Can You Buy an Annuity at Any Age?

Yes, it’s possible to buy an annuity at nearly any age. Usually there are few or no lower age limits. But annuity purchases do have older age limits. These restrictions vary based on annuity type, product, and individual contract rules.

Technically, you may be able to buy an annuity for even a child. However, most annuity purchases are with retirement money, especially IRA money. So, annuities tend to be more appropriate for people of near-retirement and retirement age. You will also see retirement savers in their 30s and 40s purchasing annuities for principal protection, safe growth, or tax-deferred accumulation in another place alongside retirement accounts. Overall, annuity buyers tend to range from ages 40-80, depending on their needs and goals.  

In an old survey by Gallup of individual annuity owners, the average age for first-time annuity buyers was 51. The survey found the median age of first-time contract owners to be 52.

Since age limits can vary among annuity types, let’s take a look at those now.

Different Annuity Types and Age Restrictions

Generally age restrictions arise with three kinds of fixed-type annuities: immediate annuities, fixed index annuities, and multi-year guarantee annuities. Here’s a quick look at each type and some potential restrictions:

Immediate Annuities

With an immediate annuity, someone pays a one-time lump sum, or a single premium. In exchange, the insurance carrier promises them a guaranteed fixed income for the rest of their lifetime. The lump sum is “annuitized,” or converted in a steady stream of payments over time. Depending on the selected payout option, this income can continue for a certain period even after the contract holder deceases.

Some insurance companies will let you purchase an immediate annuity up until age 100. Many immediate annuity buyers fall into the 70s age bracket. The older someone is when they purchase an immediate annuity, the bigger the monthly payout they will receive from the insurance company. This is because at that point, the payout is based more on actuarial estimates of life expectancy. Note, however, once annuitized, those annuity payments can’t be changed back into a lump-sum balance.

Fixed Index Annuities

Age limits vary in the fixed index annuity market. Some insurance companies let you buy a fixed index annuity up to age 75. Other carriers cap the buying age limit at 85. Overall, the average age limit tends to be around age 80. If someone is age 70 or over, a fixed index annuity should be especially tailored to the buyer’s individual needs, especially if the annuity has an income rider. Interestingly, many insurance carriers actually won’t let you buy an annuity with an income rider until you are age 50 or above.

Unlike immediate annuities, fixed index annuities have a deferral period. During this time, the contract earns interest based on movements in an index, like the S&P 500 price index. The insurance company credits your contract with earned interest, you actually don’t participate in index changes. When the index goes down, your principal and earned interest stay intact.

Note, if you take withdrawals from the contract before age 59.5, you will pay income taxes as well as a 10% early withdrawal penalty. You may also have to pay another penalty if your withdrawals exceed contractually permitted amounts during the deferral period. Most fixed index annuity contracts allow for withdrawals of up to 10% of your contract value. So, it’s prudent to be careful with contract withdrawals.

Multi-Year Guarantee Annuities

Multi-year guarantee annuities (MYGAs) are also known as “fixed-rate annuities.” In this type of contract, you usually pay a single premium or lump sum to the insurance company. In exchange, the insurance company guarantees your money will earn compound interest over a set period of time. That period tends to last for many years.

You generally have the ability to purchase a multi-year guarantee annuity until age 85. Some carriers may permit MYGA purchases even beyond that. But since it involves a drawn-out accumulation phase, this type of annuity may not be appropriate for purchases at older age. Like with other deferred annuities, many purchasers of multi-year-guarantee annuities are in their 50s-70s. If you’d like to see if this annuity type, or for that matter other annuity options, may be right for you, a qualified financial professional can help you explore your options.

What Times are Right for Annuity Purchases?

So, what’s the best age to buy an annuity? It depends. Many people get annuities for reasons tied to safety. Others purchase them for guaranteed income, whether for a set period or the rest of a lifetime. And yet some are attracted to annuities for other reasons, such as enjoying another tax-deferred “bucket” to build up retirement money alongside retirement accounts.

While no one-size-fits-all answer applies, the majority of annuity buyers are in their 50s, 60s, and 70s. Some reasons for why different age groups buy include:

• Buyers in their 30s and 40s often are especially risk-averse and want a safe vehicle for growing their savings. They may use annuities as another growth vehicle alongside tax-advantaged retirement accounts and investment brokerage accounts.
• Buyers in their 50s and 60s may buy for a variety of reasons. Many contract holders understand that retirement is nearing, and so they are seeking safe places to preserve money for retirement. Others are attracted to the guaranteed income and get into deferred contracts that will give them the lifetime income they need. Others just want a safe growth vehicle before they use their money for income in years ahead.
• Buyers in their 70s tend to buy annuities for income reasons. Occasionally, just like in age brackets, you’ll see purchases for other goals. But income certainty and lifelong income security tend to be driving buyer rationales in this age bracket.

No matter what, any annuity strategy should be individually tailored to your financial picture. It should make sense for your needs, goals, circumstances, liquidity requirements, and other objectives. A financial professional can help you evaluate your financial picture and explore annuity options that help you achieve financial security.

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