National Annuity Awareness Month - June

June is National Annuity Awareness Month — and if you've built real wealth over your lifetime, this is worth paying attention to. For a long time, annuities got lumped in with investment products and dismissed by the people who didn't understand them. That's changed. And while you might not be a fan of annuities, More and more sophisticated investors are recognizing what annuities actually do well: manage risk, protect income, and take the uncertainty out of retirement.

 

If you've spent decades building a strong financial foundation, the question isn't whether you can retire. It's whether your retirement income will hold up for 25 or 30 years, no matter what the market decides to do.

That's a different question — and it deserves a different kind of answer.

Here's a plain-English look at how annuities work and why they're worth considering as part of a complete retirement income strategy.

 

What Annuities Are Designed to Do

An annuity is a contract between you and an insurance company. You contribute a sum of money — all at once or over time — and in exchange, the insurance company guarantees you a stream of income based on the terms you agreed to. Depending on the structure, that income can start immediately or at a future date you choose. Some pay for a set number of years. Others pay for as long as you live — no matter how long that turns out to be. Because the payout is backed by a contract, not a portfolio, it doesn't move when the market does.

Why High-Net-Worth Retirees Consider Annuities

Most affluent investors have done the right things — diversified portfolios, real estate, private equity, alternative investments. Those vehicles are built for growth, and they do their job well.

 

But growth vehicles come with volatility, and volatility is a different problem in retirement than it is during accumulation. When you're drawing income, a bad year in the market isn't just a number on a statement. It's a decision about whether to sell assets at the wrong time.

 

Annuities play a different role entirely — they provide income that shows up every month regardless of what the Dow did on Tuesday.

 

Helping Manage Longevity Risk

Here's the risk nobody likes to talk about: outliving your money. And for high-net-worth households — where better healthcare and healthier lifestyles often mean longer retirements — longevity risk is real. A deferred income annuity lets you set money aside now and turn on income later, sometimes as late as age 80 or 85, specifically to cover the years when other assets may be running thin. Think of it as insurance against a long life. That's not a bad problem to have — but it is a problem that needs to be planned for.

 

Building a Predictable Income Base

One of the principles I come back to with every client is this: your essential expenses should be covered by guaranteed income. Social Security, a pension if you have one, and annuity income form that floor. When your must-pay bills are covered no matter what, your growth-oriented investments can stay invested — because you don't need to touch them to keep the lights on. That separation between guaranteed income and growth assets is what gives a retirement plan real staying power.

Promoting Confidence During Market Volatility

Even people who have been investing for 40 years can feel the pull to do something when markets drop hard. That impulse — to react, to reposition, to protect — is what costs investors money over time. When part of your income is guaranteed and completely disconnected from the market, that impulse has less power over you. You already know your income is coming. The volatility is still there, but it's someone else's emergency — not yours.

 

Enhancing Portfolio Structure

A well-built financial plan assigns a purpose to every dollar. Some money is there to grow. Some is there to produce income. Some needs to stay liquid. Annuities serve a specific and important function in that structure — they anchor the income side so you're not forced to pull from growth assets at the wrong time. When markets pull back, a retiree with guaranteed income can let their portfolio sit and recover. A retiree without it has to make harder choices.

 

Adding Another Income Source

Most retirees draw income from several places — Social Security, dividends, rental income, portfolio withdrawals. Adding a guaranteed annuity income stream to that mix creates something valuable: an income source that isn't dependent on any market, any tenant, or any quarterly earnings report. It just pays. And having that certainty in the mix changes how you approach everything else.

 

Considering the Benefit of Tax‑Deferred Growth

For investors who have already maxed out their IRAs and 401(k)s, certain annuities offer tax-deferred growth inside a non-qualified account. You're not paying taxes on the earnings until you take the money out — which gives you flexibility in how you manage income and tax exposure year by year. It's not the only reason to consider an annuity, but for someone in a high bracket looking for additional tax-deferred vehicles, it's worth understanding.

 

Why Annuities Are Receiving Renewed Focus

Longer retirements. Fewer pensions. Market cycles that nobody can predict. Those three things together have pushed a lot of serious investors to take a second look at annuities — not as a replacement for their growth strategy, but as a foundation underneath it. People want to know their income is safe. An annuity is one of the few financial products that can make that guarantee in writing and back it up.

 

Determining Whether Annuities Fit Into Your Retirement Plan

Annuities aren't for everyone, and they're not designed to hold all of your money. What they're designed to do is take the income risk off the table — so the rest of your portfolio can do what it's built to do without the pressure of also being your only source of income. There are real differences between products, and the details matter: how the income is calculated, what the fee structure looks like, how accessible the money is if you need it. That's a conversation worth having with someone who works with these products every day and can show you exactly how the numbers work for your specific situation. If you'd like to explore whether a guaranteed income strategy makes sense as part of your retirement plan, give us a call.