Annuities Offer Protection and Growth Potential

Annuities have always played a role in retirement planning, but with economic uncertainty and market volatility, their importance has grown recently. They offer the chance for growth along with protection of principal during market downturns, supported by the claims-paying ability of the issuing insurance carrier. While they can be a vital part of the retirement planning process, annuities are sometimes overlooked by advisors who focus strictly on accumulation and stock market investments. For people getting close to retirement, and those without the appetite or flexibility for stock market risk, annuities can be an attractive option to help provide income for life. Annuities were actually created for retirement — they were first used during ancient Roman times to compensate retired soldiers. They're meant to help generate income once you stop collecting wages. There are many different types of annuities, but fixed and fixed indexed annuities differ from retirement accounts like 401(k)s and IRAs in that they are not subject to market risk, and they can offer guarantees based on the financial strength of the issuing insurance company. It's important to understand that fixed and fixed indexed annuities are not investments — they are contracts. Even though they may credit interest based on market performance, the money is not actually invested in the market at all. The insurance company, based on its claims-paying ability, can guarantee principal and sometimes offer participation in stock market upside. One of the biggest reasons retirees run out of money is sequence of returns risk — withdrawing money early in retirement during a down market, where withdrawals outpace account growth. A fixed indexed annuity can help counter this risk by offering a guaranteed lifetime income option, potentially protecting both principal and income benefit even during a market downturn. This can also add flexibility, allowing retirees to keep other assets invested in the market while riding out downturns. Some annuities are also designed to help combat inflation through a cost-of-living adjustment (COLA) feature. Annuities can offer real protection and growth potential, but purchasing one without guidance can be tricky — there are many types, each with different benefits, and no single option fits everyone. Variable annuities, for example, are directly invested in the market and carry the same risk as any market investment. If you have questions about annuities, how to help protect your retirement assets, or how to explore reliable monthly income options in retirement, we're here to help. This article is for informational purposes only and is not intended as financial, legal, or tax advice. Consult a qualified professional before making financial decisions. Source: Allianz Life, "Americans Are More Worried About Running Out of Money Than Death" (2025)