Annuities

Determine Whether Annuities Are For You

How to Assess Annuities

Wondering if an annuity fits your financial plan? Start by assessing your income needs, goals,and risk tolerance.

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Annuities are good at:

  • providing guaranteed income
  • hedging longevity risk
  • tax-deferred growth
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An annuity could help if:

Social security + pension < your expenses

An annuity may help fill the gap.

Assessment Guide

Here’s a structured approach to evaluate if and what kind of annuity might work for you.

Define Your Income Goals

Ask yourself:

  • Do I want income for life?
  • Do I need income now or in the future?
  • Do I want to supplement Social Security or a pension?
  • Do I want to protect a spouse or dependents?

Assess Your Current Financial Picture

Consider:

  • Your retirement savings: 401(k), IRA, investments
  • Pensions or other income sources
  • Monthly expenses and expected inflation
  • Whether you anticipate a long retirement

Know The Types of Annuities

Different annuities serve different needs:
Type:

Immediate Annuity

Key Feature

Start income within 12 months

Best For

Income now

Type:

Deferred Income
Annuity

Key Feature

Income starts later

Best For

Longevity protection

Type:

Fixed Annuity

Key Feature

Guaranteed rate of return

Best For

Safety & predictable growth

Type:

Fixed Index Annuity

Key Feature

Growth tied to stock market index with downside protection

Best For

Moderate growth with some safety

Type:

Variable Annuity

Key Feature

Invested in subaccounts (stock market risk)

Best For

Growth with upside potential, often for tax deferral

Consider Your Risk Tolerance

  • Low risk tolerance: fixed or fixed indexed annuity may be suitable.
  • Moderate to high: Variable annuities with income riders might offer upside, but with more risk and fees.

Evaluate Timing

  • Are you close to retirement and need income soon?
  • Are you planning for income in 10-20 years?
  • Want to cover late-in-life risks?

Understand the Cost and Trade-offs

  • Surrender charges if you withdraw early
  • Riders for income, long-term care, or death benefits may have fees
  • Potential loss of liquidity
  • Compare internal fees, especially in variable annuities

Quick Self-Check

Is an annuity right for you?

  • I want guaranteed income for life.
  • I’m worried about outliving my money.
  • I’m in good health and expect a long retirement.
  • I want to reduce market risk.
  • I’m comfortable locking up some assets for future income.

If most of these apply to you, an annuity might be worth exploring further.