December 1, 2025

Behavioral barriers to buying annuities (and how to overcome them)

Most individuals value financial security, yet many struggle to commit to annuities. More often than not, behavioral barriers rather than the products themselves create the greatest obstacles. Even those who are financially savvy often hesitate to move forward with annuities.

“Fortunately, annuities are seeing greater use and acceptance, and the industry is doing a better job of explaining how they work. However, more needs to be done. These products can help drive accumulation, manage risk, and provide income in retirement, but only if clients have a good understanding of how they work,” explained David Byrnes, SVP and chief distribution officer at Security Benefit.

By recognizing the behavioral barriers that truly drive hesitation, annuity advisors and other related professionals can reframe conversations, build confidence, and guide clients toward decisions that ultimately support their long-term financial goals and security.

The most common behavioral barriers

In many cases, individuals resist annuities because of psychological and informational roadblocks, not product mechanics. Here’s a closer look at the behavioral barriers that cause many of them to hold back:

Lack of understanding

Put simply, many clients don’t know what annuities are. “They don’t understand how they work or the benefits they provide. They believe they’re complex in nature and therefore avoid them altogether,” said Mark Milbrod, vice president of ASG, an AmeriLife company.

There are plenty of annuities with features such as multiple riders and different payout options that are often overwhelming to those who are unfamiliar with them.

Negative media reputation

Unfortunately, mainstream financial firms often make negative and inaccurate blanket statements about “all” annuities. “Let’s be honest. A simple headline, such as “Don’t Buy Annuities,” will stick out in someone’s mind,” explained Milbrod.

Choice overload

Annuities are not created equal. In fact, there is no shortage of options on the market.

Some are designed for growth, while others are designed to guarantee income. Confusing the two can pose additional hesitation to act on these products.

Fee myths

“One of the biggest pushbacks on annuities has to do with fees. Many people hear or believe that all annuities have excessive fees. However, this is simply not true,” said Aaron Brask, Financial Planner at Aaron Brask Capital. Many annuities offer better terms than comparable products and effectively embed negative fees.

Comfort with traditional investments

People are used to traditional investment models, such as stocks, bonds, and mutual funds. They tend to stick with what they know.

“Traditional investment philosophies focus on access to funds and are generally liquid. Income annuities, for example, do not rely on growth or account values that people are familiar with. They’re designed to provide income and not necessarily returns,” explained Milbrod.

How to turn barriers into opportunities

When clients seem resistant to annuities, what they’re often looking for is reassurance. Every concern, whether it be about product complexity, fees, or anything else, can be treated as an opportunity to inform clients and help them feel more confident.

Focus on client education

“The key to resolving some of these barriers is education. Taking a deeper dive into what an annuity contract can accomplish for their particular needs is so important,” said Milbrod. For example, if an individual’s concern is longevity and they fear running out of money, an income annuity can serve as a great tool to lessen those fears.

Additionally, if they understand that an annuity is a “pension payment,” not unlike an old-fashioned company-sponsored plan or Social Security, for that matter, their negative perceptions can quickly change.

Begin with basic products

“Starting with simpler products, such as a 5-year fixed annuity in one’s 30s or 40s, can help build confidence and familiarity with how annuities work,” said Tim Walsh, CEO at American National Insurance.

When you’re trying to get someone to understand and appreciate annuities, variable annuities, hybrid annuities, and multi-year guaranteed annuities, for example, can be overwhelming. Initially, stick to basic products that offer predictable growth and low risk.

Crunch the numbers

Brask touched on the importance of doing the math so that clients understand what they’ll get if they invest in an annuity. “Annuites often offer guaranteed returns that are more competitive than comparable products,” said Brask.

By breaking down project income, guaranteed growth, and even potential tax benefits, clients can visualize the tangible value of an annuity. Numbers may alleviate some uncertainty and make it easier for individuals to move forward.

Leverage AI and technology

AI-driven tools can provide personalized recommendations based on individual goals, reducing complexity. Furthermore, digital calculators and planning platforms can allow clients to visualize guaranteed income alongside other assets. Additionally, chatbots and virtual assistants may help deliver real-time answers, improving transparency and confidence.

“These technologies work best when paired with guidance from a financial professional, ensuring that decisions remain informed and personalized. Technology streamlines the process, but having a human in the loop is essential for final decision-making,” explained Tom Buckingham, chief growth officer at Nassau Financial Group.

The post Behavioral barriers to buying annuities (and how to overcome them) appeared first on Insurance News | InsuranceNewsNet.