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Retirees who turn their savings into a guaranteed monthly income via annuities may live longer, according to new research.

A working paper from the National Bureau of Economic Research, or NBER, finds that folks who choose annuities are about 3% less likely to die over the next decade than those managing withdrawals on their own. It’s a small difference, but it could say a lot about how financial security shapes our overall well-being.

The study analyzed data on roughly 600,000 retirees in Chile, where the retirement system forces most workers to choose how to turn their savings into income.

Over five years, annuity users had about 2.5% lower mortality; over 10 years, that gap widened to roughly 3.6%.

Why Chile offers a unique case

Unlike the U.S., where retirement income is a mix of Social Security and personal savings, Chile relies primarily on a defined-contribution pension system. Most workers build retirement savings in individual accounts managed by private pension funds rather than through a traditional government pension.

At retirement, they must choose how to receive that money — typically by buying a guaranteed annuity or opting for market-based withdrawals (with some hybrid options available). Chile also has a centralized marketplace that makes annuities easier to compare and purchase.

That structure has helped create one of the more active annuity markets in the world. More than 60% of Chilean retirees choose annuities, compared with less than 5% of U.S. retirees, according to the Center for Retirement Research at Boston College.

Part of the reason that annuities are so popular in Chile is that the alternative is limited. Retirees who don’t buy an annuity instead enter a government-run withdrawal system that pays out savings in installments.

What may explain the link to longevity

So why would the way you take your money in retirement be linked to how long you live?

The researchers point to a few possible explanations. One is financial stress: Retirees who rely on market-based withdrawals may face more uncertainty about how long their savings will last, especially during downturns. Annuities, by contrast, provide a steady paycheck. That stability may reduce anxiety and the mental strain tied to financial uncertainty.

The second explanation is that people with guaranteed income are more likely to invest in their health, such as keeping up with routine checkups, preventive care and other ongoing medical needs.

“Many people fear running out of money more than they fear death,” says 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.”

Retirees managing withdrawals on their own can end up “living and dying with every market spike and dip,” she says, constantly adjusting their sense of security based on short-term market swings.

For some, the process of figuring out how much to withdraw can feel overwhelming, especially when there’s no guaranteed paycheck to anchor spending decisions. Even when a plan exists, she says, uncertainty about whether the money will last can still create ongoing anxiety during market downturns.

That stress, Welsh argues, can change behavior. Without a steady income stream, some retirees become hesitant to spend money on essentials that support their quality of life — like health care, nutrition and social activities — because they’re trying to avoid outliving their savings.

Instead, a lifetime income stream can create a sense of stability that makes it easier for retirees to actually use their money. “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,” says Welsh.

What this means for U.S. retirees

While Chile’s system is unique, the underlying challenge remains: turning savings into a reliable paycheck that lasts as long as you do.

In the U.S., that responsibility increasingly falls on the individual. Traditional pensions — which once provided guaranteed lifetime income — have largely disappeared, leaving most retirees to rely on a mix of Social Security and personal savings.

Still, the findings of the NBER paper don’t mean annuities are a must-have. However, the research does highlight something some retirees overlook: the value of predictable income.

The purpose of annuities "is to bring stability and to provide longevity insurance,” Welsh says, not to maximize returns.

That’s why some financial planners suggest using annuities to cover essential expenses — such as housing, food and health care — while keeping the rest of a portfolio invested for growth. The idea is to create a solid financial floor that reduces the pressure to withdraw during market downturns.

However, annuities still come with tradeoffs. They typically limit access to your money once you buy in, and fixed payments may lose purchasing power over time if inflation rises.

“Annuities are often dismissed because of their complexity,” Welsh says. “But there is only one number that matters: What is the amount that is deposited into your checking account every month for the premium you provide?"

Ultimately, how you turn your savings into income later in life may matter just as much as how much you’ve actually saved. Reducing financial uncertainty isn’t just about peace of mind; it could also play a role in long-term health.

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