Retirement has changed. For today’s retirees, managing market risk, outliving savings, and covering healthcare costs are all top-of-mind concerns. While Social Security and pensions used to form a stable foundation, many retirees are looking for ways to add certainty to their financial future. One solution that’s gaining attention again? Annuities.
We’re not talking about the complicated, high-fee products of the past. Modern fixed and fixed indexed annuities have evolved into flexible retirement tools that can offer income guarantees, growth potential, and even legacy planning benefits. Here are four ways annuities might help you get more out of your retirement.
1. Protect Against Outliving Your Savings
Americans are living longer. Great news, but it makes retirement income planning more complex. A 65-year-old today can expect to live another 20 years or more. With longevity comes higher healthcare expenses and more pressure on your retirement savings.
Fixed annuities and fixed indexed annuities can provide guaranteed income for life, helping reduce the risk of outliving your assets. If market volatility keeps you up at night, annuities may offer a welcome buffer: growth potential without the downside risk of a market crash. Your principal is protected, and income payments can last as long as you do.
2. Fill the Gaps When You’ve Maxed Out Other Retirement Accounts
Contributing to retirement accounts like 401(k)s, IRAs, and HSAs is a great place to start. But what if you’ve maxed those out or you got a late start and want to accelerate your savings?
Annuities can offer tax-deferred growth without annual IRS contribution limits. That means your money compounds over time, and you won’t owe taxes on your earnings until you withdraw. For higher earners or those trying to “catch up” on retirement, annuities can serve as a useful supplemental vehicle.
Of course, annuities aren’t a fit for every situation. Withdrawals before age 59½ are subject to a 10% federal tax penalty in addition to regular income taxes. That’s why it’s important to evaluate whether an annuity fits into your broader retirement strategy.
3. Create Flexible Income Streams for Retirement
Contrary to popular belief, annuities aren’t rigid or one-size-fits-all. They can be surprisingly flexible when structured properly. You can customize your annuity with features like:
- Lump-sum or partial withdrawals
- Lifetime income or income for a set period
- Income riders that allow you to start and stop payments
- Spousal options for continued income after your death
This flexibility makes annuities a good fit for retirees who want predictable income, but on their terms. By pairing annuities with other income sources (like Social Security or part-time work), you can build a more stable, diversified retirement paycheck.
4. Leave a Legacy and Avoid Probate
If leaving something behind for a spouse or loved ones is important to you, certain annuities offer benefits beyond your lifetime. For example, joint and survivor annuities continue to pay income after one spouse passes away. Others allow beneficiaries to take over the contract without paying immediate taxes or dealing with probate.
Annuities with properly named beneficiaries can transfer directly to heirs, bypassing the often lengthy and expensive probate process. Depending on how the annuity is structured, this could provide an efficient, tax-smart way to pass on assets.
Work With the Right Financial Professional
Annuities are complex products, and not all of them are created equal. Terms, fees, riders, and surrender charges vary widely depending on the issuing insurance company and product type. What works for one retiree might not work for another.
That’s why it’s crucial to consult with a financial professional who understands retirement income planning, not just someone selling a product. At Wilian Financial, we help you weigh your options and decide if an annuity aligns with your goals. If it does, we’ll guide you toward the right kind of annuity, with terms that work for your needs.
Ready to explore your options? Let’s talk about how annuities might play a role in your retirement strategy.