Annuities and Retirement: Creating Guaranteed Income

When considering an annuity, it can be tempting to focus only on how much your money could grow. But for many retirees, growth isn't the only reason to consider annuities.

Certain annuities can serve another important purpose: creating a predictable stream of income and helping manage the risk of outliving your retirement savings.

Creating Income That Can Last

Market investments can play an important role in helping retirement savings grow, but their value can fluctuate. That's especially concerning for retirees who need to withdraw money during a market downturn.

Certain annuities can provide guaranteed income for life, depending on the product and payout option selected. That can create another source of predictable retirement income alongside Social Security, a pension, or other savings.

Why Annuities May Appeal During Uncertain Markets

Market volatility, inflation, and economic uncertainty can make retirement planning feel less predictable. For someone approaching retirement, a significant market decline at the wrong time can have an outsized effect, especially when they're already taking withdrawals.

An annuity may help reduce some of that uncertainty by providing a source of income that isn't entirely dependent on short-term market performance.

That doesn't mean replacing stocks and other investments with annuities. Instead, an annuity may be one part of a broader retirement strategy. Investments can provide opportunities for growth, while guaranteed income from annuities can help cover predictable expenses.

Know What You're Buying

Not all annuities work the same way.

Fixed, fixed indexed, and variable annuities have different approaches to growth, risk, and income. Annuities can also be immediate or deferred, depending on when income payments begin. Some products offer lifetime income through the annuity's payout structure or optional riders, while others are primarily designed for accumulation.

Costs, surrender charges, withdrawal restrictions, income guarantees, and other features can also vary significantly.

If all of this sounds confusing, that is understandable. We can help you understand your options, their pros and cons, and their place in your retirement plan.

Could an Annuity Fit Your Retirement Plan?

An annuity isn't right for everyone. But it may be worth exploring if you're concerned about outliving your savings, want a more predictable source of retirement income, or are looking to reduce your reliance on market returns for essential expenses.

Before purchasing one, consider how much liquidity you'll need for emergencies and other expenses, as annuities may impose surrender charges or other restrictions on withdrawals.

Most importantly, look at an annuity in the context of your entire retirement plan. This is one piece of a larger puzzle. We can help you compare products, understand their costs and restrictions, and determine whether guaranteed income fits your long-term goals.

You don’t have to figure this out on your own. We are here to help.

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