Almost any adult who lives in the United States, has a valid Social Security Number or ITIN, and can meet an insurer’s minimum premium can buy an annuity. The practical question of who can buy an annuity is really a question of who gets turned down: applicants outside the insurer’s age window, people without lawful U.S. residency or a valid tax ID, buyers who cannot demonstrate mental capacity to sign a contract, and applicants whose finances fail the suitability review. Each of these is a separate gate, and an application has to clear all of them.
Age Limits for Buying an Annuity
Every insurance company sets its own age window. The minimum is typically 18, matching general contract law, though some insurers set the floor at 21 for certain products tied to retirement accounts.
The ceiling matters more, because it is where older buyers actually get blocked. For deferred fixed annuities, most major carriers cap new applications at age 85. Immediate annuities, which begin paying income right away, often accept buyers in their 80s and sometimes beyond, since the shorter expected payout period is already priced in. Variable and indexed annuities fall somewhere between, depending on the insurer.
Age interacts with retirement-account rules, too. If you hold the annuity inside an IRA or 401(k), you must begin required minimum distributions by April 1 of the year after you turn 73, rising to 75 starting January 1, 2033.1Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) A long-deferred annuity purchased late in life inside one of these accounts can conflict with the RMD schedule, since deferred annuities are designed to postpone payouts rather than distribute them yearly.
Citizenship, Residency, and Tax ID
You need a clear legal presence in the country. Most insurers limit sales to U.S. citizens or lawful permanent residents with a valid Green Card. The application requires a Social Security Number or Individual Taxpayer Identification Number so the insurer can report earnings and distributions to the IRS.
Foreign nationals living outside the United States are generally ineligible. Under the USA PATRIOT Act, insurers must collect your name, address, date of birth, and identifying documents, then check that information against government watchlists.2Financial Crimes Enforcement Network. USA PATRIOT Act Without a domestic address or valid tax identification number, the application will be rejected at the identity-verification step.3FFIEC. FFIEC BSA/AML Assessing Compliance with BSA Regulatory Requirements – Customer Identification Program
Mental Capacity and Legal Representatives
An annuity is a binding financial agreement, so the buyer must have the mental capacity to understand its terms, risks, and benefits. An insurer can determine that someone with advanced cognitive impairment or dementia cannot legally consent to the purchase.
A legal representative acting under a durable power of attorney or a court-ordered guardianship can buy an annuity on someone else’s behalf. The insurance company will require notarized documentation proving the representative’s authority before processing the application. Without clear evidence of either mental capacity or authorized legal representation, the insurer will refuse to issue the contract.
Financial Suitability
Even when every other requirement is met, an insurer can decline the sale if the annuity does not fit your financial situation. Most states have adopted suitability rules based on the NAIC’s Model Regulation #275, which requires insurance agents to evaluate your income, liquid net worth, existing financial obligations, and investment goals before completing a sale.4National Association of Insurance Commissioners. Model Law 275 – Suitability in Annuity Transactions The central question is whether buying the annuity would cause you unreasonable financial hardship, for example by tying up so much of your savings that you cannot cover an emergency.
The regulation does not set a single percentage of assets you must keep liquid. Insurers assess whether you can maintain your usual standard of living after paying the premium. If the compliance review finds that the purchase would leave you without adequate cash reserves, the compliance department will block the transaction.
Variable annuities are classified as securities, so an additional standard applies. Broker-dealers recommending variable annuities must comply with the SEC’s Regulation Best Interest, which took effect June 30, 2020 and requires firms to act in the retail customer’s best interest when making a recommendation.5U.S. Securities and Exchange Commission. Frequently Asked Questions on Regulation Best Interest FINRA Rule 2111, which previously governed suitability for securities recommendations, now applies only to transactions not covered by Regulation Best Interest.6Financial Industry Regulatory Authority. FINRA Rule 2111 – Suitability
Minimum Premium
Each insurer sets its own minimum, and the amount varies widely by product type. Fixed annuities can start as low as $1,000 at some carriers, though many require $5,000 or more. Variable and indexed annuities typically require between $5,000 and $25,000. Immediate annuities tend to have the highest minimums, often in the $25,000 to $100,000 range, because they begin paying income right away. Deferred annuities that accept ongoing contributions sometimes allow initial deposits as low as a few hundred dollars.
These are carrier-specific thresholds, not regulatory requirements. If you cannot meet one insurer’s minimum, a different company may take you. A very small premium produces a very small income stream, though, so the practical value of an annuity bought with a minimal deposit is limited.
Buying Through a Trust or Business
Annuities are not limited to individual buyers, but the tax consequences change significantly when the owner is not a living person. Under federal tax law, if an annuity is held by a corporation, partnership, or certain trusts, the contract loses its tax-deferred status entirely. The annual earnings are taxed as ordinary income to the owner each year rather than growing tax-deferred until withdrawal.7Office of the Law Revision Counsel. 26 U.S. Code 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
Tax deferral is preserved when the annuity is:
- Held by a trust acting as an agent for a natural person, such as a revocable living trust where a named individual is the beneficial owner.
- Inside a qualified retirement plan, including a 401(k), 403(b), or IRA.
- An immediate annuity purchased with a single premium that begins payments within one year.
- Acquired by an estate through a decedent.7Office of the Law Revision Counsel. 26 U.S. Code 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
If you are looking at holding an annuity through an irrevocable trust or a business entity, confirming that the trust qualifies as an agent for a natural person is what preserves the tax benefit that makes annuities attractive in the first place.
Qualified Versus Non-Qualified Annuities
How you fund the annuity, with pre-tax or after-tax money, determines a separate set of rules that shapes whether the purchase makes sense for you.
A qualified annuity sits inside a tax-advantaged retirement account such as an IRA, 401(k), or 403(b). Contributions are typically made with pre-tax dollars, giving you a deduction now, and you owe ordinary income tax on the entire amount when you withdraw. Qualified annuities are subject to IRS contribution limits for the underlying account and require you to begin taking RMDs at age 73, rising to 75 in 2033.1Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)
A non-qualified annuity is purchased with after-tax dollars outside of a retirement account. There are no IRS contribution limits; you can invest as much as the insurer will accept. On withdrawal, only the earnings portion is taxed as ordinary income, and your original investment comes back tax-free. Non-qualified annuities have no RMD requirement, giving you more control over when you take distributions.8Internal Revenue Service. Publication 575, Pension and Annuity Income
Both types grow tax-deferred while the money stays in the contract, and both trigger a 10% federal tax penalty on the taxable portion of any distribution taken before age 59½.7Office of the Law Revision Counsel. 26 U.S. Code 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts That early-withdrawal cost, along with any surrender charges the insurer imposes in the first several years of the contract, is worth weighing against your access to other liquid savings before you commit to a premium.