Annuities have been all the rage lately among financial advisors. Research from ProtectedIncome.org revealed that 50% of financial advisors are allocating more of their clients’ investments into annuities.
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However, it’s not just financial advisors who are pouring money into annuities. The same research indicated that 64% of consumers would put their money into an annuity, while 36% would put it into the stock market.
These are some of the reasons why annuities are gaining momentum over stocks and other assets.
Market volatility has been a critical factor that makes it easier to see why annuities have gotten so hot. Investors just went through some of the most volatile months the stock market has ever seen due to President Donald Trump’s tariff wars.
The S&P 500 dropped by more than 10% in a single week, and growth-oriented stocks did even worse. Artificial intelligence stocks, in particular, got hammered because of DeepSeek news and the tariffs.
While young investors can afford to wait out volatility, not everyone wants volatility in the first place. Furthermore, retirees need more stability with their nest eggs since they’re ready to withdraw each month.
That’s where annuities come into play. These financial products maintain steady valuations during market volatility and reward investors with steady cash flow. Even indexed annuities don’t lose money. These annuities have their interest rates tied to the stock market, so a bad year for stocks will result in lower gains for the annuity. However, this type of annuity won’t have its value go down if the stock market crashes.
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Inflation drives risk-averse investors to put their money into low-risk assets that can maintain or beat the rate of inflation. Annuities have elevated rates, which make it easier for these financial products to outperform inflation.
You can also get lifetime payments with an annuity. Your annuity’s rate stays the same, even if the Federal Reserve cuts interest rates multiple times this year. Inflation reduces your purchasing power if you leave your money in the bank, and for many people, annuities act as a viable solution to this problem.
The more persistent inflation is, the more attractive annuities will look for retirees. Bonds are also good for this purpose, but bonds eventually mature, and your next bond’s interest rate may not be as attractive as the current rate.