In the past, annuities have been a topic avoided by many, but lately interest levels have risen—a lot. In fact, online searches for terms like “annuities” and “pensions” are up by 160% while “are annuities good or bad” are up by 200%, according to ThinkAdvisor.
With retirement lasting longer and retirees worried about recent market volatility, tariff uncertainty, potential Social Security cuts, and continued inflation, now may be a good time to learn more about how different tools, such as annuities, might work in a retirement portfolio. And since June was Annuity Awareness Month, we decided to open up the conversation and provide some clarity.
To start, whether you’re planning for retirement, getting close, or already in it, it’s important to have a retirement plan in place, and review it regularly. While accounts like 401(k)s or IRAs are important retirement savings vehicles, they don’t automatically come with a plan for how income will be drawn from those assets once paychecks stop. Planning for income distribution is a key part of creating a long-term financial plan.
As you get closer to retirement, it may make sense to review how much of your savings are subject to stock market volatility. One concept that highlights this is “sequence of returns risk.” This refers to the impact of market performance in the early years of retirement, which can significantly affect how long your savings last. For example, someone who retires during a market downturn and begins taking withdrawals might see their portfolio decline faster than someone who retires during a market upswing, even with the same average return. Since market timing is unpredictable, working with a financial professional to explore multiple income and investment strategies tailored to your needs can help manage these risks.
An annuity is a contract between an individual and an insurance company designed to provide a monthly stipend or income during retirement. There are many different types of annuities, and some have different fee structures and contract terms which may, or may not, befit your financial situation. That’s why it is generally a best practice to work with an independent financial advisor who has access to many different types of annuities to compare between.
Some annuities, such as certain lifetime fixed indexed annuities, can offer a stream of income in retirement that is designed to last as long as you live. These guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company and are subject to the terms of the annuity contract. Some policies may also include optional features, sometimes available for an additional cost, that are designed to help address inflation.
For some investors, annuities can be an appealing way to turn part of their retirement savings into a predictable monthly income stream. This may help reduce the complexity of managing withdrawals, aside from required minimum distributions (RMDs), and can complement other retirement income sources. With some income needs covered by the annuity, other portions of the portfolio may remain available for market participation or future use, depending on your goals and risk tolerance.
A study by David Blanchett and Michael Finke (2021) found that many retirees prefer the predictability of guaranteed lifetime income over drawing from their investment accounts, even when they have the means to do so. For some, it can feel more intuitive to spend income than to withdraw from long-accumulated savings. That’s one reason why consulting a financial professional may be helpful when designing a retirement income plan that aligns with your personal comfort, goals, and financial circumstances.
Roughly 10,000 Americans reach age 65 each day, highlighting the growing importance of retirement income planning. For some individuals, annuities may play a role in the fixed-income portion of their portfolio, depending on personal goals and needs. While traditional models often focused on the stock-to-bond ratio, research by Roger Ibbotson, Robert Shiller, and Wade D. Pfau has examined how certain annuity types, such as fixed indexed annuities, might contribute to addressing risks like longevity and market volatility. These studies suggest that, under the right circumstances, annuities may offer meaningful benefits alongside other fixed-income strategies. Specific outcomes depend on individual assumptions, product features, and planning context.
In today’s interest rate environment, some fixed indexed annuities offer optional bonus features that may increase the value of the annuity’s income benefit base, depending on the terms of the contract. These features often come with additional costs, conditions, or holding requirements. Other available riders may include provisions for long-term care, terminal illness, or spousal income, depending on the policy. Because features vary widely by provider, annuities can be tailored to individual needs. However, it’s important to understand the details and potential trade-offs involved.
With so many choices, it’s important to remember that every person’s situation is unique, meaning annuities may or may not be indicated depending on your specific needs and goals. That’s why we’re here to help you explore your options, explain how different annuities work, and create a long-term retirement plan. If you’d like to discuss how annuities might fit into your retirement strategy, give us a call! You can reach Bulwark Capital Management in Tacoma, Washington at 253.509.0395.
Sources:
https://www.thinkadvisor.com/2025/04/15/6-reasons-annuity-is-no-longer-a-dirty-word/
https://401kspecialistmag.com/retirees-prefer-spending-lifetime-income-over-savings/
https://www.kiplinger.com/retirement/annuities-what-you-dont-know-can-hurt-you
https://www.protectedincome.org/wp-content/uploads/2023/06/RP-20_Pfau_final.pdf
https://thequantum.com/a-closer-look-at-bonds-versus-fixed-indexed-annuities/
https://safemoney.com/blog/annuity/shaquille-oneals-strategy-why-annuities-are-essential/
Investment Advisory Services offered through Trek Financial LLC, an investment adviser registered with the Securities Exchange Commission. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein.
Any annuity guarantees are backed by the financial strength and claims paying ability of the issuing insurance company and may be subject to caps, restrictions, fees and surrender charges as described in the annuity contract. Index or fixed annuities are not designed for short term investments and may be subject to caps, restrictions, fees and surrender charges as described in the annuity contract. Crediting methodologies can be complex and difficult to comprehend. You should make sure you understand the risks and rewards of any annuity before considering an investment.
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