Be Scrupulous About Purchasing an Annuity or Annuities This Year

As we approach the middle of the year, there are folks, as always, thinking seriously about buying an annuity or adding to their annuity collection. But buyer beware.  This is no routine year, one in which an annuity purchase might be chosen without serious analysis. You want to get things right amid a rapidly transitioning backdrop.

If not, you may eventually regret your purchase. Choosing an annuity is more challenging than usual because stiff global tariffs are still up for grabs. Should they occur, most pundits believe the stock market will take a hit because many things would cost more and prod consumers to spend less – a big deal given that consumer spending represents two-thirds of the economy.

Because the chances of this are pretty high, most economists are projecting that the economy, already showing some signs of stress, will weaken further, perhaps significantly, as the year progresses. And the bond market, which has been much weaker than average, especially in comparison to stocks, would also take a hit because interest rates — already painstakingly high – would climb further.

Here is the $64,000 question: Is this the scenario mostly likely to occur? The answer has been murky but now appears to be moving toward the brighter side, a number of astute pundits say. The thinking is that the economy will wind up somewhat weaker, but not a lot weaker, because things probably won’t be that bad. Among other things, President Trump has already weakened his tariff positions several times, in part because the American Association of Individual Investors has been deeply worried about where stocks and the economy overall may be headed in coming months.

There is more to say here – and I will shortly – but the current backdrop suggests that relatively aggressive annuity shoppers should strongly consider buying a so-called buffered annuity, which invests in stocks and offers good downside protection, albeit not 100% protection. This means it will earn more in a decent market. This isn’t too much to expect because the stock market tends to rise markedly more often than it declines.

On the other hand, one type of annuity you want to sidestep unless you’re extremely aggressive is a variable annuity, which once dominated the market but no longer does. Variable annuities provide little to no protection from market loss, unless riders are tacked on at an added cost. For investors who want to preserve at least most of their capital, variable annuities don’t measure up. 

More conservative investors? They should stick with fixed indexed annuities (FIAs), which are safe from losses and earn modest stock market gains in good years. Conservative folks might also consider plain vanilla fixed annuities – so-called MYGAs (Multi-Year Guaranteed Annuities). These, too, do not lose money in a down market. They don’t benefit from gains in a good stock market. But they offer annual returns that are far more generous than highly orthodox bank certificates of deposit.

Let’s retrace the 2025 outlook for the financial markets. Even if this ultimately turns out to be a difficult year, it doesn’t mean there will also be tough years thereafter. This is an important reminder because an annuity is a multi-year investment. Regardless of various challenges, markets historically have always regenerated themselves and gone on to produce respectable gains.

Moreover, the financial markets, especially the stock market, may ultimately fare well for the third consecutive year.  Even after huge sell-offs earlier in 2025, the market has managed to rebound relatively close to where it was at the 2025 record closing high in mid-February. The S&P 500 rose more than 6% in May alone – the best month since late 2023.

This also compels President Trump to do what he can to keep the good times rolling, given that corporate America is still relatively healthy. Other relatively positive developments are lurking as well.

Last month, for example, a federal trade court declared that Trump didn’t have the authority to impose sweeping tariffs on virtually every nation, voiding the levies. An appeals court put this ruling on hold less than a day later.  Still, many economists are cautiously optimistic that the ruling will hold up on appeal – an outcome that would likely reduce the risk of price increases and some slowing in economic growth.

Another bright spot, at least theoretically, is that inflation has been falling again in recent months. This would be a tailwind for stocks and bonds if it continued.  Interest rates have been unchanged since late last year and have ample room to fall if this bright spot holds up.

Ironically, perhaps the biggest positive of all is the fact that China, which has been hit by U.S. tariffs harder than most, knows how to play hard ball. It has just put a sixth-month limit on rare-earth export licenses for U.S. automakers, other manufacturers, consumer electronics and military equipment. A temporary pause could easily become permanent if the U.S. lightens up further on U.S. tariffs. This may be in the cards. Rare earth minerals and magnets are critical in many parts of the manufacturing world, and most of them come from China.

Looking for an annuity at this juncture? Here are three strong annuity options to consider:

• A fixed indexed annuity (FIA).  This is a tax-deferred annuity option that does not lose money in a down market, combined with an opportunity for growth.  If you invest, for example, in the S&P 500 and it rises during your contract period, you might get 45% of the index’s gains. It provides more growth potential than a fixed annuity and is equally protected from losses. Unlike a variable annuity, a FIA provides a steady, predictable income stream, which can be crucial for budgeting in retirement.   

• Athene Amplify 2.0.  A so-called buffered annuity, Athene Amplify offers the potential of superior index gains in tandem with a level of downside protection in volatile markets.  As an example, investors who choose a six-year contract and a 10% downside buffer with a 0.95% annual fee can earn returns equal to 125% of any growth in the S&P 500. An additional option, Athene Amplify 2.0 NF, offers the same features with relatively competitive rates and no annual fee.  This annuity may be attractive to even relatively conservative annuity investors. 

• Other buffered annuities. These are similar to Athene Amplify 2.0. They are usually less generous but still offer advantages. They commonly can protect against a market decline of up to 20%, as well as 10%, albeit the former means lower returns. Some buffered annuities, such as Equitable Structured Capital Strategies PLUS, also accommodate a so-called dual direction option, which pays an investor a positive return even if the stock market declines as much as 20% over several years. (Again, this comes with less upside potential.)

Some investment pros are sometimes critical of annuities, mostly because they think their fees are too costly. But there is an important place for them, especially for retirees and soon-to-be retirees. What most annuities provide — and most other investments do not — is guaranteed income, often for life. How can this not be a positive?