How Boomers Can Navigate Annuities in a Post-Election Economy

Economic uncertainty, compounded by political and regulatory upheaval, is making it difficult for baby boomers to plan for the future. Annuities have emerged as a popular retirement income source, but it’s important to understand how economic shifts could impact your return when navigating annuities in this post-election economy.

The Rising Popularity of Annuities for Baby Boomers

Baby boomers are worried about outliving their retirement savings. Many are turning to annuities as a way to secure lifetime income. Indeed, annuity sales have been booming. LIMRA says total annuity sales were up 12% year over year in 2024, marking the third year of record-high annuity sales.

As 2025 gets underway, interest in annuities has remained strong. However, the situation is shifting and market turbulence could impact your annuity strategy.

The Post-Election Economic Impact on Retirees

The early months of 2025 have been characterized by social, political, and economic upheaval. For retirees, the stakes are especially high. Here are just a few of the factors affecting retirees: 

• Market volatility has threatened retirement funds. According to Investor’s Business Daily, the S&P 500 dropped by nearly 20% from a recent high. The markets then rallied somewhat on April 9, but many retirees are still worried about their savings.
• Changes to Social Security have retirees spooked. According to USA Today, Trump has said he will not cut Social Security benefits and that he wants to end taxation of benefits. Nevertheless, some seniors are worried about the future of retirement benefits amid government cuts. 
• Trade wars are sparking recession fears. According to Time, economists are warning that a trade war caused by new tariff policies could trigger a recession. Faced with higher costs due to tariffs, companies may raise prices (causing consumers to spend less) or lay off workers.
• Interest rates could go down. According to USA Today, the Federal Reserve held firm on interest rates in early 2025 but is forecasting two cuts for later in the year. This is good news for people who are looking to take out a loan or refinance an existing one – Fannie Mae says mortgage rates are expected to drop in 2025 and 2026. However, for people who want to grow their savings, lower interest rates are unfavorable – and many retirees are in this situation.

What Does All This Mean for Annuities?

The post-election economic situation is complex, as is its impact on annuities.

On the one hand, demand for annuities may continue to rise as people look for retirement income solutions to guard against the impact of market volatility on 401(k) investments. Those who are worried about potential cuts to Social Security may also be motivated to secure their own source of retirement income via annuities.

On the other hand, falling interest rates and poor market performance could cause annuity returns to shrink. How or if your returns will shrink largely depends on the type of annuity you have and when you bought it.

• A variable annuity has a variable crediting rate tied to the underlying investments. If the stock market crashes, variable annuities lose considerable value. People often buy variable annuities hoping the underlying investments will perform well and the annuity will grow. However, people who are worried about a recession and falling market values may not want to risk buying variable annuities.
• A fixed annuity has a fixed minimum crediting rate established at the time of purchase. With an fixed indexed annuity, the actual credit rate may be higher based on the performance of the index that is used, but the minimum crediting rate shields the annuity from losses during times of market volatility. Other fixed annuities have a pre-determined crediting rate that does not change. People who want stability during times of market volatility may find fixed annuities appealing. However, if you purchase a fixed annuity when interest rates are low, your crediting rate will likewise be lower, which means the return will be smaller.

Annuities and Tax Changes

When considering annuities, it’s also important to consider how tax changes could impact your annuities.

Annuities enjoy tax-deferred growth. This means you don’t have to pay taxes on the interest growth while the annuity is in the accumulation phase – you only have to pay taxes on growth when you make withdrawals. This is ideal for people who are trying to save for retirement and don’t want to have to deal with unexpected tax bills. It also lets you maximize compound interest growth, since you won’t lose value to taxes during the growth period.

Considering how important taxes are when planning your annuity strategy, any changes to the tax code could have a big impact on your annuity. This means many retirees are likely wondering what’s in store for their taxes. According to Bankrate, President Trump has some big ideas for tax changes, including the elimination of taxes for anyone earning less than $200,000. However, the details of this plan are still unknown. In the meantime, Congress is considering extending the Tax Cuts and Jobs Act (first enacted in 2017), which brought down taxes for many Americans.

Since lower taxes could mean retirees pay less to Uncle Sam when receiving annuity payments, this is an issue retirees will want to watch.

What Does This Mean for Your Annuity Strategy?

You may be worried about how the post-election economy will impact your retirement strategy. Here are two tips to help you navigate:

1. If you have an annuity, consider whether it is still a good fit. It’s possible that switching to a different annuity could produce better returns. For example, if you purchased an annuity years ago when interest rates were lower, you might be able to secure a better crediting rate now. If you purchased a variable annuity and think the market will perform badly, you might want to switch to a fixed annuity. However, you should make sure you understand any surrender fees and early withdrawal tax penalties you may owe before making any changes.
2. If you don’t have an annuity yet, consider purchasing one now. If you’re looking for retirement income, an annuity could be a good fit for your finances. Since interest rates may go down later in the year, it’s worth locking in a fixed annuity with a good crediting rate before that happens.

Do you have more questions about annuities for retirees? Canvas offers straightforward fixed annuities that provide retirement income. You will receive guidance from our licensed and non-commissioned agents, so you can count on them to objectively help you navigate your annuity options.

Apply now.