A simple framework to help you decide if you should consider purchasing an annuity
The following educational materials are intended for informational purposes only and are not intended to constitute personalize financial advice.
When it comes to retirement, annuities are one of those solutions many folks still find a bit confusing. Some people see them as a safe, reliable source of growth and income. Others worry about complexity, fees, or giving up access to their money. So how do you decide if an annuity should be part of your retirement plan? This guide offers a simple way to think about that decision.
Start with this question: what problem are you trying to solve?
Before evaluating any financial product, it helps to define the problem. Annuities are not designed to maximize growth. They are designed to protect what you’ve saved and with some types of annuities, ensure you don’t run out of money in retirement.If neither of those is of concern, an annuity may not be necessary. If they are, an annuity can play a meaningful role.
Then ask yourself these five questions:
1. Do you need predictable income in retirement?
If you want a reliable, paycheck-like income stream in retirement, an annuity may be worth considering.
● Yes → Continue to the next question
● No → You may not need an annuity
2. Do you worry about outliving your savings?
Retirement can last 20–30 years or more. Annuities are one of the few tools designed to provide income for life.
● Yes → An annuity becomes more relevant
● No → Other strategies may be sufficient
3. How comfortable are you with market risk?
If your income depends heavily on investments, market downturns—especially early in retirement—can have a lasting impact. Annuities can reduce exposure to market volatility and provide a more secure, stable foundation.
● Low comfort with market risk → Consider an annuity
● High comfort with market risk → You may prefer staying invested directly in the market
4. Do you need access to your money?
Annuities are a long-term financial tool, typically require committing funds for a period of time.
● Need flexibility and liquidity → Annuities have a surrender charge period, offering partial excess to
your money for a set number of years.
● Can set aside a portion for long-term goals → Potentially could be a fit
5. How do growth and protection fit into your financial goals?
This is one of the most important distinctions.
● Maximize Returns → Traditional investments may be more appropriate
● Income, protection, and long-term accumulation → Annuities may fit well
The bottom line
Annuities may be a good fit if you:
● Want guaranteed income you can’t outlive
● Prefer stability over market exposure for part of your portfolio
● Are approaching or in retirement
● Want to cover essential expenses with more certainty
They may be less appropriate if you:
● Need full liquidity and flexibility
● Are focused primarily on maximizing returns
● Already have sufficient guaranteed income
A final thought
The most effective retirement plans don’t rely on a single strategy. They combine predictable income for stability, investments for growth, and flexibility for life’s unknowns. Understanding where an annuity fits—and where it doesn’t—is what leads to better decisions. Consult with a financial professional to discover more about whether an annuity could be a good fit in your overall retirement strategy.