Annuities are often a smart option for retirement, but they aren’t just for those nearing the end of their career. With the right financial strategy, annuities can help adults of all ages grow their savings, generate lifelong income, or even enjoy a lump sum when needed. The key is understanding how age limits, withdrawal rules, and other options impact various financial goals. 

Read on to better understand when you should buy an annuity, depending on your long-term financial vision.

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Can you buy an annuity at any age?

Yes — you can buy most annuities at any age — but many providers require buyers to be at least 18, and annuities are typically considered a long-term financial planning strategy for older folks preparing for retirement. 

Younger purchasers might prefer fixed index annuities because they’ll benefit from exposure to market gains without the risk of losing their principal. And if you’re 50–70 or older, with an eye toward retirement, you’ll likely prefer an income annuity due to their relative safety and the fact that they pay a guaranteed stream of income for a set number of years or for life. 

Minimum and maximum age limits for annuities

There are no legal age requirements for purchasing an annuity, but many insurance providers set minimum and maximum limits:

• Minimum age restrictions: Most annuities require you to be at least 18 to participate. 
• Maximum age restrictions: The insurance provider may impose an upper age limit depending on how the annuity is structured. For example, deferred annuities don’t always have a maximum age limit. But immediate annuities, which are designed to start dispersing guaranteed income to the investor right away, often set the maximum age limit at 75–95 years old — similar to how a pension works. 
• Tax-advantaged annuities: There’s a 10% tax penalty if you withdraw your money before you reach the age of 59½. If you need access to your money before that time, you may want a different contract type. Even if your money isn’t in a tax-deferred account, your earnings are taxable, and early withdrawal can significantly impact your retirement savings. One exception is a non-tax-deferred annuity that lets you withdraw 10% of your account each year.

Worth noting: If the insurance company doesn’t place an age restriction on an annuity you’re interested in, your age at the time of purchase can still be a significant factor in selecting the right product. 

What’s the best age to buy an annuity?

The best time to buy an annuity depends on your age, financial goals, anticipated retirement needs, and personal risk tolerance. One of the many benefits of annuities is that there are products that suit every purchaser, and a financial advisor can tailor your contract to suit your needs. 

Buying an annuity in your 20s and 30s

Younger purchasers in this age range often opt for more aggressive and riskier options. However, if you’re in your 20s and 30s and are looking for a secure financial vehicle that will allow you to grow your wealth, you may consider a non-tax-deferred annuity, which lets you make periodic deposits and withdraw funds each year, penalty-free. So when you’re younger, you could lock in a high 30-year annuity rate to increase your overall earnings.

Buying an annuity in your 40s and 50s

These years are ideal to begin retirement planning — and a tax-deferred annuity is great for this, since it lets you grow your wealth more rapidly (because you can defer taxes). Plus, if you’re closer to 59½ — when you can withdraw funds without paying the 10% IRS early distributions penalty — you don’t have to wait as long to access your money. 

You might also opt for a fixed or fixed index annuity, since these are low-risk and offer a guaranteed, predictable income stream in retirement. 

Buying an annuity in your 60s and 70s

At this stage in life, you might prioritize stable income and financial security. Immediate annuities are a popular choice because they pay out right away, providing a steady, pension-like income to supplement Social Security and other retirement funds. 

If you’re looking to secure income for the future, deferred annuities with lifetime income riders can guarantee payments later in retirement, helping you achieve long-term financial stability. 

Fixed annuities are also a safe option, offering higher interest rates than traditional savings accounts or CDs without the risk of market volatility. 

The income annuity age 75 rule and payout considerations

Some financial institutions set 75 as the upper limit for income annuities. Statistically, individuals buying income annuities in their later years don’t receive guaranteed payments for as long. So, the older you are when you purchase an annuity, the higher your monthly annuity payments will typically be. 

If you’re 75 or older, consider these factors before buying an income annuity:

• Purchase restrictions: You may be unable to purchase immediate annuities with lifetime guaranteed income. 
• Required minimum distributions (RMDs): The IRS requires withdrawals to begin at age 73 for tax-advantaged annuity accounts, which could affect retirement planning.

• Liquidity: Accessing emergency funds may be critical during this time of your life, so pay attention to surrender charges for early disbursement. If you need to tap into these annuity funds, it can adversely affect your retirement plan. 

Purchasing an immediate or fixed annuity with guaranteed annuity payouts may still be one of the best ways to secure an income stream for the rest of your life.

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External factors impacting annuity purchase

Determining the right time to purchase an annuity might seem daunting — here are some factors to consider. 

Age and retirement goals

Annuities are often retirement products aimed at offering a steady income stream post-retirement. So consider when you’d like to retire and how much income you’ll need to last you for life. The more time you have before you expect to retire, the longer you have to build wealth, which means larger payouts. 

Buying an annuity when interest rates are high

When interest rates are high, fixed annuities become more attractive because they lock in higher guaranteed returns for the contract’s duration. This can help you secure better long-term growth compared to purchasing during a low-rate environment. Fixed index annuities also offer higher rate caps, increasing their potential for gains tied to market performance. 

Variable annuities, on the other hand, are less directly impacted by interest rates since their returns depend on the performance of underlying investment sub-accounts, typically composed of stocks and bonds. But rising interest rates can impact bond-heavy portfolios negatively, potentially reducing short-term returns in variable annuities with fixed income exposure. 

Also, some insurers adjust their guaranteed benefit riders based on interest rate conditions, meaning higher rates could result in less favorable terms on income guarantees.

Buying an annuity in a volatile market

In a volatile market, annuities can provide stability by offering predictable growth and income. Fixed annuities guarantee returns regardless of market conditions, making them a safe option when uncertainty is high. And fixed index annuities offer growth potential tied to market performance but with downside protection against losses. 

Because variable annuities are directly tied to market performance, their value can fluctuate with stock and bond prices. While they offer higher growth potential over time, they also expose investors to more risk. If the market is particularly unstable, those considering variable annuities should assess whether they can tolerate potential short-term losses. Some investors may choose optional riders, like guaranteed income benefits, to mitigate risk, though these come with additional costs (they usually eat away at your payouts). 

When should you start taking money from an annuity?

Most people wait out the duration of their annuity contract’s term before receiving payouts. If you want to withdraw early, first consider potential penalties.

Surrender fees

A surrender charge is a penalty charged by the insurance company for early withdrawal. They typically decline over the annuity's life, so the closer you are to the beginning of the contract, the more substantial the penalty is. 

IRS 59½ rule

If you elect to draw funds from an annuity before age 59½, your gains will be subject to a 10% penalty unless an exception applies. Even if your annuity isn’t tax-deferred, the penalty applies to the taxable portion of your disbursement — although there are exceptions.

Required minimum distribution (RMD) rule

Required minimum distributions (RMDs) are mandatory annual withdrawals from retirement accounts — excluding Roth IRAs — that begin at age 73. Once they start, you must accept a distribution every year to avoid penalties. 

This communication is for informational purposes only. It is not intended to provide, and should not be interpreted as, individualized investment, legal, or tax advice.