When Is the Best Time to Buy an Annuity?

The retirement red zone: the five years where timing matters most

Financial planners talk about a "retirement red zone," the stretch that runs roughly five years before you stop working through five years after. If you plan to retire at 65, that puts the danger zone at about ages 60 to 70.

The reason this window matters so much comes down to what planners call sequence of returns risk. A steep market drop is painful at any age, but it is recoverable when you are 30 and still adding new money every paycheck. The same drop lands very differently at 62, right as you stop contributing and start pulling money out. You are forced to sell shares at depressed prices just to cover living expenses, and that loss becomes permanent in a way it would not have been ten years earlier.

Take two coworkers, Mike and Diane, both age 65 at retirement, each holding $500,000 in a 401(k) plan. In Mike's first year of retirement, the market falls 28 percent, and he has no choice but to sell shares near the bottom to pay his bills. Diane made a different move before retiring: she moved $250,000 into a MYGA, so her core expenses were already covered regardless of what stocks did that year. Five years later, Diane's total savings are meaningfully ahead of Mike's, not because her long-term returns were better, but because the timing of one bad year never forced her to lock in a loss.

That is the core case for putting some retirement money into an annuity during the red zone: it protects the dollars you cannot afford to lose right when the market is most likely to hurt you.

The best age to buy a MYGA or another fixed-rate annuity

A multi-year guaranteed annuity works well the moment you have money you will not touch for three to seven years and you want a locked, guaranteed rate instead of taking on market risk. In practice, that tends to put the sweet spot for MYGA buyers somewhere between age 55 and 70.

The logic is straightforward: a 5-year MYGA purchased at 60 matures right at 65, just as many people begin retirement income. A 3-year MYGA bought at 62 also lands at 65. You can stagger several terms, sometimes called an annuity ladder, so maturities line up with when you actually expect to need the cash.

One note for older buyers: money inside a traditional IRA is still subject to required minimum distributions once you reach the IRS's RMD starting age, currently 73. Most MYGA contracts let you take that distribution through the free withdrawal allowance, often up to 10 percent of the account value each year, without a surrender charge, but confirm the exact mechanics with the carrier before you fund the contract.

The best age to buy an income annuity: an SPIA or an FIA with an income rider

Income-focused annuities do not follow the same rule as MYGAs, and the two main types pull in opposite directions.

How age changes an immediate annuity's payout

A single premium immediate annuity, or SPIA, pays more per month to older buyers because the insurance company expects to send fewer total payments. As a hypothetical illustration, a $150,000 life-only SPIA might pay roughly $815 a month if purchased at 65, versus roughly $1,000 a month for the identical premium purchased at 70. That is about $185 more every month for waiting five years.

The catch is the income the 65-year-old already banked. Sixty months of $815 checks add up to about $48,900 before the 70-year-old buyer ever receives a payment. At $185 a month in extra income, it takes roughly 22 years, until somewhere around age 92, for the later purchase to fully catch up. If your family tends to live well into the 90s and you are in good health, waiting can pencil out. If you need the income sooner, or longevity is not on your side, buying earlier is usually the better call. Our immediate annuity calculator lets you test both ages with your own numbers.

Why an income rider almost always rewards buying earlier

A fixed index annuity paired with a guaranteed lifetime withdrawal benefit works on the opposite timeline: earlier is nearly always better. The income rider grows a separate "benefit base" every year you leave it alone, using a guaranteed roll-up rate, commonly in the 5 to 6 percent range compounded annually, regardless of how the index performs. The longer that roll-up runs, the bigger the base your eventual income gets calculated from.

Here is a hypothetical example using round numbers. Someone who deposits $150,000 at age 58 into an FIA with a 6 percent compound roll-up, then turns on income at 68 after a full 10-year deferral, would see the benefit base grow to roughly $268,600. At a payout factor of 5.7 percent for that age, that produces about $15,300 a year, or roughly $1,275 a month, for life. If that same buyer waited until 63 to make the deposit, leaving only a 5-year roll-up before income starts at 68, the benefit base would land closer to $200,700, generating about $11,400 a year, or roughly $950 a month. That five-year delay in buying costs almost $4,000 a year in guaranteed income, for life. Use our income rider calculator to model your own deposit and deferral period.

