June is Annuity Awareness Month—a time to spotlight a retirement tool that often goes overlooked but has never been more important. In today’s uncertain financial landscape, many retirees are vulnerable to risks that can quietly erode their financial security.
The good news? Annuities—when used correctly—can be a powerful solution to three of the most pressing retirement risks: longevity, market volatility, and income shortfalls.
Whether you’re approaching retirement or already there, understanding how annuities work to manage these risks could be the difference between guesswork and confidence.
Risk #1: Outliving Your Money (Longevity Risk)
The Challenge:
People are living longer than ever, which is a blessing—but it also creates a budgeting nightmare. How do you plan for a retirement that could last 30 years or more?
A common mistake is relying solely on investment accounts or systematic withdrawals. These methods don’t guarantee your income will last—especially if the market takes a hit early in retirement.
How Annuities Help:
Certain annuities—like lifetime income annuities or fixed indexed annuities with income riders—provide a guaranteed stream of income for life. It doesn’t matter how long you live or what happens in the markets. That monthly payment keeps coming.
This converts a portion of your nest egg into a predictable “retirement paycheck” that continues as long as you need it.
Pro Tip: Look for annuities that offer joint life payout options if you want to protect both spouses.
Risk #2: Market Volatility and Sequence of Returns
The Challenge:
Retirees who draw income from volatile markets face what’s called “sequence risk.” This happens when a market downturn hits early in retirement—right when you start taking withdrawals. The result? Your portfolio could shrink faster than expected and never fully recover.
How Annuities Help:
Fixed and fixed indexed annuities protect your principal from market losses. That means you won’t lose money during market downturns—while still having the potential for growth when the markets perform well.
With the right structure, an annuity can act as a volatility buffer—a safe income layer that gives your other investments time to rebound before you’re forced to withdraw from them.
Example: If the market drops 20% in your first retirement year, and you’re drawing income from an IRA, you’re locking in losses. If you had used an annuity for income instead, your portfolio could stay intact.
Risk #3: Retirement Income Gaps
The Challenge:
Many people enter retirement with a shortfall between what they need every month and what guaranteed sources like Social Security provide. That’s known as your “retirement income gap.”
For example, if your expenses are $6,000/month and Social Security only provides $3,500/month, you’re left with a $2,500 shortfall. Drawing that from investments may not be sustainable.
How Annuities Help:
By allocating a portion of your savings into an income-generating annuity, you can create a stream of guaranteed income to fill that gap—without touching the principal of your other assets.
- This ensures your essentials—housing, food, insurance, utilities—are covered, no matter what happens with inflation or the market.
Additional Benefits of Annuities in 2025
Beyond solving these three core risks, annuities in 2025 offer several advantages:
- Tax deferral: Your earnings grow tax-deferred until you withdraw them.
- Customizable riders: Add income, long-term care, or death benefit features.
- Legacy planning: Certain annuities allow you to pass unused funds to heirs.
Importantly, the annuity landscape is evolving. Carriers now offer more flexibility, lower fees, and hybrid features that combine income, growth, and protection.
Tip for 2025: Many retirees are choosing fixed indexed annuities because of their balance between upside potential and downside protection—especially with market volatility at historic highs.
Is an Annuity Right for You?
An annuity isn’t one-size-fits-all. The right choice depends on:
- Your age and health
- Your income needs
- Other retirement assets
- Your risk tolerance
Here are a few cases where annuities may be especially valuable:
| Retirement Situation | Annuity Type to Consider |
|---|---|
| You need income now | Immediate Income Annuity |
| You want future income starting at age 70+ | Deferred Income Annuity (DIA) |
| You want growth tied to the market—but not losses | Fixed Indexed Annuity (FIA) |
| You want a CD alternative with better yields | Multi-Year Guaranteed Annuity (MYGA) |
| You want guaranteed income and legacy protection | FIA with Guaranteed Income & Death Benefit |
Questions to Ask Before You Buy
Not all annuities are the same. Before you invest:
- What are the fees?
- Is the income guaranteed for life?
- What’s the credit rating of the issuing insurer?
- Are there surrender charges or liquidity options?
- How does the annuity fit into your overall retirement plan?
Working with a fiduciary advisor who understands annuities—and isn’t tied to one company—can help you get unbiased advice tailored to your goals.
Final Thoughts: Don’t Wait to Secure Your Future
Annuity Awareness Month is a reminder that you don’t need to settle for uncertainty in retirement. With the right annuity, you can turn a portion of your assets into dependable income, protect against market downturns, and ensure your money lasts as long as you do.
That’s not just smart planning—it’s peace of mind.
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Written by Brent Meyer, founder and president of SafeMoney.com. With more than 20 years of hands-on experience in annuities and retirement planning, Brent is committed to helping Americans make informed, confident financial decisions.
The post 3 Retirement Risks Annuities Solve—and Why They Matter first appeared on SafeMoney.com.