For individuals who prefer to protect their hard-earned savings while still seeking steady growth, annuities can be a valuable component of a comprehensive retirement plan. They are the only financial product designed to provide a guaranteed, lifelong income stream—one you can never outlive—offering confidence, stability, and peace of mind in retirement.
They are often considered a strong option for risk-averse investors seeking financial stability and peace of mind in retirement, rather than high growth / high risk potential.
Key Benefits of Annuities
- Guaranteed Lifetime Income: The primary advantage of an annuity is its ability to provide a steady, predictable "paycheck replacement" for the rest of your life, similar to a personal pension. This helps eliminate the fear of outliving your savings (longevity risk).
- Principal Protection: Many types of annuities, particularly fixed and fixed-indexed annuities, offer protection features that guarantee the return of your initial investment (premium), regardless of market downturns.
- Tax-Deferred Growth: Money within a deferred annuity grows on a tax-deferred basis, meaning you don't pay taxes on the earnings until you withdraw the money, usually in retirement when you may be in a lower tax bracket.
- Portfolio Diversification: Annuities can help diversify your overall retirement portfolio by providing a stable, low-risk component to balance against more volatile investments like stocks.
- Customization Options: Annuities can be tailored to specific needs using optional riders (add-on features) that can provide benefits like inflation adjustments (cost-of-living adjustments), enhanced death benefits for beneficiaries, or coverage for long-term care expenses.
- Peace of Mind: The contractual guarantees and predictability of income help reduce financial stress and worry about market volatility and daily expenses during retirement.