With 2024 being the year with the greatest number of retirees hitting 65,1 there is a significant demographic of people reaching retirement age who have questions on what are the next steps for their investments. This aging population, often referred to as the “silver tsunami” has several key financial challenges they will need to face in short order.
In light of these challenges, an annuity can be a potential option for this population as they seek to grow their wealth in retirement. Here we list several reasons why an annuity can be an appealing investment for retirement:
An annuity – which is a contract with an insurance company that can provide a steady income stream or serve as protection from loss of principal – can be an effective tool in retirement planning by providing a steady and reliable source of capital. Here’s how an annuity can be used in retirement:
Asset preservation: Depending on the annuity type, annuities can provide a guaranteed rate of return or level of protection that gives investors comfort when they no longer have their employment wages in retirement. Fixed annuities, for example, provide a guaranteed rate of return, which can help reduce investment risk compared to more volatile investment options. This can be a particularly attractive to retirees who prioritize stability and protecting their capital.
Guaranteed income stream. An annuity can provide a consistent and predictable source of income, which can be practically valuable in ensuring that retirees have enough money to cover their essential living expenses. With an annuity, clients can build a personal pension for themselves in retirement.
Longevity protection: By converting a portion of their retirement savings into an annuity, retirees can protect against the risk of outliving their assets. Lifetime annuities guarantee payments for as long as the retiree lives, offering peace of mind and financial security.
Tax-deferred growth: Funds within a deferred annuity grow tax deferred, meaning that the interest earned is generally not taxed until withdrawals begin. This can be advantageous for retirees looking to maximize their investment growth.
Supplementing other retirement income: An annuity can complement other sources of retirement income such as Social Security, pensions and withdrawals from retirement accounts. This type of diversification can enhance the overall financial stability of an investor in retirement.
Simplified financial management: By providing a regular income stream or a fixed rate of return, annuities can simplify financial management in retirement, reducing the need for complex budgeting or investment decision.
When considering an annuity, it is essential for retirees to evaluate their overall financial situation, retirement goals and other income sources. Consulting with a financial advisor can help determine the most appropriate type of annuity or income structure to ensure a secure and comfortable retirement.
Author: no author
Source: © 2025 JPMorgan Chase & Co.
Retrieved from: JPMorganChase.com
FINRA Compliance Reviewed by Red Oak: 4123419
Fixed Annuities are long term insurance contracts and there is a surrender charge imposed generally during the first 5 to 7 years that you own the annuity contract. Indexed annuities are insurance contracts that, depending on the contract, may offer a guaranteed annual interest rate and some participation growth, if any, of a stock market index. Such contracts have substantial variation in terms, costs of guarantees and features and may cap participation or returns in significant ways. Investors are cautioned to carefully review an indexed annuity for its features, costs, risks, and how the variables are calculated. Any guarantees offered are backed by the financial strength of the insurance company. Surrender charges apply if not held to the end of the term. Withdrawals are taxed as ordinary income and, if taken prior to 59 ½, a 10% federal tax penalty.
Please consider the investment objectives, risks, charges, and expenses carefully before investing in Variable Annuities. The prospectus, which contains this and other information about the variable annuity contract and the underlying investment options, can be obtained from the insurance company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
The investment return and principal value of the variable annuity investment options are not guaranteed. Variable annuity sub-accounts fluctuate with changes in market conditions. The principal may be worth more or less than the original amount invested when the annuity is surrendered.