OK, get ready. I'm about to say a bad word. Annuities. Well not really a bad word but annuities have gotten a bad rap since I started in the profession many years ago. Truthfully, it's not annuities that are bad, it's the agents that sell them without understanding how they should be used and what annuities are right for the specific client's needs. My dad used to say, "Don't put all of your eggs in one basket unless you truly love omelets." In other words, don't put all your investment dollars into any one product. There are insurance agents out there that are only licensed to sell annuities and no other investment vehicles. So, they end up putting all the client's money into the one thing that they can sell. That's not the right way to help a valued client. An annuity is a tool, nothing more. We want to make sure that our clients have all of the most appropriate tools in their toolbox.
Why Fixed Indexed Annuities Work for Retirement
Fixed indexed annuities are a popular choice for retirees looking to secure their financial future. These annuities offer a unique combination of guaranteed income and potential for growth, making them a valuable asset for retirement planning. One of the key benefits of fixed indexed annuities is their ability to provide a steady stream of income for seniors. Unlike traditional annuities, which offer fixed payments, fixed indexed annuities allow folks to benefit from market gains while protecting them from market losses. This means that our clients can enjoy the security of a guaranteed income stream while also having the potential to earn more if the market performs well.
Another advantage of fixed indexed annuities is their flexibility. You can choose from a variety of payout options, including lifetime income payments, withdrawals, or a combination of both. This flexibility allows us to tailor your annuity to meet your specific financial needs and goals.
Additionally, fixed indexed annuities offer tax-deferred growth, meaning you can enjoy the benefits of compounding interest without having to pay taxes on your earnings until you start making withdrawals. This can help maximize your retirement savings and potentially reduce taxes.
Overall, fixed indexed annuities are a great option for retirees looking to secure a reliable source of income in retirement. With their unique combination of guaranteed income, potential for growth, and tax advantages, fixed indexed annuities can provide financial security in your golden years.
Please give us a call to schedule a financial meeting with your advisor to see if this may be a possible fit for your portfolio.
By Marc Frye
Marc Frye provides financial analysis and market commentary for the ARA newsletter, translating complex economic trends into actionable insights for retirees.
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Easy Eddie's Take
Marc's dad had the right idea about not putting all your eggs in one basket. Here's what I see in 2026: most people asking "How much of my retirement should be in an annuity?" are surprised to learn that financial advisors typically recommend no more than 25-30% of your total retirement portfolio in any single annuity product. Think of it this way - a fixed indexed annuity works best when it's part of a balanced approach alongside your 401k, IRA, Roth IRA, and Social Security benefits.
The tax-deferred growth Marc mentioned is particularly valuable right now. With 2026 IRA contribution limits at $7,500 for those over 50 and Required Minimum Distributions starting at age 73, many Arizona retirees find that fixed indexed annuities help bridge that gap between when they retire and when they must start taking RMDs from traditional retirement accounts.
One question that comes up all the time is whether fixed indexed annuities make sense if you already have a pension. The answer depends on your specific situation, but having multiple income streams in retirement is usually a smart strategy. A little diversification today can make a big difference tomorrow.