How interest rates shape annuity timing

MYGA rates move with the broader bond market, especially yields on U.S. Treasury securities. Insurance companies invest premiums largely in investment-grade bonds, so when Treasury yields climb, carriers can typically afford to credit higher rates within a few weeks to a few months, and pay less when yields fall. That relationship held through the rate cycle of the early 2020s, when a series of Federal Reserve rate hikes pushed both Treasury yields and new MYGA offers noticeably higher, and it tends to work in reverse whenever the Fed eases.

Rates move for reasons that have nothing to do with your personal timeline, which is exactly why the age-based guidance above matters more than trying to call the next move in rates. Current rates by term change often, so rather than print a number here that will be stale in a week, check the annuity quote page for what carriers are actually offering right now.

Should you wait for rates to rise before buying?

Waiting is a bet, and like most bets it can go either way. Here is a hypothetical scenario that shows the shape of the risk.

Say you have $150,000 ready to invest in a 5-year MYGA currently offering 5.10 percent. Locking that in today and letting it run for six years (the term plus a one-year comparison window) grows the deposit to roughly $202,200. Now say you wait 12 months instead, parking the money in a savings vehicle earning 4.40 percent while you watch rates.

The pattern is common across rate scenarios: the upside of guessing right tends to be smaller than the downside of guessing wrong, because you also give up a year of compounding on the amount that was sitting in cash. Many retirement planners suggest splitting the difference instead of making an all-or-nothing bet: lock in a portion of your money now and leave the rest to reassess later.

Why waiting too long can shrink an income rider's payout

For an income rider, time itself is the product. The roll-up rate compounds the benefit base every single year the contract stays in deferral, and that growth stops the moment you switch on withdrawals.

A common and costly mistake is buying an FIA with an income rider at 68, letting it grow for only two or three years, then activating income at 70 or 71. That short runway produces far less lifetime income than the same rider purchased a decade earlier with a full 10-year deferral, as the earlier example showed.

There is also a fee to consider. Many income riders charge roughly under 1 percent of the benefit base each year for as long as the rider is active. Buy late and activate soon after, and you are paying that fee for very little added growth. Buy with years of runway ahead of you, and the fee is spread across a benefit base that has time to compound meaningfully. If you are still several years from needing income, starting the roll-up clock now is usually worth more than waiting for a "better" moment to buy.

Life events worth an annuity review

A handful of life moments reliably signal that it is time to at least run the numbers on an annuity.

• A job change or retirement with a 401(k) to move. Rolling old retirement plan money into an IRA is a natural point to separate "growth money" from "income money," and a portion often makes sense in a MYGA or FIA.
• A pension offering a lump sum instead of monthly payments. An immediate annuity can recreate that monthly check, sometimes with better survivor options than the original pension.
• Selling a home or a business. A large, taxable windfall can be repositioned into a MYGA to grow tax-deferred instead of sitting exposed and generating a big current tax bill.
• Receiving an inheritance. Money that was not earmarked for a specific purpose, and arrives when you are already in your 60s or 70s, is a common fit for either a MYGA or an income annuity.
• Spotting a gap between guaranteed income and fixed expenses. If Social Security and any pension fall short of covering your must-pay bills, that gap is the clearest reason to price out a single premium immediate annuity to close it. See guaranteed income versus market income for how to think about sizing that floor.

Getting started

Good timing comes down to three things lining up: the product matches your actual timeline, the rate is reasonable against recent history, and you have compared more than one carrier before signing anything. None of those require guessing where rates go next.

A licensed strategist can run quotes across several highly rated carriers side by side, so you see real numbers for your age, deposit and goal instead of a single headline rate. Compare your options on the annuity quote page, or start with our broader guide to annuity types if you are still deciding which product fits your plan at all.