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  • Writer's pictureHarry N. Stout

324- Brief History of Annuities: A Centuries Old Tradition

In support of Annuity Awareness Month, we thought you might want a quick history of the product. What you will find is that annuities go back centuries and provided income to people of many nations. In this post, I will give you a brief ride through annuity history and highlight key events and developments. You will see that these products have existed in some form or another for hundreds of years.

The Beginning

The origin of today's annuity products dates back to Roman times. In the financial history books, the first annuities can be found referenced to the time before Christ and played a role in the Roman Empire. The word annuity has a Latin basis and stems from the word, “annua”, meaning for payments made yearly or recurring annually. Roman soldiers received payment in the form of annuities for their military service after their active duty ended.

Annuities are also mentioned in the Middle Ages and were used by feudal lords to help cover the cost of warfare. They were funded by individuals who were offered large amounts of cash that went to the surviving investor in the form of tontines. Tontines were named for their creator, a Neapolitan financier, named Lorenzo Tonti. Tontine arrangements were eventually outlawed because they encouraged the death of investors so that their interests would be redistributed among the remaining investors.

Annuities made their initial appearance in the American colonies in the late 1700s as a means for religious groups to provide a secure retirement for ministers and their families. They were set up such that the sponsoring church promised to pay a lifetime income in return for contributions made by the ministers. At the time of the War of 1812, annuities finally became available to the public as a private financial instrument when a Pennsylvania insurance company began to issue individual annuities.

The financial turmoil and uncertainty of the Great Depression of the 1930s helped annuities gain popularity. The uncertain economic environment triggered a huge demand for annuities by individuals and families that were concerned that their bank would become insolvent. To many investors it became apparent that life insurance companies offered more financial security and stability than their banking institutions. These people wanted their future incomes to be as secure as possible.

At the same time, the U.S. government wanted the public to become more financially aware in an effort to manage during this uncertain time. The government's goal was to incent individuals to save. The concern spawned the creation of corporate-sponsored retirement annuities, or pension plans, that energized the individual annuity industry. As part of this legislation, tax deferral was given to qualified retirement plans including annuities. The popularity of annuities continued to grow as individuals took advantage of the tax-deferred nature of these products.


In 2022, annuity products are gaining in popularity as they are included as an option within more and more 401(k) plans and are being recognized by individual consumers as the only source of guaranteed lifetime income to fund their lengthening life expectancies. Over $250 billion of individual annuities are purchased by consumers each year with a similar amount purchased by employees as part of their benefits package. If you have not looked into annuities as a tool to use in your lifetime income planning, there could not be a more opportune time than today to do so.


Looking to learn more about annuities and get answers to your key questions? The FinancialVerse: Today’s Annuity Products - A Tool to Create Protected Lifetime Income explores the many benefits of annuities and how they can be a valuable addition to your financial plan.

Ready to improve the quality of your financial life? Harry is the host of a new podcast from the FinancialVerse where he shares practical ways to relieve money stress and anxiety. Each 7 to 10-minute episode is designed to fit into your busy lifestyle. Subscribe today or just ask Alexa or Siri to play the FinancialVerse podcast.

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