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The History of Annuities and Why They Aren’t a Fad

Filed under: Retirement

There always seems to be some new financial tool or fad that offers an easy way to solve your biggest financial challenges. If you’re approaching retirement or recently retired, you may have even seen complex financial products that sound too good to be true.

Some people mistakenly place annuities in that category. Annuities have become increasingly popular in recent years. The combination of longer life expectancies, increased medical costs and volatile markets has created difficult challenges for today’s retirees. Many people find that annuities help them confront those challenges.

Annuities aren’t a new development, though. In fact, they’ve been around for centuries. That’s because they’re primarily used to help people address a challenge that has existed since the beginning of time: the risk of outliving one’s ability to generate resources. While annuities have evolved and changed over the years, they’ve always existed to address the challenge of longevity.


Ancient Annuities

The first known annuities existed in ancient Rome in the third century. Back then they were known as an annua, which was a contract between a buyer and a seller. The buyer would provide a lump sum of money, and the seller would provide a stream of income for the remainder of the buyer’s life. The buyer hoped to profit by living for many more years, while the seller hoped to have to make payments for only a limited amount of time.

Over the years, annuities became more formal and structured. Churches used them to fund construction of new buildings. Governments offered them to raise money for war efforts. Some community groups organized annuity pools, allowing pool survivors to share remaining proceeds after a participant in the group passed away.


Annuities in the United States

In the late 18th century, annuities began to appear in the United States. The earliest types were offered by churches to widows and parentless children. Soon, though, annuities were offered by a number of groups, including businesses, state governments and the military.

In the 1930s, the U.S. government essentially became an annuity provider for the masses when it created Social Security. In the 1950s, programs like TIAA-CREF began offering deferred annuities to teachers, health care workers and others.


Annuities in Recent History

In recent decades, annuities have evolved from being niche financial products to popular tools that are helpful in addressing retirement challenges. Many companies today offer annuity contracts, and they’re available in a broad range of types.

You can find annuities that limit downside market risk, provide guaranteed lifetime income and even help pay for long-term costs. Some annuities offer market exposure. Others pay a fixed interest rate. Some annuities are very similar to the original annuas of ancient Rome and simply pay a stream of income in exchange for a lump-sum contribution.

An annuity could be a useful tool for your retirement strategy. However, it’s important to choose an annuity that meets your unique needs and objectives. A financial professional can help you determine whether an annuity is right for you.

Ready to explore annuity options? Let’s talk about it. Contact us at Ambrose Financial & Insurance Services. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.


Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.

Annuities are insurance products backed by the claims-paying ability of the issuing company; they are not FDIC insured; are not obligations or deposits of, and are not guaranteed or underwritten by any bank, savings and loan or credit union or its affiliates; are unrelated to and not a condition of the provision or term of any banking service or activity

Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged.  Annuities are long-term, tax-deferred vehicles designed for retirement and contain some limitations.

16695 – 2017/5/23