Can a 55-Year-Old Buy an Annuity?

Have you ever wondered if there’s a “right” age to buy an annuity? At 55, retirement might still feel years away, yet it’s close enough that financial choices begin to carry extra weight. With market fluctuations, longer lifespans, and evolving retirement rules, many people in their 50s are asking a timely question: Is an annuity a suitable option for me right now? 
According to the Insured Retirement Institute, about 30% of Americans ages 55 to 64 own some type of annuity as part of their retirement income approach (1). The reason? Predictability. In an environment where pensions are less common and 401(k) balances can change with the markets, annuities can provide something valuable, a potential source of income for life. 
 

Why Age 55 May Be a Strategic Time 

Buying an annuity at 55 isn’t just possible; it may be appropriate for some individuals. Many people in this age bracket are in their peak earning years, building savings while also catching up on retirement contributions. That makes it a window of opportunity to allocate part of those assets toward guaranteed income later. 
At this stage, you can choose between two main types: 

• Deferred annuities, which begin paying later (often at or after retirement). 

• Immediate annuities, which start payouts right away. 

For someone age 55, a deferred annuity can make sense. It allows the contract value to grow tax-deferred until you start receiving payments, typically in your 60s or later, when you may also be in a lower tax bracket (2). 
 

Understanding the Fine Print 

Before purchasing, it’s important to understand the trade-offs. Many annuities include surrender periods, a set number of years during which you may face penalties for early withdrawals. For a 55-year-old, that might mean limited access to funds until around age 60 to 65. 
Flexibility is another consideration. Once income payments begin, annuities are designed to provide stability, not liquidity. They can work best to help cover predictable expenses, not as your sole source of retirement income. 
Annuities are not one-size-fits-all. There are fixed, variable, and indexed options, each with different features, risks, and potential returns. Understanding these differences can help ensure the product aligns with your broader goals. 
 

The Tax Angle 

The growth within an annuity is tax-deferred, meaning you won’t owe taxes on earnings until you withdraw funds. However, withdrawals before age 59½ may be subject to a 10% IRS penalty in addition to ordinary income tax (3). 
That’s why many individuals between 55 and 60 use this period to allow for several years of potential tax-deferred growth before accessing funds penalty-free. 
 

A Thoughtful Next Step 

So, can a 55-year-old buy an annuity? Absolutely. But the more important question is: Should you? The answer depends on your full financial situation, including your goals, income needs, tax considerations, and comfort with risk. 
Annuities can play a helpful role in creating reliable retirement income, but like any financial product, they’re most effective when used as part of a well-rounded strategy. 
If you’re exploring how an annuity might fit into your approach, consider scheduling a complimentary meeting with us as soon as possible. Together, we can review whether this income option aligns with your timing and long-term goals. 
Sources:
(1) Insured Retirement Institute. IRI Retirement Fact Book 2024. 
(2) Internal Revenue Service. Publication 575: Pensions and Annuities, 2025. 
(3) U.S. Internal Revenue Code § 72(q), “Tax on Early Distributions from Deferred Annuities.” 
Annuities are long-term insurance products designed for retirement purposes.

This information is for general informational purposes and should not be considered tax, legal, or investment advice. You should consult with a qualified professional regarding your specific situation.