Retirees who convert their savings into guaranteed monthly income through annuities may live longer, according to new research.
A working paper from the National Bureau of Economic Research found that annuity holders were roughly 3% less likely to die over the following decade than retirees managing their own withdrawals. The gap is modest, but it points to a meaningful link between financial security and overall health.
The study examined data on approximately 600,000 retirees in Chile, where the retirement system requires most workers to decide how to convert their savings into income. Over five years, annuity users showed around 2.5% lower mortality; over ten years, that difference grew to roughly 3.6%.
Why Chile stands apart
While U.S. retirement income typically combines Social Security with personal savings, Chile operates a primarily defined-contribution system. Most workers accumulate savings in individual accounts managed by private pension funds. At retirement, they must choose between purchasing a guaranteed annuity or opting for market-based withdrawals, with some hybrid paths available. Chile also maintains a centralized marketplace that streamlines annuity shopping.
More than 60% of Chilean retirees select annuities, compared with fewer than 5% of U.S. retirees, according to the Center for Retirement Research at Boston College. Those who skip an annuity in Chile enter a government-run withdrawal system that distributes savings in scheduled installments.
What the longevity link might reflect
Researchers suggest a few possible explanations. First, financial stress plays a role. Retirees drawing from markets face ongoing uncertainty about whether their savings will hold out, particularly during downturns. Annuities deliver a reliable paycheck each month, which may lower anxiety tied to financial unpredictability.
Second, those with guaranteed income may be more inclined to spend on health — routine checkups, preventive care, and ongoing medical needs — rather than hoarding savings against the risk of outliving them.
“Many people fear running out of money more than they fear death,” said Angie Welsh, founder and president of My Annuity Agents. “The financial stress that comes with the unknown has real negative impacts on both physical and mental well-being.”
Self-directed retirees can find themselves emotionally tied to market swings, Welsh said, adjusting their sense of financial security with every uptick and downturn. Without a guaranteed income, the challenge of deciding how much to withdraw can feel daunting. Even with a plan in place, lingering doubts about whether the money will last can create persistent anxiety during volatile periods.
That stress can alter behavior. Without steady income, some retirees cut back on health care, nutrition, and social spending to stretch their savings further.
A guaranteed income stream, by contrast, can foster stability that makes it easier to actually use savings. “The simplicity of a lifetime income account can provide a feeling of security that improves their mental well-being and empowers them to spend money on things that increase their longevity,” Welsh said.
What this means for U.S. retirees
Chile’s system is distinctive, but the underlying question is familiar: how to convert savings into income that lasts as long as you do.
In the U.S., that burden increasingly falls on individuals. Traditional pensions offering guaranteed lifetime income have largely vanished, leaving most retirees to piece together Social Security with personal savings.
The NBER findings do not make annuities mandatory, but they underscore an element many retirees undervalue: income predictability.
“The purpose of annuities is to bring stability and to provide longevity insurance,” Welsh noted, not to maximize returns.
Some advisors suggest using annuities to cover essential costs — housing, food, health care — while keeping the remainder of the portfolio invested for growth. The aim is a financial foundation that removes pressure to sell assets during market declines.
Tradeoffs remain. Annuities typically restrict access to funds once purchased, and fixed payments can erode in real terms if inflation picks up.
“Annuities are often dismissed because of their complexity,” Welsh said. “But there is only one number that matters: What amount is deposited into your checking account every month for the premium you provide?”
How you structure your retirement income may matter as much as how much you have saved. Reducing financial uncertainty could be about more than peace of mind — it may also influence how long you live.