The 4 Things Annuities Actually Solve For: The P.I.L.L.

If you’ve ever listened to an annuity sales pitch, you’d think these products could solve everything. Growth, income, long-term care, inflation, legacy, you name it. The problem is that’s not true.

Annuities are contracts, and like any contract, they have specific purposes. They’re not magical “cure-all” products.

That’s why I created the P.I.L.L. Framework. It’s the simplest way to understand what annuities actually do and what they don’t. If your financial goal doesn’t land in one of these four categories, you don’t need an annuity.

Here’s how it breaks down.

P: Principal Protection

This is where most people start. You’ve saved, you’ve worked, and now you want to protect your money. That’s what principal protection annuities do.

Think Multi-Year Guaranteed Annuities (MYGAs) or Fixed Index Annuities (FIAs). These are CD-type products. You put money in, you get a guaranteed rate (MYGA) or a formula-based return (FIA), and your principal is safe from market losses.

These aren’t built for equity-like returns. They’re designed to give you bond-like safety, tax deferral, and the peace of mind that your principal won’t disappear the next time Wall Street takes a dive.

If protecting what you already have is the goal, this is the “P” in your P.I.L.L.

I: Income for Life

This is the big one. Annuities are the only product that can contractually guarantee you income for as long as you live. Period.

We’re talking about Single Premium Immediate Annuities (SPIAs), Deferred Income Annuities (DIAs), and sometimes Income Riders attached to other contracts. These are pure risk-transfer tools. You give the insurance company money, and they guarantee you a paycheck for life, no matter how long you live.

Social Security is an annuity. Pensions are annuities. When you buy one yourself, you’re basically creating your own pension.

If you’re worried about running out of money, this is where annuities shine. They don’t promise the highest return, but they do promise income you can’t outlive.

L: Legacy

What happens to your money when you die? That’s the “L” in P.I.L.L.

Some people want to leave a guaranteed amount to heirs, no matter what. Others want to ensure the unused principal passes directly to beneficiaries, not back to the insurance company. Annuities can solve for that through refund options, a period certain, or beneficiary payouts.

For example, you can structure a SPIA or DIA so that 100% of any unused money goes to your heirs. You can also use certain annuities purely as safe legacy transfer vehicles, knowing the money bypasses probate and goes straight to your beneficiaries.

Legacy isn’t about growth. It’s about certainty.

L: Long-Term Care / Confinement Care

This is the area people worry about most and annuities can help, but let’s be clear: they’re not long-term care insurance.

What they can do is provide confinement care benefits or enhanced payouts if you can’t perform certain daily living activities or need nursing home care. Some annuities also allow you to add riders that double income for a period of time if care is needed.

Again, not free. You’re paying for these features somewhere in the contract. But for people worried about healthcare costs later in life, annuities can play a role here.

Why the P.I.L.L. Matters

The P.I.L.L. test simplifies everything. Instead of getting lost in sales jargon, just ask:

• Am I trying to protect my principal?
• Do I need guaranteed income for life?
• Do I want to leave a legacy for my heirs?
• Do I need protection for long-term care or confinement care?

If the answer is no to all four, you don’t need an annuity. It’s that simple.

What Annuities Don’t Solve

Here’s what’s not on the P.I.L.L. list:

• Stock market growth.
• Beating inflation dollar for dollar.
• Solving every financial need in one product.

If someone is pitching you an annuity for those reasons, it’s hype.

Annuities Are Contracts

Annuities are contracts. You buy them for what they will do, not for what they might do.

The P.I.L.L. Framework keeps it simple: Principal Protection, Income for Life, Legacy, and Long-Term Care. That’s it. That’s what annuities are designed to solve for.

If your financial goals line up with one or more of those, an annuity might be a fit. If they don’t, keep your money where it is.

That’s the truth about annuities, and it’s the only test you need.