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Managing Longevity Risk With Annuities

Stan Haithcock
January 30, 2023
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Annuity Benefits for Retirees

One of the biggest risks retirees face is outliving their savings. With people living longer than ever, there is a growing concern about whether retirement savings will last for the entirety of one's retirement. Annuities can be a valuable tool for managing this risk, as they provide a guaranteed income stream for a set period of time.

An annuity is a contract between an individual and an insurance company. In exchange for a lump sum payment, the insurance company agrees to provide the individual with a steady stream of income over a specific period of time, typically for the remainder of the individual's life. This can be an attractive option for retirees worried about outliving their savings, as it provides a guaranteed source of income that cannot be outlived.

Key Benefits

One of the key benefits of annuities is that they can provide a guaranteed income stream for life. This can be especially valuable for retirees worried about outliving their savings, as it ensures that they will have a source of income for as long as they live. Additionally, some annuities offer the option for an income stream to be provided for a certain number of years, which can also provide peace of mind for retirees.

Another benefit of annuities is that they can protect against inflation. While the income stream from an annuity may not be adjusted for inflation, many annuities offer an option for a fixed income stream or a fixed rate of return that can help to protect against inflation. This can be especially valuable for retirees worried about their savings' purchasing power decreasing over time.

There are different types of annuities available to help manage longevity risk. Immediate Annuities start paying out right away, and Deferred Annuities begin paying out at a later date.

It's important to remember that annuities are not for everyone. Schedule a call with me, and let's discuss whether an annuity is the right choice and how it can best be used to help manage longevity risk and protect against outliving your savings. An annuity can be a powerful tool, but it's essential to understand these financial products' unique features and potential limitations.


Another approach that is gaining popularity is the use of annuitization. This is the process of converting a retirement account, such as an IRA or 401(k), into an annuity. By annuitizing these accounts, retirees can turn their savings into a guaranteed income stream that cannot be outlived.

Annuities can also be paired with long-term care Income Riders, which provide additional benefits in case of the need for long-term care. These riders may provide benefits that help cover the cost of long-term care, which can be a significant expense for retirees.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.

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