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The US annuity market has done something it had never done before: 4 consecutive years of record sales, closing 2025 at $464.1 billion, up 7% on the year. The momentum carried into 2026. The second quarter brought $121.2 billion, the 11^th straight quarter above $100 billion, and first-half sales of $228.7 billion set a new first-half record, according to LIMRA¹. Its January outlook expected 2026 sales to stay above $450 billion, on the assumption that interest rates would drift gradually lower. That assumption has not held. A market that sells nearly half a trillion dollars of guaranteed-income product a year is worth understanding on its own terms, and worth stress-testing, because the conditions that built it are already changing underneath it.

This piece does two things. It walks through the demand engine, the demographic, rate, and distribution forces that pushed sales to this level. Then it pressure-tests the market against the 2 scenarios most likely to strain it: rates moving sharply, in either direction, and equity markets turning.

Three forces built this market, and they reinforce each other rather than acting in isolation.

Sitting on top of these is the growth driver the industry is now most excited about: in-plan annuities. The SECURE Act of 2019 gave plan sponsors a safe harbor for selecting an annuity provider and made lifetime-income options portable between plans, and SECURE 2.0 in 2022 removed further barriers, including raising the limit on qualifying longevity annuity contracts. Together they make it easier to embed annuities inside 401(k), 403(b), and other defined-contribution plans, letting plan sponsors offer participants a way to turn accumulated savings into predictable income without leaving the plan. This matters because it changes the point of sale. Instead of a retiree seeking out an annuity through an adviser, the annuity becomes a default-adjacent option inside the vehicle where the money already sits. If in-plan adoption follows the path the industry expects, it broadens the funnel from people who actively shop for guaranteed income to the far larger population of ordinary plan participants.

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A record-setting run invites the question of what could interrupt it. Two scenarios matter most, and the honest answer is that the market is more resilient to one than the other.

LIMRA's 2026 outlook was built on gradual rate cuts, and the environment has moved the other way. On September 16, 2026, the Federal Reserve raised the federal funds rate by a quarter point, to 3.75% to 4.00%, citing inflation that remains elevated. LIMRA's second-quarter results already credited rising rates for part of the demand, with crediting rates climbing during the quarter. So the live question for 2026 is no longer only what falling rates would do. It is what rising rates do, and the two directions hurt in different places.

Rising rates help new sales. Higher crediting rates make fixed-rate deferred annuities competitive with certificates of deposit again, and higher payout rates make income annuities more attractive; single-premium immediate annuity sales hit a record $4.1 billion in the second quarter. The strain falls on the in-force book. Contracts written at lower rates start to look stale next to new offers, and much of the fixed-rate business sold during the 2022 to 2024 boom carried short guarantee periods, so a growing volume of it is reaching the end of its surrender-charge period and is free to move. If policyholders surrender to chase better rates, carriers either raise renewal rates and give up margin, or let the money go and sell bonds that have lost market value to pay it out. Market value adjustments soften that hit, but they do not remove it.

The falling-rate case has not gone away; it has only been deferred. If rates fell fast, the effect would not be uniform across the product shelf. Fixed-rate deferred annuities (FRDAs), whose appeal rests almost entirely on crediting a rate better than a Certificate of Deposit (CD), are the most exposed. Their sales were already down 10% in the first half of 2026, before any cuts arrived. A rapid fall would sharpen that, because the moment a fixed annuity's credited rate stops clearly beating cash alternatives, the reason to buy one weakens. On the carrier side, falling rates squeeze new-money yields against guarantees written when rates were higher, compressing margins on the very products that led the boom.

The design point that matters here is that the modern annuity shelf is no longer mostly fixed-rate. Indexed and buffered products, RILAs and FIAs, do not sell on a headline crediting rate in the same way. They sell on equity-linked upside with downside protection, which holds appeal across a wider range of rate environments. That is precisely why the mix has shifted toward them, and why a rate decline would slow the market rather than stall it. The exposure is concentrated, not systemic.

This is the scenario the shift toward indexed products has quietly made more important. RILAs and FIAs are attractive in part because they promise participation in equity gains with a floor or buffer on losses. That promise is easiest to keep, and cheapest for the carrier to hedge, in calm or rising markets. The indexed boom matured against a largely benign equity backdrop, and that backdrop has only strengthened: LIMRA credited record equity markets, including new highs in June 2026, for second-quarter RILA and variable annuity demand.

A sharp, sustained equity downturn tests the model on 2 fronts. For buyers, the appeal of a buffered product is real precisely in a downturn, so demand for protection can actually rise, which is why the industry likes to say annuities do well in volatility. The strain is on the carrier's side. The options and hedges that fund the buffers become more expensive and harder to manage when volatility spikes, which forces carriers to cut caps and participation rates on new business. A less generous product is a less compelling one, and renewal-rate disappointment on in-force policies can dent the reputation of the whole category. The risk is not that demand collapses in a downturn. It is that the terms carriers can afford to offer deteriorate at the same moment buyers most want the protection, narrowing the gap between what is promised and what is delivered.

The deeper vulnerability sits behind both scenarios and connects to the wider structural story in the sector. The private capital that expanded carrier capacity did so partly by investing the backing assets in higher-yielding, less liquid holdings. That model is comfortable while markets are orderly. A correlated move, a sharp rate shift combined with credit or equity stress, would test asset-liability matching and liquidity at exactly the point when new sales economics are also under pressure. Rising rates make this sharper, because surrenders would have to be funded by selling assets that are both less liquid and worth less than when they were bought. No single one of these forces is likely to break the market. A correlated combination is the tail worth watching.

The annuity machine is running on a genuine, durable engine. Peak 65 is real, the retirement wave behind it extends well past 2027, and the pension gap it exposes is precisely what these products are built to fill. In-plan annuities could extend the runway well beyond the current retiree cohort by meeting savers inside the plans where their money already lives. This is a structural demographic market finally being served by product design that fits it.

The fragilities are narrower and more specific than the headline sales figure suggests. Rate-sensitive fixed products are exposed in both directions: falling rates erode their appeal, and rising rates, now the live case, test the in-force book through surrenders. The market's shift toward buffered products has reduced that dependence. Indexed products are exposed to equity stress through the cost of the protection they promise. And the asset strategies funding carrier capacity carry a correlated-stress tail that supervisors are already scrutinizing. For actuaries, the useful frame is that the demand side of this market is about as solid as demand gets, and the risks that deserve attention live on the supply side, in pricing discipline, hedging cost, and the assets standing behind the guarantees.