For decades the subject of “annuities” has been largely avoided by financial professionals working at major wirehouses, while retirement income, if discussed at all, centers around withdrawal rates—such as the 4% rule—from 401(k) or similar qualified retirement accounts.
Based on many conversations I’ve had, this is still the case despite the research done by academics like Roger Ibbotson, Robert Shiller, and Wade D. Pfau showing that fixed indexed annuities, when used correctly, can improve retirement outcomes while addressing longevity and market risk when compared against using bonds in the fixed portion of the typical retirement portfolio.
But lately, there seems to be a change in the air, at least at the consumer level. For one thing, according to ThinkAdvisor.com, Google searches for the terms “pensions” and “annuities” were up 160%, while search volume for the keyword phrase “are annuities good or bad” is up 200%. More people are even googling how to pronounce the word “annuity.”
It makes sense, given recent market volatility, tariff uncertainty, and continued inflation, that consumers are worried about their retirements. In fact, new research by Allianz shows that people continue to fear running out of money in retirement more than they fear death, with 54% citing inflation specifically as the biggest factor. Another study by Nationwide shows that 75% are worried that they will run out of money before they run out of lifespan, and they are not interested in becoming part of the growing numbers of Americans reaching age 100 or older.
While dealing with inflation, longevity, and market volatility is no one’s ideal situation, it doesn’t have to be a nightmare for your retirement clients. Stop avoiding the conversation about annuities, and start looking at how they might be used effectively in the plans you design.
As your clients get closer to retirement, continuing to expose too much of the portfolio to volatile stock markets doesn’t make sense due to the financial principle called “sequence of returns risk.” With all things being equal, someone who retires during a down market can see their retirement savings drop precipitously for the long-term if they start withdrawing funds, versus someone who retires and starts withdrawing funds when markets are going up.
Because no one has a crystal ball, it’s probably best to hedge and leverage several strategies on your clients’ behalf in their overall financial and retirement plan.
In the last few years, annuity sales have risen as 10,000 people per day turn 65 in America. An annuity is a contract between an individual and an insurance company designed to provide a monthly stipend or income during retirement. Some annuities, like lifetime fixed indexed annuities, even provide retirement income that won’t run out no matter how long your client lives, guaranteed by the financial strength and claims-paying ability of the insurance company providing the annuity policy. And some annuities even have contract provisions to address inflation.
In general, the appeal of annuities is that retirees can take part of their retirement nest egg and purchase monthly retirement income in the form of an annuity without having to worry about withdrawals except for their mandated RMDs (required minimum distributions).
A recent study by David Blanchett and Michael Finke finds that retirees prefer spending lifetime income instead of dipping into savings or their 401(k), even if they can easily afford to. “I don’t think people purposefully want to horde their savings; they are just finding it difficult to view savings as a potential form of retirement income,” says Finke, Professor and Frank M. Engle Chair of Economic Security Research at the American College of Financial Services. “Estimating how much income can be withdrawn from investments in retirement is far more complex than receiving a monthly pension payment,” the study points out.
A Quantum partnership offers access to hundreds of annuities from dozens of insurance companies, including annuities with limited distribution. Some fixed indexed annuity contracts are even providing bonuses that consumers can use to bolster their annuity value in this higher interest rate environment. Other features can include optional coverage terms for long-term care or terminal illness, or spousal income.
Insurance company innovations have come a long way. While annuities are not right for everyone, Quantum is here to help you examine what annuities are available that might fit your client’s parameters, how they work, and how they might fit into the client’s retirement portfolio. Give us a call at 800.440.1088 and we will run a case design for your client or prospect.
“I can lose every dime tomorrow and still be fine. Annuities are what allow me to sleep at night.” ~Shaquille O’Neal
Sources:
https://www.thinkadvisor.com/2025/04/15/6-reasons-annuity-is-no-longer-a-dirty-word/
https://401kspecialistmag.com/retirees-prefer-spending-lifetime-income-over-savings/
https://www.kiplinger.com/retirement/annuities-what-you-dont-know-can-hurt-you
https://www.protectedincome.org/wp-content/uploads/2023/06/RP-20_Pfau_final.pdf
https://thequantum.com/a-closer-look-at-bonds-versus-fixed-indexed-annuities/
https://safemoney.com/blog/annuity/shaquille-oneals-strategy-why-annuities-are-essential/
With almost 15 years in the financial services industry, Kyle has become one of the top consultants in the industry. His passion is helping advisors grow by leveraging their strengths and helping them improve on any areas of weakness.
