Annuities May Help Clients Live Longer: Study

The resulting study found that annuities substantially reduced mortality at five- and 10-year horizons, increasing longevity by 2.55% in the former and by 3.62% in the latter.

"Further analyses indicate that annuities reduce mortality by shielding retirees from income volatility and investment-related stress," the authors wrote. "Complementary survey evidence suggests that annuitants invest more in health and report lower disability rates."

Previtero told ThinkAdvisor that, ideally, to show that annuities cause lower mortality, they would have randomly assigned annuities to some retirees and phased withdrawals to others. (Or lump sums, as in the case of retirees in the U.S.) They would then have asked who lived the longest. If individuals randomly assigned an annuity, as in a lottery, lived longer, they could conclude that annuities cause higher longevity.

"Of course, this experiment, academics call these randomized controlled trials, cannot be executed in the field for several reasons," he said. "Annuities are irreversible, for one. Imagine the legal liabilities if someone is assigned an annuity and dies the very next day."

With this unfeasible yet ideal experiment in mind, Previtero said they designed their study of Chilean retirees. From prior research, he said they concluded that individuals are more likely to select annuities following poor stock market performance.

"When markets do badly, people expect them to continue doing badly and therefore prefer the security of an annuity," he said.

Previtero said they use this evidence to establish causality.

"Imagine two retirees in a country where retirement is mandatory at age 65," he said. "Phil retired in May 2025, following six months of good stock returns. Bob retired in May 2026, following six months of poor stock market returns. Given recent market performance, Bob is more likely to choose an annuity. We then ask: does Bob live longer than Phil, who chose a phased withdrawal?"

In reality, people can choose when to retire, said Previtero.

"We therefore present several results documenting that allowing retirees to choose when to retire does not drive our findings or preclude a causal interpretation of the effects of annuities on longevity in our setting," he said.

Guaranteed Income Equals Lower Stress

Jeff Judge, managing partner at Chesapeake Financial Planners in Forest Hill, Maryland, said he has spent two decades "watching the annuity conversation get mangled by bad marketing on one side and fear on the other."

"This study cuts through all of it," he said. "The clients in my practice who carry guaranteed lifetime income sleep differently than the ones riding a portfolio through every correction."

In his experience, Howard Sharfman, senior managing director of NFP Insurance Solutions, said clients with reliable lifetime income sources, particularly annuities, often enjoy not only longer lives, but healthier and more fulfilling retirements.

"The psychological benefit of knowing they will not outlive their income materially reduces financial anxiety and stress associated with market volatility," he said. "That peace of mind allows clients to focus more on family, health, travel and enjoying retirement rather than worrying about whether their assets will last."

Stability Can Lead to Investments in Health

Clients who have a meaningful portion of their lifestyle expenses covered by guaranteed lifetime income generally experience far less stress related to day-to-day market movements, said Sharfman.

As a result, they feel more freedom to invest in their physical well-being, he said.

"Instead of focusing on what the market did today, they are able to focus on what truly matters to them, their children, grandchildren, health, philanthropy and personal experiences," he said. "We also see many of these clients invest more intentionally in their health and quality of life because they feel financially secure about the future."

Judge said the clients who he sees spending on gym memberships, physical therapy and specialist appointments without hesitation tend to be the ones who can see income on the calendar. The ones watching a portfolio balance tick down in a bear market often delay those expenses, he said.

"That's where the health connection runs through, not just anxiety in the abstract," he said.

Clients strongly resonate with this message, Sharfman said, because it addresses one of retirement's greatest fears: running out of money.

"One ultra-high-net-worth client once told me, 'Being richer is not necessarily better, but being poorer is definitely worse.' That insight captures the emotional value of guaranteed income," he said. "When clients know their core lifestyle expenses are permanently covered, they tend to feel happier, more confident and less stressed."

The most effective retirement strategy, said Sharfman, combines guaranteed annuity income to cover essential lifestyle needs, a growth-oriented investment portfolio to participate in market appreciation and life insurance to create an income tax-free legacy for future generations.

"That combination provides financial security, growth potential and peace of mind," he said.