When should you buy an annuity?

Wondering when the best age to buy an annuity is? It all depends on your situation.

Man reviewing finances with his laptop.

Annuities are designed to generate guaranteed lifetime income.

When is the best time and what is the best age to buy an annuity? That depends on your individual circumstances and preferences. It also depends on the specific annuity age requirements, which are determined by the provider. Consider the following:

Immediate vs. deferred annuities

Annuities that provide payouts immediately after purchase are known as immediate annuities. These are typically purchased in a single lump sum when you want to convert assets into an income stream right away — hence the term immediate.

Deferred annuities can generate an income stream at some point in the future. These can be purchased with a lump sum or with a series of payments over time. One benefit of deferred annuities is that the value of your annuity may grow over time before pay out begins.

Deferred annuities offer tax benefits as well. For example, even if they're purchased outside of a qualified retirement plan like an IRA or 401(k), you don't have to pay taxes on the earnings; you only pay taxes on the payouts you receive.

The right time to buy

With a deferred annuity, the earlier you buy (the younger you are), the more time your premiums can benefit from tax-deferred growth. An early purchase may be especially attractive if you have already contributed the maximum amount to other tax-advantaged accounts like an IRA or 401(k).

However, you can always buy an annuity closer to retirement after allowing your investments to grow in a brokerage account or qualified retirement plan. Then, buying an annuity can be part of the retirement income plan you develop before retirement.

The right time and the best age to buy an annuity will ultimately depend on your needs and your situation. But it's never too late to consider adding an annuity to your retirement income plan to gain some peace of mind. To determine when an annuity makes sense for you, contact your local State Farm® agent.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

Neither State Farm nor its agents provide tax or legal advice.

Start a Quote
Select a product to start a quote.
Agents Near You
Contact Us

Also Important

How Do Annuities Work

An annuity provides a way to receive a paycheck for the rest of your life. State Farm agents share how annuities work and how it can fit into your retirement plan.

Choosing an Annuity That's Right for You

Three types of annuities. Find out how they are different and which fits your needs.

Related Articles

How Do Annuities Work

An annuity provides a way to receive a paycheck for the rest of your life. State Farm agents share how annuities work and how it can fit into your retirement plan.

What Is a Life Annuity

A life annuity is commonly purchased to help provide financial security in retirement and can offer a steady income no matter how long you live.

What's the Difference Between Life Insurance and an Annuity

Staying informed about how annuities and life insurance work makes it easier to come up with a financial roadmap that's tailored to your needs.