Retirement Income & Protection
Annuities for Retirement Income & Principal Protection
If you're near or in retirement and want to protect what you've built and turn it into income you can't outlive, here's how fixed and indexed annuities work and who they fit.
What is a fixed indexed annuity?
A fixed indexed annuity is a contract with an insurance company that offers principal protection along with interest credited based on the performance of a market index, subject to a cap or participation rate. In a down-market year your principal is protected by a floor; in an up year you receive index-linked interest up to the cap. Guarantees are backed by the insurer's claims-paying ability.
Why do people near retirement consider annuities?
As people approach or enter retirement, protecting accumulated savings and creating predictable income often becomes more important than chasing growth. Annuities are designed to address sequence-of-returns risk — the danger of a market drop early in retirement — and can provide income intended to last for life, which may help reduce the risk of outliving your savings.
Can I move my 401(k) or IRA into an annuity?
In many cases, yes. A 401(k) or IRA can often be rolled into an annuity, generally without immediate tax consequences when handled as a proper transfer or rollover. It's a common approach for people who want to convert a portion of their retirement savings into protected, income-generating assets. A suitability review helps determine how much, if any, makes sense.
How much in assets makes an annuity worth considering?
Annuities tend to fit people who have accumulated meaningful retirement savings — commonly those with $250,000 or more in investable assets — and who want to protect a portion of it and convert it into income. The right amount to allocate depends on your overall plan, other income sources, and goals.
Are annuities guaranteed?
The guarantees in an annuity — principal protection, income riders, minimum interest — are backed by the claims-paying ability of the issuing insurance company, not by a government agency. That's why the financial strength of the carrier matters. Terms such as caps and participation rates also affect how much interest is credited.
Annuity vs. bonds for retirement income?
Both aim for stability but work differently. Bonds carry interest-rate and default risk and don't guarantee lifetime income. An annuity can offer principal protection and, with an income rider, guaranteed lifetime income — but it's less liquid and carries surrender periods. Many retirement plans use both.