The Glorious History of Annuities: From Ancient Egypt to Modern Times

June 19, 2024

Annuities, those often overlooked but immensely valuable financial tools, have a storied history that spans millennia. As instruments designed to provide a steady income stream that lasts in perpetuity, they have been cherished by soldiers, ministers, and even some of history’s most illustrious figures. Let’s take a journey through time to explore the rich history of annuities and discover why they remain a cornerstone of financial planning today.

The Very First Annuity: Egypt

Between 1100 and 1700 B.C., archaeologists discovered evidence in Egypt’s legal codes that an annuity was purchased by Hepd’efal, a prince ruling in Sint during the Middle Empire. These finding sheds light on the first use of annuities in ancient Egypt.

The Early Rise of Annuities : Ancient Rome

While annuities have roots in ancient Egypt, they gained greater popularity in the Roman Empire over two thousand years ago. The Romans called their form of annuities as “annua,” which provided annual payments to citizens in exchange for a one-time lump sum. These annua were primarily used to reward soldiers for their loyalty and service, ensuring they had a stable income in their retirement. This simple yet revolutionary concept laid the groundwork for the financial products we use today.

Annuities in the Middle Ages

During the medieval period, annuities evolved to include tontines, a unique financial instrument where investors pooled their money and received payments based on the survivors of the group. Kings and feudal lords used tontines to finance wars and internal conflicts, demonstrating the versatility and importance of annuities in various contexts.

Colonial and Early American Use

The concept of annuities crossed the Atlantic to the American colonies, where they played a significant role in the economic activities of the time. One notable use of annuities was by the Presbyterian Church in 1720, which provided retirement income for aging ministers and their families. This early adoption laid the foundation for the widespread use of annuities in the United States.

Benjamin Franklin, one of America’s Founding Fathers, was a staunch advocate of annuities. In his will, Franklin left two annuities to the cities of Boston and Philadelphia, which funded public works projects and contributed to the cities’ growth. His forward-thinking use of annuities highlights their long-term value and impact.

Annuities in the 19th and 20th Centuries

During the Civil War, annuities were used by the Union to reward military officers in place of land grants. President Lincoln supported this initiative to aid injured and disabled soldiers, showcasing annuities’ role in providing financial security in times of need.

In the early 20th century, annuities became more accessible to the general public. The Pennsylvania Company for Insurance on Lives and Granting Annuities began offering annuities in 1812, marking a significant milestone in making these financial tools widely available. The Great Depression further cemented the importance of annuities as a safe and reliable source of income, with many Americans turning to them for financial stability.

Celebrities and Historical Figures Who Embraced Annuities

Throughout history, numerous famous individuals have recognized the value of annuities:

• Babe Ruth: The legendary baseball player invested all his money in annuities, famously stating, “I may take risks in life, but I will never risk my money, I use annuities, and I never have to worry about my money.” His foresight ensured his financial security during the Great Depression.
• Albert Einstein: The renowned physicist invested in annuities to provide for his family’s future. Einstein appreciated the predictability and guaranteed income that annuities offered, ensuring financial stability alongside his groundbreaking scientific work.
• Hettie Green: Known as the “Witch of Wall Street,” Green was one of the wealthiest women of her time. Her savvy investments included annuities, which provided a stable income stream and contributed to her immense fortune.
• Benjamin Franklin: As mentioned earlier, Franklin’s use of annuities to benefit the cities of Boston and Philadelphia is a testament to their long-term value and impact on public works and financial growth.
• Shaquille O’Neal: NBA superstar turned sports commentator recently admitted to CNN that he didn’t start off managing money well, spending a million dollars in about 45 minutes after signing his first professional contract at age 20. He now advises young athletes to educate themselves on financial management, emphasizing the importance of learning about annuities and saving 75% of their earnings for retirement.

Annuities in the Modern Era

The 20th and 21st centuries saw the evolution of annuities into more sophisticated financial products. In 1952, TIAA-CREF introduced the first variable annuity, offering a combination of guaranteed income and investment growth potential. The advent of fixed indexed annuities in 1995 provided retirees with a way to earn interest based on market performance while protecting their principal.

Today, annuities continue to offer a range of benefits, from guaranteed lifetime income to tax-deferred growth and protection against market volatility. They remain a popular choice for individuals seeking financial security during retirement or in preparation for retirement.

Conclusion

Annuities have a long and illustrious history, from their inception in Egypt and ancient Rome to their widespread use in modern financial planning. They have been embraced by soldiers, ministers, historical figures, and celebrities alike for their ability to provide stable, guaranteed income. As we look to the future, annuities will undoubtedly continue to play a crucial role in helping individuals secure their financial future.

If you’re considering how to ensure a stable and guaranteed income in your retirement, remember the lessons from history and the wisdom of figures like Benjamin Franklin and Babe Ruth. Annuities offer a reliable way to achieve financial peace of mind, just as they have for centuries!