Here are some valid reasons to not use an annuity:
- People simply don't have enough wealth to purchase an annuity
- People who need more liquidity than an immediate lifetime annuity would provide with 'just' its ongoing monthly income payments
- People who simply have enough guaranteed income already from their Social Security payments or pensions to cover their (essential) needs.
- People who are so affluent that they just don't need the income guarantees that annuities provide, and instead can afford to take the 'risk' of remaining invested in volatile markets and the long-term upside that can still provide.
- People in poor health and aren't actually planning for a long retirement in the first place (which both makes the lifetime annuity inappropriate given the elevated risk of death, and often not necessary because a shorter life expectancy means current retirement savings may be more than sufficient).
At the same time, here are some invalid reasons not to use an annuity:
- Opposition to high-fees/high-commissions (which in practice are coming down or being eliminated with the rise of fee-based annuities)
- A fear of losing assets currently in managed accounts (but in the end, one who annuitizes and can make it through retirement in any form, is better than one who keeps assets in the investment accounts... until end out spending it down to $0 anyway!?)
- A fear of lost liquidity (in practice, partial annuitization is often also quite effectively, especially when using a deferred income annuity or a QLAC in a retirement account)
- Waiting for better rates (yes, interest rates are low, but annuitization still provides a boost in the form of mortality credits over the interest rates in any environment, and, in practice, waiting for rates to rise amounts to trying to "market time" interest rates... which as the past decade has shown, is just as hard to do as timing the stock market itself?).