Are Annuities Good for Retirement?

The Core Value of Annuities: Longevity Insurance

The primary reason to consider an annuity in retirement is longevity risk — the risk of outliving your savings. If you live to 90 or 95, a portfolio of stocks and bonds may be depleted. An annuity with a lifetime income rider guarantees monthly income for as long as you live, no matter how long that is. This is a form of insurance that no other financial product provides.

When Annuities Make Sense

Annuities are most valuable in specific situations:

• You have no pension and want guaranteed monthly income in retirement
• You are concerned about outliving your savings
• You have already maxed out your IRA and 401(k) and want additional tax-deferred growth
• You want to protect a portion of your savings from market losses
• You want to create a predictable income floor alongside Social Security

When Annuities May Not Be the Right Fit

Annuities are not the right choice for everyone:

• You need immediate access to your savings (annuities have surrender periods)
• You are in poor health and may not live long enough to benefit from lifetime income
• You already have sufficient guaranteed income from Social Security and a pension
• You are in a low tax bracket and tax deferral provides little benefit

The Honest Pros and Cons

Pros: guaranteed income for life, principal protection (for fixed and indexed annuities), tax-deferred growth, death benefit for heirs, and peace of mind. Cons: surrender periods limit liquidity, complex products with many variations, some products have high fees (especially variable annuities), and the income guarantee comes at a cost compared to self-managing investments.

How Much of Your Savings Should Go Into an Annuity?

Most financial planners suggest that annuities should cover your essential expenses — the costs you cannot reduce if markets decline. A common approach is to use Social Security and an annuity to cover essential expenses (housing, food, healthcare) and keep the rest of your savings in flexible investments for discretionary spending and emergencies. This 'income floor' strategy provides security without sacrificing all flexibility.

Getting an Honest Annuity Evaluation

AG Insurance provides honest, no-pressure annuity consultations. We explain how each product works, what it costs, and whether it fits your specific situation. We represent multiple carriers and have no incentive to recommend a product that is not right for you.