Intermediate

When to Buy an Annuity

8 min read Last updated: February 2025

The Right Time to Buy an Annuity

Deciding when to buy an annuity is one of the most important financial decisions you'll make for your retirement. While there's no universal "perfect time," several factors can help you determine the optimal moment for your circumstances.

Age Considerations

Your age significantly impacts annuity rates and benefits:

  • Under 55: Generally too early - you typically can't access pension benefits
  • 55-65: Early purchase can lock in longer-term security but may result in lower rates
  • 65-70: Traditional retirement age - often offers good balance of rates and security
  • 70+: Higher rates available but shorter benefit period

Market Timing Factors

Several market conditions affect annuity rates:

  • Interest Rates: Higher interest rates generally mean better annuity rates
  • Gilt Yields: Strong correlation with annuity rates
  • Economic Climate: Overall economic conditions can impact rates

Important Note

Trying to time the market perfectly is risky. Focus on your personal circumstances rather than waiting for "perfect" rates.

Personal Circumstances to Consider

Your individual situation plays a crucial role:

  • Health Status: Current health conditions might qualify you for enhanced rates
  • Financial Needs: Immediate income requirements vs. future security
  • Other Income Sources: Existing pensions, investments, or rental income
  • Family Situation: Dependents and inheritance plans

Signs It Might Be Time to Buy

Consider purchasing an annuity when:

  • You need guaranteed income to cover basic expenses
  • You're concerned about market volatility
  • You want to ensure lifelong income security
  • Current annuity rates align with your expectations
  • You've assessed other retirement income options

Alternative Timing Strategies

Consider these alternative approaches:

  • Phased Purchase: Buy multiple smaller annuities over time
  • Split Strategy: Combine annuity with other retirement products
  • Deferred Purchase: Delay buying while using other pension options

Pre-Purchase Checklist

Before making your decision, ensure you've:

  • Compared quotes from multiple providers
  • Considered all annuity types
  • Disclosed any health conditions
  • Understood the tax implications
  • Consulted with a financial advisor

Professional Advice

Given the permanent nature of annuity purchases, consider seeking professional financial advice before making your decision.

Next Steps

To help with your decision: