For most of my career, I have approached annuities the same way I treat dental work – necessary in narrow circumstances, oversold by those who profit from them, and often the wrong move for the average investor.
But something unusual is happening right now. And if you’re in or near retirement, you’d be foolish to ignore it.
Thanks to stubborn inflation and the Federal Reserve keeping rates higher than anyone expected, payouts on single-premium immediate annuities are at levels we haven’t seen in more than a decade. This is the simplest, cleanest version of the product: You pay a lump sum to the insurance company, they pay you a monthly income for life.
MarketWatch recently noted the same change, noting that payouts on these contracts have reached multi-year peaks.
This doesn’t mean you should run out and buy one. This means that before this window closes you must understand what exactly is going on.
If we were having this conversation over coffee I would want to tell you this.
1. Higher interest rates mean bigger monthly checks
The math here is not complicated. When an insurance company sells you an immediate annuity, they take your lump sum, invest it mostly in bonds, and pay you a piece every month for the rest of your life.
When bond yields are low, those monthly checks are insignificant. When yields increase, the check becomes fatter.
The 10-year Treasury, on which benchmark insurers most rely, was creeping around 1% during the pandemic. By the end of May 2026, it is closer to 4.6%.
It’s the difference between an annuity that barely beats a savings account and an annuity that ultimately pays you like a real pension.
2. What it really looks like in dollars
Let’s talk concrete, because abstract talk about overpaying doesn’t pay your electricity bill.
According to current industry rate surveys, a 65-year-old putting $100,000 into a single-premium immediate annuity in April 2026 can expect about $625 per month for life. A woman of the same age would receive about $590, because women live longer on average.
Deposit $500,000 and that monthly check will climb above $3,000.
Four years ago, the same payment would have been about 25% to 30% lower. That’s a real increase – for a lifetime – for the same upfront investment.
3. The shopping frenzy is real, and the data is wild
I’ve been watching this market for over 40 years, and I’ve never seen anything like the current rush into annuities.
The Life Insurance Marketing & Research Association (LIMRA), the industry’s main research organization, reports Total annuity sales to reach record $464.1 billion in 2025. This is the fourth consecutive record year. Sales of single-premium immediate annuities alone increased 23% in Q4 2025.
Limra says 4.1 million Americans are turning 65 each year — what they call “Peak 65.” Many of them do not have a pension, and are struggling to build one before they retire.
Demand isn’t going to slow down any time soon.
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4. The window probably won’t stay open
Here’s the catch, and it’s huge.
The Fed is keeping rates high to fight inflation, which the Bureau of Labor Statistics pegged at 3.8% annually through April, largely caused by our conflict with Iran. But markets are already pricing in the cut.
When the Fed cuts rates, bond yields fall. When bond yields decline, annuity payments also decline.
LIMRA itself is forecasting weaker fixed annuity sales in 2026 due to softening rates.
This isn’t the first time the math has tilted in favor of retirees — I’ve seen a similar window flagged in 2022. Now the difference? The case is sturdy and the runway is short.
If you’re considering it for two years, your generous payment period may be measured in months, not years.
5. Inflation eats fixed payments alive
Now for the bad news. The same inflation that is impacting today’s payouts is also every annuity buyer’s worst enemy.
If you deposit $3,000 a month at age 65, it will be $3,000 a month forever – even if a gallon of milk costs $15 in 20 years. At 3.8% inflation, your purchasing power is almost halved in less than 20 years.
Some annuities offer cost-of-living riders, but they reduce your initial payout by 30% to 50%. It is a cruel business.
The way I think about it: Annuities are one part of your retirement income strategy, not the whole thing. Combine this with investments that grow – and look at other ways to guarantee yourself a steady income while you’re at it.
6. The fine print can ruin you
This is where most people get burnt. Annuities are sold, not bought – and the people selling them earn hefty commissions. This creates a powerful incentive to push you toward the wrong product.
Go for single-premium immediate annuities or boring multi-year guaranteed annuities. Avoid convertible, indexed and “income riders” instruments designed to mislead you and make you pay 7% or more to the seller.
Plus, an annuity is only as safe as the insurance company behind it. State guaranty associations typically cover $250,000 to $500,000 per person, per insurer. If you’re buying more than that, split it among two or three A-rated companies.
And please – get quotes from at least three different insurers before signing anything.
7. A good place to start
We have the pleasure of recommending . They help you understand which types are suitable for your age and how much monthly income you can expect.
If you’re age 50 or older, you can lock in a permanent pay check today. You can’t survive it, and Wall Street can’t take it away.
Here’s a 2 minute questionnaire that can help you decide what you need.
bottom line
I’m not telling you to buy an annuity. For many of my readers, the answer is still no. But if you’re on the fence – if you need guaranteed income to cover your basic bills in retirement – the math has finally come out in your favor.
If you want an in-depth primer before you make a move, you should learn about annuities in detail.
Just don’t panic. The Fed won’t keep paying retirees this well forever.