How Annuities Fit Into a Retirement Income Strategy
Annuities are often misunderstood because they are discussed without context. In reality, annuities are not a retirement plan by themselves—they are tools that may be used within a broader income strategy.
At their core, annuities are contracts designed to provide income, either immediately or at a future date. Some offer predictable payments, while others incorporate growth components tied to market performance.
Within a retirement income strategy, annuities may serve several purposes:
Providing a predictable income stream
Reducing reliance on market withdrawals
Supporting longevity planning
Stabilizing overall income structure
The role an annuity plays depends on how it is coordinated with other assets. When used thoughtfully, annuities can help cover essential expenses, allowing remaining assets to be invested with greater flexibility.
It is important to understand that annuities are not uniform. Features, costs, liquidity provisions, and risk profiles vary significantly. As with any financial tool, suitability depends on individual objectives, timelines, and risk tolerance.
In retirement income planning, annuities are evaluated not in isolation, but in terms of how they contribute to income reliability and portfolio balance.
