Fresno Financial Planner Update: Are Annuities Worth the Investment?

Fresno Financial Planner Update: Are Annuities Worth the Investment?

New research by Mark Warshawsky, the retirement income guru who’s now a visiting scholar at George Mason University’s Mercatus Center, suggests more retirees should consider making an immediate annuity part of their retirement portfolio—and also highlights a reason why many people may simply ignore this advice.

When it comes to turning retirement savings into lifetime retirement income, many retirees and advisers rely on the 4% rule—that is, withdraw 4% of savings the first year of retirement and increase that amount by inflation each year to maintain purchasing power (although in a concession to today’s low yields and expected returns, some are reducing that initial draw to 3% or even lower to assure they don’t deplete their savings too soon).


It’s nerve-wracking to land on the right kind of retirement savings because, let’s face it, that’s what you have to live off of for the rest of your life! Let’s start with the reasons you may want to get a longevity annuity. A longevity annuity:

  • Provides peace of mind: Guaranteed lifetime income can provide you with peace of mind through a paycheck that you won’t outlive. The longer you live, the more you’ll get out of the benefit.
  • Offers optimal tax benefits: The IRS designates longevity annuities to get the same tax treatment as IRAs. In other words, you don’t have to pay taxes when you take money out of your account as long as it’s a qualified longevity annuity. However, you purchase nonqualified annuities with post-tax funds and might have to pay income taxes each year. Make sure you know what type of annuity you’re looking into.
  • Simplifies your retirement planning: With a longevity annuity, you’ll automatically get a paycheck during retirement. It can ultimately simplify knowing what to invest, what to invest in and takes the DIY out of retirement planning.


Naturally, you’ll face some cons that affect choosing longevity annuities. Let’s take a look at the cons: 

  • More illiquid than stocks and bonds: You can accelerate some monthly payments, but in general, you’re “stuck” with the same monthly amount. 
  • No cash value: You don’t have a cash value that you can withdraw for with a longevity annuity.
  • Your money becomes isolated from the market. In other words, even if the stock market performs well, you can’t take advantage of the upswings in the market.

Clearly, we all have to make our own decisions based on our particular circumstances about the best way to turn savings into income that we can count on throughout retirement, while also assuring we have a stash of assets we can tap for emergencies and unexpected expenses. There’s no one-size-fits-all solution. That said, I think it’s a good idea for anyone nearing or already in retirement to at least consider an annuity as a possibility. If you rule it out, that’s fine. Annuities aren’t for everyone. Just be sure that if you’re nixing an annuity, you’re doing it for valid reasons, not because of a misplaced faith in your ability to earn outsize returns or because you’re unduly swayed by lump-sum culture.

Fresno Retirement Advisor Takeaways 

As your Fresno financial advisor we thought this was a good takeaway: Millions of workers suffered from job loss and wage reductions this year. If you’re among them, your income is likely lower than in past years, which — since you need to pay income tax on the amount you convert — would reduce how much income tax you pay when making this change. You have to meet specific income requirements to contribute to a Roth IRA, and you’ll also face a maximum contribution limit that varies based on your age. Keep in mind that not everyone can contribute to a Roth IRA — at least not the full amount. In 2021, married filings with a modified adjustable gross income (MAGI) below $198,000 can contribute the full amount to a Roth IRA.

Diversifying your retirement assets among a variety of vehicles and alternatives—both insurance and investment oriented, depending on what is appropriate for your situation—may offer you a better chance of meeting your retirement income goals throughout your lifespan. We help our clients with problems sometimes associated with retirement such as stopping spend down and avoiding probate. In doing so we leverage stop spend down as well as long-term care strategies designed to help accomplish those goals.

When searching for Fresno financial advisors, look no further than Soutas Financial & Insurance Solutions Inc. your Fresno financial planning consultant is committed to helping take the complexity out of retirement planning. By using a variety of insurance and investment strategies that focus on Asset Protection, Long-Term Care Strategies, Legacy Planning, Tax-Efficient Strategies, IRA, 401(k) & 403(b) Rollovers, Life Insurance Annuities, Medicare, we can help you develop an overall retirement income strategy specific to you and your family. We have a strong team of professionals helping ensure you receive all the assistance you need not only in developing your retirement income strategy, but in maintaining it throughout your retirement. Contact us today at 559-230-1648 or visit us today at Soutas Financial to get your retirement plans on track for success!

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Soutas Financial & Insurance Solutions, Inc. are not affiliated companies. California Insurance License # OK48173

Other Fresno Financial Advisor Articles 

Soutas Financial & Insurance Solutions Inc. 
333 W. Shaw Avenue Suite 106
Fresno, CA 93704 
(559) 230-1648 

via Which Generates More Retirement Income—Annuities or Portfolio Withdrawals?

via Is a Longevity Annuity a Good Guaranteed Retirement Savings Strategy for You?

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Soutas Financial & Insurance Solutions, Inc. are not affiliated companies. California Insurance License # OK48173. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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