Annuities Explained: A Smart Choice for Retirement Planning

Congratulations on building your nest egg! Now, you can take steps to protect your earnings and set up a steady income for retirement. Annuities can give you guaranteed income, help shield your savings from market ups and downs, and make planning easier. They can provide you with peace of mind by ensuring your income lasts, allowing you to cover your needs without worry. An annuity may give you more freedom to use your other retirement savings and enjoy life.

What Are Annuities?

Annuities are insurance contracts that provide a guaranteed income stream in exchange for an upfront payment or a series of payments. By offering stable payments regardless of market conditions, they aim to ensure long-term financial security, particularly in retirement. 

Unlike stocks or mutual funds that fluctuate in value, annuities prioritize stability. They allow individuals to convert part of their savings into a consistent income, helping to minimize the risk of outliving their money. Payments can be scheduled monthly, quarterly, or annually for a specific period or for life.

Types of Annuities Available

There are several types of annuities to consider, each with unique features suited to different retirement goals:

• Fixed annuities provide guaranteed interest rates and predictable payments. They’re ideal for those who want stability and are comfortable with conservative returns.
• Variable annuities offer the potential for higher returns by investing in market-based accounts. Payments can fluctuate based on investment performance, which introduces more risk but also more growth potential.
• Deferred annuities allow your contributions to grow tax-deferred over time, with payments starting at a later date — helpful for people who are still working or planning.
• Immediate or single premium annuities begin paying out income shortly after you make a lump-sum investment, making them useful for retirees who want money right away.

The right annuity depends on your timeline, income needs, and comfort with market risk. A knowledgeable advisor can help you decide which structure aligns best with your broader retirement strategy.

Key Benefits for Retirees

Annuities’ significant advantages make them an appealing part of a retirement income plan:

• Predictable, lifelong income that continues regardless of market conditions
• Tax-deferred growth on earnings until withdrawals begin
• Optional riders, such as guaranteed death benefits or long-term care coverage
• Protection from market volatility to help preserve your principal

These benefits can give retirees a sense of financial peace, allowing them to focus on enjoying retirement instead of worrying about market performance or outliving their savings.

Are Annuities a Smart Choice?

For many retirees, the answer is yes. Annuities can complement other retirement assets like IRAs, 401(k)s, and brokerage accounts by providing a guaranteed income floor. This security can reduce the pressure to generate returns from your other investments, helping you preserve your savings longer.

Life expectancy is around age 79 in the United States. However, many actuarial tables used by insurance companies and retirement planners suggest that a healthy 79-year-old has a decent chance of reaching their late 80s or even early 90s. Lifestyle increasingly shapes longevity, not just genetics. The longer you live, the more valuable your steady annuity income will be. 

Annuities may not be the right fit for everyone, especially those who need immediate access to all their funds. However, they are a powerful solution for anyone seeking predictable income, protection from market downturns, and confidence that their money will last as long as they do.

At Dickstein & Associates, we help clients evaluate how annuities fit within their overall financial picture and long-term goals. You can also explore other essential coverage for every life stage to build a comprehensive plan for the future.

Secure Your Retirement With Expert Guidance

Choosing the right annuity takes expertise and careful planning. The experienced advisors at Dickstein & Associates can help you explore your options, align your plan with your goals, and build a retirement strategy that gives you lasting confidence.

Contact us today to explore how annuities can secure your financial future and provide you with peace of mind.

FAQ About Annuities

Should an annuity be part of a retirement plan?

Suppose predictable income and long-term stability are priorities. In that case, annuities can be an excellent complement to other retirement savings, providing security while freeing your other assets to grow or be used more flexibly.

What is the downside of buying annuities in retirement?

Annuities often require a long-term commitment and may limit liquidity, meaning your funds are less accessible. In exchange for prioritizing predictable income and long-term stability, you receive guaranteed income and protection from market risk — benefits that other investments cannot assure.

Who are annuities best suited for?

Annuities are well-suited for retirees who want reliable income, lower exposure to market volatility, and peace of mind as they plan for decades of retirement.