Fixed annuities can be valuable tools for addressing key retirement planning concerns such as principal protection, pre-determined income, and longevity risk. While they involve certain trade-offs, these features are specifically designed to provide the predictability that many retirees prioritize. They may not be suitable for everyone, particularly those who require frequent access to large amounts of funds or are seeking maximum stock market growth potential. But for many, they play a key role in providing retirement income they prefer.
We encourage you to review these potential benefits of Fixed Annuities below and to inquire with any questions.
Protect What You’ve Spent Decades Building: When you’re within 5-10 years of retirement, you’ve likely accumulated significant savings, but you also have less time to recover from major market downturns. A substantial market correction that might be recoverable in your 40s can be more challenging in your early 60s. Fixed annuities can protect a portion of your assets from market volatility, helping ensure that money you’ve worked decades to accumulate is there when you need it.
Create a Personal Pension: Most people approaching retirement today don’t have sufficient, or traditional pensions. Fixed annuities allow you to create your own pension-like income stream with pre-determined payments for life. This can provide peace of mind, helping to cover essential expenses regardless of market performance or how long you live.
Eliminate Longevity Risk: One of the biggest fears in retirement is outliving your money. With people regularly living into their 90s, your retirement savings may need to last 30+ years. Annuities with lifetime income options help to eliminate this risk. You receive payments for as long as you live, whether that’s 10 years or 40 years, providing supplemental financial security no matter how long retirement lasts.
Reduce Sequence of Returns Risk: The years immediately before and after retirement are critical. Poor market returns during this period, known as sequence of returns risk, may permanently damage your retirement plan, even if markets recover later. By moving a portion of assets into fixed annuities during these vulnerable years, you protect yourself from being forced to sell investments during a downturn to fund living expenses.
Simplify Retirement Income Planning: Managing investments, calculating sustainable withdrawal rates, and adjusting for market conditions requires constant attention and discipline. Fixed annuities may simplify retirement planning by providing pre-determined, predictable income without ongoing management decisions, further reducing the possibility of emotional reactions to assets invested in the markets. You know exactly what you’ll receive each month from a fixed annuity, making budgeting straightforward and reducing financial stress.
Fill the Social Security Gap: Many people benefit from delaying Social Security until age 70 to maximize benefits, but need income before then. A fixed annuity or DIA can help bridge this gap, providing guaranteed income from retirement until Social Security begins, allowing you to optimize lifetime benefits and helping to mitigate financial hardship during the waiting period.
Lock In Today’s Rates: Interest rates fluctuate over time. When rates are favorable, locking in guaranteed returns through MYGAs or guaranteed income through SPIAs and DIAs may secure attractive terms for years or decades. This protects you from potential future rate fluctuations and provides more certainty about your retirement income foundation.
Provide Peace of Mind: Perhaps most importantly, fixed annuities offer something invaluable as you approach retirement: peace of mind. Knowing that a portion of your income is pre-determined regardless of market crashes, political upheaval, or economic recessions allows you to enjoy retirement without constant financial anxiety.
Considerations: Fixed annuities address specific retirement planning concerns but involve important trade-offs and are not appropriate for everyone. In exchange for pre-determined income and principal protection, you sacrifice true liquidity, growth potential in the stock market, and flexibility. Standard fixed payments don’t keep pace with inflation, though cost-of-living adjustment (COLA) riders are available for a fee, but typically may reduce initial income payments. These products are most suitable for individuals who have adequate emergency funds outside the annuity, have considered tax-advantaged retirement accounts, prioritize income certainty over growth, are within 5-10 years of retirement or already retired, and are comfortable with the liquidity restrictions. We encourage you to carefully evaluate whether these products and their inherent trade-offs align with your complete financial picture, goals, and risk tolerance as understanding what you’re giving up is just as important as understanding what you’re gaining.