Annuities and longevity appear more closely connected than previously understood, according to recent research from the National Bureau of Economic Research. A working paper finds that retirees who convert their savings into guaranteed monthly income through annuities are roughly 3% less likely to die within a decade than those managing withdrawals on their own. The difference is modest, yet the implications for retirement planning are significant. The study adds a new dimension to the ongoing debate over annuities and longevity, linking financial structure to health outcomes in ways economists had only theorized before.
The researchers studied roughly 600,000 retirees in Chile, where retirement policy forces workers to actively choose how to transform their savings into income. Over a five-year window, annuity buyers showed a mortality rate about 2.5% lower, and the gap widened to roughly 3.6% over ten years.
Annuities and Longevity: What the NBER Study Found
The study, titled The Effect of Annuities on Longevity, was authored by Borja Larrain of Pontificia Universidad Católica de Chile, Alessandro Previtero of Indiana University, and Felipe Severino of Dartmouth. Using individual-level administrative data, the team tracked annuitization decisions and mortality outcomes across two decades.
What makes the finding compelling is the instrumental variable design. Since Chilean retirees are more likely to choose annuities after poor stock-market returns, the researchers could isolate causal effects rather than simple correlation. As a result, the 3% longevity gap is not just a reflection of healthier people choosing annuities.
That matters because the “annuity puzzle” has long puzzled economists: annuities ought to insure against outliving savings, yet most retirees in developed countries avoid them. The new research suggests the cost of avoidance may extend beyond finances.
Chile’s Retirement System Drives Annuity Adoption
Chile operates on a defined-contribution pension model, unlike the United States, where most income comes from Social Security plus personal savings. Chilean employees build their nest egg in individual accounts managed by private pension funds, then choose at retirement how to draw it down.
At retirement, the choice is typically between buying an annuity, taking market-based withdrawals, or a hybrid of the two. Chile’s centralized marketplace makes annuity comparison straightforward, and that ease has produced one of the world’s most active annuity markets.
More than 60% of Chilean retirees choose annuities. In contrast, fewer than 5% of US retirees do the same, according to the Center for Retirement Research at Boston College. The gap is not primarily about preferences; it reflects structural differences in how each system presents the choice.
Why Financial Stability May Extend Life
The researchers offer two main explanations for the link between annuities and longevity. The first is stress. Retirees relying on market-based withdrawals often worry about outliving their savings, particularly during downturns, and sustained financial anxiety carries well-documented physical health costs.
The second is behavioral. People with assured income tend to invest more in preventive care, nutrition, and medical checkups rather than skimping to preserve a shrinking balance. “Many people fear running out of money more than they fear death,” Angie Welsh, founder and president of My Annuity Agents, told researchers. She notes that the stress of uncertainty has tangible negative effects on mental and physical well-being.
Retirees managing their own withdrawals can find themselves “living and dying with every market spike and dip,” constantly recalibrating spending against short-term market moves. Consequently, many hold back on healthcare and quality-of-life spending that would genuinely benefit them. The annuities and longevity findings reinforce what retirement researchers have long suggested about stress and health. A predictable income stream flips that dynamic; it lets retirees spend with confidence rather than fear.
How US Retirees Face the Same Decumulation Problem
The US retirement landscape has shifted dramatically over the past 40 years. Traditional defined-benefit pensions have largely disappeared, leaving most workers to stitch together Social Security plus whatever they saved in 401(k)s and IRAs. According to Athene’s 2026 Retirement Outlook, average US earners now derive less than 10% of overall wealth from pensions, and nearly 70% of 401(k) dollars for workers in their 50s sit in equities, exposing pre-retirees to market shocks at the worst possible time.
That structural gap is where the research on annuities and longevity gets practical. Lifetime income products can restore the predictability that defined-benefit pensions once provided. Our coverage of the retirement tax trap facing US retirees explores the flip side of the decumulation challenge, where unmanaged withdrawals create tax problems that compound over decades.
Some financial planners now suggest using annuities to cover basic living costs, including housing, food, and healthcare, while leaving the rest of the portfolio invested for growth. This approach aims to eliminate the pressure to sell equities during downturns just to cover rent.
Annuities and Longevity: Trade-Offs to Weigh
No financial product is friction-free, and annuities are no exception. They typically restrict access to principal once purchased, which limits liquidity for emergencies. Fixed annuities can also lose purchasing power to inflation, especially over the long horizons that longevity research implies.
Per U.S. News’ 2026 guide to annuities, updated regulations now require agents to prioritize client interests under the NAIC’s best-interest standard. Still, the product remains complex, and fees can vary widely across carriers. Consumers should check financial strength ratings from agencies like AM Best (A- or higher) before committing.
“Annuities are often dismissed because of their complexity,” Welsh notes. “But there is only one number that matters: what is the amount deposited into your checking account every month for the premium you provide?” That framing strips the product back to its core function: predictable income.
The 2026 Annuity Market in Context
Demand for guaranteed income is rising across the US retirement system. More 401(k) plans are adding in-plan annuity options, and insurers are responding with products designed for modern defined-contribution participants. Fixed annuity rates have stayed competitive, with top multi-year guaranteed annuities (MYGAs) offering yields meaningfully above bank CDs through early 2026.
For context on broader financial literacy efforts, see our coverage of NatWest’s workplace financial education launch, which reflects how employer-led programs are trying to close the knowledge gap. Separately, our reporting on IRS enforcement action against taxpayers underscores why retirement income planning is not optional anymore; the consequences of winging it are real and growing.
None of this implies annuities are a universal answer. The research on annuities and longevity simply suggests that predictable income carries benefits beyond the numbers on a statement.
Final Word on Annuities and Longevity
The connection between annuities and longevity does not make annuitization a required move. Rather, it adds a data point most retirement conversations overlook: the stress of managing decumulation on your own may carry a measurable health cost over time.
For retirees weighing the decision, the sensible first step is to calculate the income gap between expected Social Security, any pension, and baseline expenses. If a gap exists, annuitizing just enough to cover essentials, rather than the entire portfolio, often captures the stability benefit without giving up flexibility. Speak with a fiduciary financial advisor before committing, especially given the permanence of most annuity contracts.
Ultimately, how retirees convert savings into income may matter as much as how much they saved. That single insight, pulled from the annuities and longevity research, is worth the attention of anyone nearing retirement.