stream of income to supplement or complement Social Security and other savings.
Even in retirement, annuities can remain valuable options. You can choose products that protect your principal and still leave room for growth, which can make them a valuable addition to a retirement strategy.
What is involved in buying an annuity? Factors to consider
Consider the following when trying to decide the right time to purchase an annuity.
Age and retirement goals
Annuities can provide reliable retirement income, so your age and timeline matter. Think about when you want to retire and how much income you’ll need to cover your expenses for life.
Buying an annuity when interest rates are high
Interest rates can affect your earnings. Fixed annuities are more attractive when rates are high because they lock in higher guaranteed interest rates over the life of the contract. Fixed indexed annuities also benefit from higher rate caps, offering greater growth potential tied to the market.
Variable annuities aren’t directly linked to interest rates since their returns depend on investments in sub-accounts. However, rising rates can impact subaccounts that are bond-heavy in these products and potentially lower short-term gains.
Buying an annuity in a volatile market
Fixed annuities can provide stability when the market is unpredictable. Fixed annuities guarantee your earnings regardless of market swings, while fixed indexed annuities let you benefit from market linked growth with protection against losses.
Variable annuities can move with the market. They can deliver higher long-term growth potential but carry more short-term risk. If the market is volatile, make sure you can handle potential losses. You can add optional riders — like guaranteed income benefits — to reduce risk, though they usually come at an extra cost and can lower overall payouts or growth.
Annuity payments
There are two types of annuities related to payment timing: immediate annuities and deferred annuities. Knowing the difference helps you figure out which one may best fit your retirement strategy.
Immediate annuity
An immediate annuity pays you right away or shortly after purchase but must start payments within one year. This payment structure gives you guaranteed income for a set period, possibly for life. Immediate annuities can be a good fit for retirees who want predictable monthly income to fund their retirement plan.
Deferred annuity
Deferred annuities delay payments until a future date, typically years down the line. While you wait, your money can grow at a fixed rate, with a market index, or through investment subaccounts. This accumulation period can help you build your nest egg in the meantime. Deferred annuities can work well if you're still saving but want to set up guaranteed income for the future.
When should you start taking money from an annuity?
Most people wait to take payouts until their annuity matures to avoid fees and penalties. Keep the following in mind to help avoid unnecessary costs.
- Surrender fees: Insurance companies charge a surrender fee if you withdraw money before the contract allows. These fees typically decrease over time, so the earlier you withdraw, the higher the penalty.
- IRS 59-½ rule: When you buy an annuity and withdraw funds before age 59-½, you’ll face a 10% IRS penalty on the gains, unless an exception applies. For non-qualified annuities, the penalty can still apply to the taxable portion of your payout.
- Required minimum distributions: For most retirement accounts, required minimum distributions (RMDs) must start at age 73. Missing an RMD can result in hefty penalties, so you need to factor these mandatory withdrawals into your retirement planning.
Eliminate the middleman and buy direct from Gainbridge
Whether you’re just starting to save, building toward retirement, or already enjoying your golden years, fixed annuities can provide a future steady income stream.
Purchasing an annuity directly from Gainbridge can make the process straightforward. Because we cut out the middleman, you can secure an annuity without added complexity or unnecessary fees. Explore Gainbridge today to see your options and start to build a reliable income strategy.
This article is for informational purposes only. It is not intended to provide, and should not be interpreted as, individualized investment, legal, or tax advice. For advice concerning your own situation please contact the appropriate professional. The Gainbridge® digital platform provides informational and educational resources intended only for self-directed purposes.
Withdrawals of taxable amounts are subject to ordinary income tax and if made before age 59½, may be subject to a 10% federal income tax penalty. Distributions of taxable amounts from a nonqualified annuity may also be subject to an additional 3.8% federal tax on net investment income. Because they are meant for long-term accumulation, most annuities have withdrawal charges that are assessed during the early years of the contract if the contract owner surrenders the annuity.
Annuities are long-term retirement vehicles designed for retirement purposes. They are not intended to replace emergency funds, to be used as income for day-to-day expenses, or to fund short-term savings goals.
FastBreak™ is issued by Gainbridge Life Insurance Company, a Delaware-domiciled insurance company with its principal office in Zionsville, Indiana and is licensed and authorized to do business in 49 states (all states except New York) and the District of Columbia. Products and/or features may not be available in all states. Guarantees are based on the financial strength and claims paying ability of the issuing insurance company. Please visit gainbridge.com for current rates, full product disclosure and disclaimers and additional information.
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