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Here’s the lowdown: While IRAs cannot own life insurance, they can own annuities. If your main goal is tax deferral of interest income, owning an annuity through a traditional IRA may not be necessary since annuities already provide tax deferral. On the other hand, owning a deferred annuity in a traditional IRA is still viable if your primary reason is the guaranteed yield and principal protection. Further, there is a specific type of annuity, called a qualified longevity annuity contract (QLAC), which is designed exclusively for IRAs.

Although annuities can be purchased in Roth IRAs, it may not be the most optimal use of the account. Roth IRAs are often better suited for growth assets, as earnings in Roth IRAs compound and are distributed tax-free. However, in cases where you have most of your funds in Roth IRAs and desire guaranteed lifetime income, owning an annuity in a Roth IRA may be the only option.

Your decision to buy an annuity through an IRA or a taxable account should ultimately depend on your unique financial circumstances and goals. Either way, it’s crucial you consider the pros and cons first.