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Protected income

When an annuity makes sense — and when it doesn’t.

An annuity belongs in a plan only when it solves a specific problem. It can be used to create dependable lifetime income, reduce reliance on market withdrawals, or address another specific planning need. That does not mean every retiree needs one, every annuity works the same way, or every dollar belongs in one.

Before you choose a product

What problem are we trying to solve?

Depending on your situation, an annuity may be one way to:

  • create dependable income that lasts for life;
  • reduce reliance on market withdrawals for essential spending;
  • reduce how much an early market decline can affect part of your retirement income;
  • create an income floor beneath the rest of the plan; or
  • provide income even if you live much longer than expected.

If we can’t clearly explain what problem the annuity solves, it doesn’t belong in the plan.

And if another tool already does that job well, an annuity has no reason to be in the plan.

Just as important

When an annuity may not fit

An annuity may not be the right tool when, for example:

  • unrestricted access to the money is important;
  • surrender restrictions do not fit your timeline or your need for flexibility;
  • the guarantee does not solve a real problem in your plan;
  • the features and costs are not justified by what they provide;
  • investments may simply be a better fit;
  • leaving a legacy or keeping money liquid is a higher priority; or
  • Social Security, pensions, or other income already provide enough dependable income.

These are examples, not a complete list. Whether an annuity fits depends on your whole situation.

Tradeoffs to understand before any decision

Liquidity and surrender charges, contract and rider costs, how much market participation you give up, how the income keeps up with inflation, what remains for beneficiaries, and the alternatives that could do the same job. Guarantees depend on the claims-paying ability of the issuing insurance company.

Not every dollar needs to do the same thing.

Different parts of the plan can solve different problems.

Accessible money

Money set aside for short-term and unexpected needs.

Protected income

A portion designed so retirement income does not depend entirely on selling investments at whatever market price exists.

Market-based income and growth

Assets positioned for income, growth, inflation, and legacy.

A retirement plan may use more than one of these. The appropriate mix depends on your situation.

Explore the numbers first

See where your own plan stands.

These educational tools each look at one part of the retirement picture. None of them recommends a product.

Your next step

Start with your income, not a product.

If you want to know whether protected income deserves a place in your plan, or whether your current income sources already do the job, we can look at it together.

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