What Is the Minimum and Maximum Age to Buy an Annuity?

An annuity is a financial contract with an insurance company that provides a steady income stream, often during retirement. Individuals typically purchase an annuity by making a lump-sum payment or a series of payments over time. While there is generally a minimum age requirement to purchase these contracts, there is typically no upper age limit.

Minimum Age for Annuity Purchase

The minimum age for an individual to purchase an annuity contract is generally 18 years old. This age aligns with the legal concept of contractual capacity, which dictates that a person must be of legal age to enter a binding agreement. Insurance companies require purchasers to possess this capacity to ensure the validity and enforceability of the annuity contract. Without reaching the age of majority, an individual cannot legally consent to the terms and conditions of such a financial product.

An annuity might be established for the benefit of a minor, but the minor cannot directly purchase or control the contract. A parent or legal guardian may purchase an annuity with a minor named as the annuitant or beneficiary. Legal control and ownership of the annuity remain with the adult purchaser until the minor reaches the age of majority, at which point control may transfer according to the contract’s terms and applicable state laws.

No Upper Age Limit for Annuity Purchase

There is generally no maximum age at which an individual can purchase an annuity. Insurance companies do not impose an upper age restriction, meaning that even individuals in their later years can acquire an annuity contract. This absence of a hard limit allows older adults to utilize annuities for immediate income needs or to convert existing assets into a guaranteed income stream.

Practical considerations can emerge for very elderly purchasers. Certain riders, such as those providing long-term care benefits, may have age cut-offs or require medical underwriting, which can become more stringent with advanced age. The availability of specific features or the cost of certain guarantees might also be influenced by the purchaser’s age and health status.

How Age Impacts Annuity Payouts

The age of an annuitant at the time income payments begin, known as annuitization, significantly influences the size of those payments. Annuity payouts are linked to life expectancy projections. When an individual annuitizes at an older age, their projected life expectancy is shorter. This shorter life expectancy means the insurance company anticipates making payments over a reduced period.

For a given principal amount, older annuitants typically receive higher periodic income payments compared to younger annuitants. This calculation reflects that the total payout is spread over fewer anticipated years. This principle applies to both immediate annuities, where payments typically commence within one year of purchase, and deferred annuities, where payments begin at a future, pre-determined date. The payout amount for deferred annuities will still be determined by the annuitant’s age when the deferral period ends and payments commence.

Age and Annuity Suitability

An individual’s age and current life stage are important factors in determining the suitability of different annuity types and their features. For those in their earlier career stages, such as individuals in their 30s or 40s, deferred annuities can be a suitable option for long-term retirement planning. These contracts allow for tax-deferred growth of contributions over many years, with income payments commencing later in life, aligning with future retirement needs.

As individuals approach or enter retirement, typically in their 60s or 70s, immediate annuities often become more relevant. These products provide a predictable income stream soon after purchase, valuable for covering immediate living expenses or supplementing other retirement income sources. The choice between features like guaranteed living benefits, which provide income for life, versus death benefits, which pass remaining value to beneficiaries, also varies with age. Younger individuals might prioritize death benefits, while older annuitants may focus more on maximizing guaranteed income.