Structuring long-term financial security with fixed, variable, and indexed annuities

Annuities are long-term insurance contracts that are typically sold by financial services companies and insurance companies. The primary purpose of annuities is to mitigate the risk of outliving savings through the provision of guaranteed periodic income payments to the contract owner during retirement. Unlike investments such as stocks and bonds, annuities are not used primarily for the purpose of accumulating wealth over time. Rather, annuities are used in a manner similar to life insurance products in that they are intended to help individuals transfer risk to a third party (Nguyen et al., 2023; Kimura et al., 2024; Ellis et al., 2025).

Annuities are more effectively utilized as economic lifeboats than as sources of investment income. This role enables annuities to support individuals’ retirement concerns without straining the economy’s wealth-generating functions. Like life insurance products, the value of annuities is greatest to individuals in the middle or lower sections of the wealth distribution. If too many individuals in this segment of the population do not have access to annuities, personal and collective economic risks will increase through the negative impact on the resources that society will have available to respond to deaths and increases in longevity, including public pension programs (Wallace et al., 2023; Rahman et al., 2024).