President Trump’s shifting tariff policies are creating financial uncertainty that could directly impact the annuity market. Sudden announcements, rapid reversals and unclear deadlines are making it harder for investors and retirees to plan with confidence.
President Donald Trump’s tariff policy is having repercussions on every corner of the markets. The on-again, off-again tariff decisions, pauses and ever-changing deadlines can make it more challenging for many Americans to assess their financial situation and understand the potential impact.
Trump announced reciprocal tariffs on April 2 on more than 180 countries and territories, a day which he called “Liberation Day.” Then, on April 9, the president announced a 90-day pause on these tariffs, except for those on China. Meanwhile, uncertainty continues to wreak havoc on global financial markets.
As of today, it remains unclear what will happen after the 90-day pause and whether the Trump administration will implement any, or all, of the tariffs.
Trump’s tariff announcements “exceeded economist and market expectations, sending the S&P 500 down over 10% in the two days immediately following,” according to a BlackRock report. “And while markets rallied following the April 9th announcement of a 90-day pause of reciprocal tariffs (excluding China), significant uncertainty remains.”
This uncertainty has given rise to significant concerns for Americans, as they see their savings and retirement plans erode.
And now, many wonder whether these tariffs could also impact annuities. Navigating annuity options can already be complex, and the added ambiguity around tariffs can add another layer of difficulty. Retirees also need to weigh in key factors such as risk tolerance, income needs and long-term goals.
“Right now, the predominant sentiments faced by investors include fear and uncertainty as market volatility continues to spike,” said Rona Guymon, senior vice president of Nationwide Annuity Distribution. “While no one can predict how this might impact the annuity industry over the long term, what we can say is annuities provide a measure of certainty in an uncertain environment.”
Tariffs Could Impact Annuity Sales
In 2024, annuity sales totaled $432.4 billion, representing a 12% year-over-year increase, marking the third consecutive year of record-high sales, according to LIMRA’s U.S. Individual Annuity Sales Survey.
Now, tariffs might dampen the momentum.
Steve Sexton, CEO of Sexton Advisory Group, stated that historically, market volatility has led to declines in annuity sales.
With the 90-day pause on new tariffs, Sexton noted that we can expect general market unpredictability to slow down the purchase of variable annuities, which are considered higher-risk investments.
“Cautious investors will be less likely to take on this risk if they anticipate uncertainty in the stock market,” Sexton added.
Effected Annuities
Fixed annuities guarantee a fixed interest rate over a set period and can offer predictable growth and security, making it a comfortable option for more risk-averse retirees.
Fixed Annuities
It is worth noting that, on the downside, fixed annuities also lack liquidity and inflation protection.
As this is a longer-term view, short-term volatility will have minimal impact, unless your annuity’s guaranteed period has expired, said Tony Steuer, CLU, LA, CPFFE, Financial Preparedness Advocate at tonysteuer.com.
“In this case, the interest rate for the next year will depend on the overall interest rate environment, which is partially driven by the Fed rate,” he said.
Fixed Index and Variable Annuities
Indexed annuities, also known as fixed index annuities, typically offer returns that are tied to the performance of a market index. These contracts have two main stages: the accumulation phase, during which you save and earn interest, and the annuity phase, when you begin receiving payments.
As for variable annuities, they allow your money to be invested in several ways while it grows on a tax-deferred basis. While this offers the potential for higher future payments, unlike other annuity types, poor investment performance can also lead to losses.
As Steuer noted, both fixed index and variable annuities have an investment component, which could make them riskier in uncertain or volatile times, such as the current one.
“If the account allocation is mostly in stocks (whether it’s an index or mutual funds), the volatility in the market driven by tariffs will have a direct impact on the accumulation value,” he said.
As tariffs have mainly driven down the stock market, the return rates will be lower. Meanwhile, he added that if the investments are primarily in bond indexes or funds, then the impact will be driven by the bond market, which tariffs have negatively impacted.
“Indexed funds also have participation rates and caps, which tariffs may negatively impact,” he said.
Accumulation Phase
Another factor to consider when assessing whether tariffs could impact annuities is the accumulation period.
As tariffs are currently causing market volatility, this will impact the accumulation of variable and fixed index annuities.
“They will possibly have a long-term impact on the accumulation of a fixed annuity, depending on the interest rate guarantee period. If the payout is guaranteed, then there will be no impact,” said Steur.
Inflation Trajectory
Another factor that could impact consumers is that many experts, including Federal Reserve Chair Jerome Powell, argue that tariffs are inflationary. In turn, this could also affect annuities, making them riskier, some experts argue.
While the Fed started cutting interest rates in September 2024, it is now unclear whether it will continue to do so, further putting pressure on consumers.
“We don’t know what’s going to happen with inflation. High inflation makes annuities risky,” said Robert Persichitte, CPA, CFP, CFE, affiliate professor at Metropolitan State University of Denver and financial planner at DeLAGify Financial.
As he further explained, tariffs are inflationary and due to their impact on global financial markets, we may see high inflation, high unemployment and high interest rates.
“In this terrible scenario, getting an annuity today might lock in payouts that don’t keep up with inflation. Even if the payments are guaranteed, what you can buy with them isn’t,” he added.
That’s why it’s also important to understand the guarantees on your annuity contract.
As Steuer noted, if your contract has market exposure, continue to monitor the annuity.
“However, it’s important to keep in mind that these are long-term investments and that it’s not clear the long-term impact of tariffs,” he added.
Bottom Line
In the current economic landscape, the only certain variable is uncertainty, which is likely to persist for some time. Several factors are up in the air, including inflation, the Fed’s direction and the timing of the tariffs’ implementation.
These can compound the anxiety felt by investors as they fear running out of money in retirement.
“This is where working with a trusted advisor is going to be beneficial for investors,” Nationwide’s Guymon said. “A good advisor can help savers understand if an annuity may be the right fit for their needs – and ensure they stay focused on long-term goals.”
Editor Norah Layne contributed to this article.
