Annuity Strategies
Understanding the role annuities can play in retirement.
Annuities are insurance products designed to address a specific retirement question: how to create income that lasts as long as you do.
What is an annuity?
An annuity is a contract between you and an insurance company. In exchange for a premium — paid as a lump sum or over time — the insurer agrees to provide a series of payments, which can be structured to last for a set period or for the rest of your life.
Unlike an investment portfolio, an annuity is an insurance product. Its guarantees are backed by the claims-paying ability of the issuing insurance company, not by market returns.
Common types of annuities.
Fixed Annuities
Provide a guaranteed interest rate for a set period, offering predictable growth and principal protection from insurance carriers.
Fixed Indexed Annuities
Credits interest based in part on the performance of a market index, with a floor designed to help protect principal from market declines. They are insurance products, not stock market investments.
Income Riders
Optional add-ons that can guarantee a lifetime income stream, often with the ability to grow the guaranteed income amount over time before income begins.
Beneficiary & Death Benefits
Many contracts allow remaining value or guaranteed payments to pass to beneficiaries, though terms vary by contract and should be reviewed carefully.
Potential benefits.
Lifetime income. Income riders can create a stream of income guaranteed to last for life.
Principal protection. Many contracts include floors designed to protect your principal from market declines.
Tax deferral. Earnings grow tax-deferred until withdrawn, which may help inside a retirement strategy.
Predictability. Fixed components can help cover essential expenses without relying on market timing.
Important considerations.
Surrender periods. Contracts often include multi-year surrender periods with charges for early withdrawals above allowed limits.
Liquidity limits. Access to funds may be restricted; only a portion is typically available penalty-free each year.
Not a market investment. Fixed indexed annuities are not stock market investments and don't capture dividends or full index returns.
Carrier reliance. Guarantees depend on the claims-paying ability of the issuing insurance company.
Fees and terms. Riders, caps, participation rates, and spreads vary and materially affect outcomes.
Who an annuity may — or may not — be appropriate for.
An annuity may be worth exploring if you…
- Want income you can't outlive
- Are concerned about market declines near retirement
- Have essential expenses to cover reliably
- Value predictability over maximum growth
An annuity may not be a fit if you…
- Need full liquidity in the near term
- Are comfortable taking on more market risk for growth
- Have guaranteed income that already covers essential expenses
- Would rely on withdrawals during the surrender period
Fixed indexed annuities are insurance products and are not investments in the stock market. They are subject to contract terms, surrender charges, limitations, and availability. Empirical Wealth Group is an independent financial services firm. Insurance and annuity products are offered through appropriately licensed insurance professionals. Guarantees associated with insurance products are backed by the claims-paying ability of the issuing insurance company.
Curious whether an annuity fits your plan?
We'll help you understand whether an annuity has a role in your retirement strategy — and only when it's appropriate.