The 3 Reasons a Lifetime Annuity is the BEST Retirement Investment

When you’re planning for retirement, you’re often trying to determine the best mix of investments for your retirement portfolio. There’s no one-size-fits-all solution, and your planning process has to take into account your own particular situation and needs.

One potential investment you may want to consider is a lifetime annuity, and there are a few reasons why this insurance product can be one of the best investments you could make for retirement.

“Your investment account can run out of money, but if you have an annuity paying you a guaranteed income stream, that can go on and on and on,” says certified financial planner Karen DeRose, a representative of Lincoln Financial Advisors and managing partner of DeRose Financial Planning Group, a Chicago-based independent fee-based financial planning and wealth management firm.

Read on for some of the top reasons why a lifetime annuity would make a good addition to your retirement portfolio.

1. Ensure your money lasts

A huge concern for retirees or people approaching retirement is whether they’ll have enough money for the rest of their lives.

That’s where lifetime income annuities can come into play.

“Annuities do something that nothing else will do: they will provide you with a guaranteed income stream,” says DeRose. “That is the one benefit you cannot outlive.”

The thought of running out of money could be especially troubling for people who haven’t traditionally enjoyed much success with investments and don’t have a high degree of confidence in the future performance (and staying power) of their retirement portfolio.

“A lifetime annuity can be good for someone who is not good with money and needs to make sure it lasts,” DeRose adds.

2. Safeguard your retirement portfolio against bear markets

Many retirees saw their investments take a hit during the housing market crash and subsequent economic downturn. While annuities hinge largely on interest rates, you are locked into a certain amount of money each month (or whenever you’ve opted to receive payouts). So even though your payout may be smaller for an annuity purchased during a low interest rate environment, that income is guaranteed.

“[Lifetime annuities] can also be good for a portion of the portfolio to make sure it’s always there, no matter what the markets do,” says DeRose.

3. Guarantee an income stream for someone else

There are several different kinds of annuities, including products for spouses. A Joint Life With Last Survivor Annuity guarantees payments for a couple, and then for the surviving spouse when the husband or wife passes away.

For married couples, the joint life annuity can offer the assurance of income even after death.

That’s why lifetime annuities can be an option “when someone has to manage [income] for other people, and they [the trustee or decision-maker] want to make sure the beneficiary is always going to have a guaranteed income stream,” DeRose says.

Do lifetime annuities fit into your retirement portfolio?

At the end of the day, annuities are a complex insurance product. While they may fit well into someone’s retirement portfolio, they are not for everyone, cautions DeRose, and typically shouldn’t be a sole source of retirement income.

“They have their places, but they need to be considered in the context of overall planning,” she says.

Considering an annuity? Use the Lifetime Annuity Calculator to find out how much lifetime income you could buy. Try out the annuity calculator today.


NewRetirement Planner

Do it yourself retirement planning: easy, comprehensive, reliable

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Take financial wellness into your own hands and do it yourself retirement planning: easy, comprehensive, reliable.

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