Introduction
One of the biggest concerns retirees face is running out of money. Market volatility, inflation, taxes, and rising expenses make long-term retirement planning challenging. Annuities — particularly Fixed Indexed Annuities (FIAs) — offer a way to help create predictability, stability, and guaranteed income.
This blog explains how annuities support retirement income in a compliant and easy-to-understand way.
What Is an Annuity?
An annuity is a contract between an individual and an insurance company. In exchange for a premium, the insurer may provide:
- Principal protection
- Interest crediting
- Tax-deferred growth
- Optional income riders (for a fee)
- Guaranteed income options
Guarantees are backed by the insurer’s claims-paying ability.
How Annuities Help Create Predictable Retirement Income
1. Principal Protection
FIAs protect your principal from market losses.
Your value does not decrease due to negative market performance.
2. Predictable Income Options
Income riders (available for an additional fee) can:
- Provide lifetime income
- Offer joint income for couples
- Guarantee payments regardless of market performance
This income is based on the contract terms and rider details.
3. Market-Linked Growth (Without Market Losses)
FIAs allow interest crediting based on an external index (e.g., S&P 500®), but you are not directly invested.
This creates a balance of safety and potential growth.
4. Tax-Deferred Growth
You do not pay taxes on gains until you withdraw funds.
This allows compounding over time.
5. Stability During Volatility
During market downturns, your annuity's floor (typically 0%) prevents losses due to market performance.
This helps reduce stress and protect income longevity.
Why Retirees Choose Annuities
1. Protection from Market Risk
Retirees are vulnerable to sequence-of-returns risk — annuities help reduce this.
2. Lifetime Paychecks
Income riders can ensure you do not outlive your savings.
3. Flexibility
Many annuities offer:
- Lump sum options
- Lifetime income options
- Fixed-period income
- Spousal continuation provisions
4. Complement to Social Security
Annuity income can help cover the “income gap” between Social Security and actual expenses.
Important Considerations (Compliance Required)
- Withdrawal rules vary by carrier and contract
- Income riders may include fees
- Caps, participation rates, and spreads limit upside
- Liquidity may be limited during surrender periods
- Not all annuities are suitable for all clients
Suitability analysis is essential.
Conclusion
Annuities provide a powerful combination of protection, growth potential, and predictable income. For retirees seeking stability, they can serve as a foundation for a long-term retirement strategy.
