If you have $3 million saved for retirement, you might assume that financial worry should disappear.
After all, $3 million is still a significant amount of money. Even earning a relatively modest 3% could produce around $90,000 per year before taxes without requiring you to withdraw the original principal.
But retirement anxiety is not always caused by having too little money.
Sometimes, the more you have accumulated, the more you worry about losing it.
Need help choosing the best annuity for your unique situation? Have questions about getting an annuity? If so, it’s best to speak with an annuity specialist. Watch this short video to see how I can help you do this (at no cost to you!)
Tip: See how much an annuity could pay you using my annuity calculator
Why Can Someone With $3 Million Still Worry About Retirement?
When people do not have enough savings, they worry that they will run out of money.
When people have accumulated substantial wealth, they may worry about a major market decline, rising taxes, inflation, or making a mistake that damages everything they spent decades building.
That fear can become especially strong once you retire and no longer receive a regular paycheck.
A large portfolio may provide flexibility, but it does not automatically provide certainty. Your money may still be exposed to:
- Market volatility
- Sequence of returns risk
- Emotional investment decisions
- Unexpected expenses
- Uncertain retirement income
- The possibility of living longer than expected
A $3 million portfolio can certainly support a comfortable retirement for many people. However, the real question is whether your retirement income plan gives you enough confidence to enjoy it.
Do You Even Need an Annuity With $3 Million?
Not necessarily.
Some people are comfortable investing their money, collecting dividends and interest, and generating their own retirement income. They understand the risks, have a disciplined withdrawal plan, and do not feel that they need additional contractual guarantees.
There is nothing wrong with that approach.
You could place portions of your portfolio into dividend-paying investments, municipal bonds, Treasury securities, or other income-producing assets. Depending on interest rates and your tax situation, these investments may generate substantial income.
However, other retirees are looking for something different.
They may want:
- Contractual lifetime income
- Protection from market losses on part of their savings
- Less dependence on portfolio withdrawals
- More freedom to invest the remaining money
- Less stress when the market declines
That is where an annuity may become useful.
💡 Pro Tip: The purpose of an annuity is not necessarily to outperform your investments. Its primary value may be transferring part of your retirement income risk to an insurance company.
👉 Want to compare guaranteed retirement income options? Schedule a call with me.
You Do Not Have to Put All $3 Million Into an Annuity
One of the biggest misconceptions about annuities is that you must move your entire portfolio into one.
You do not.
In the example I reviewed, I used $1.2 million, or 40% of a $3 million portfolio. That leaves $1.8 million available for cash reserves, investments, future expenses, or other financial goals.
For example, someone might decide to keep:
- $300,000 in cash or short-term reserves
- $1.5 million invested for continued growth
- $1.2 million in an annuity for future guaranteed income
The right allocation will be different for every person. You may want to use less than 40%, or you may decide that using more makes sense.
The goal is not to place every dollar into an annuity. The goal is to determine how much guaranteed income you need and then decide how much of your portfolio should be used to create it.
What Could $1.2 Million Produce in Guaranteed Income?
Here is the example shown in the video illustration:
- The husband is 62
- The wife is 63
- They live in Texas
- They deposit $1.2 million
- They wait five years before starting income
- They select joint lifetime income
In the illustration, several carriers produced annual income near $130,000.
Global Atlantic showed approximately $131,000 per year, while North American showed approximately $130,000 per year. Other carriers were also available, including Corebridge, Midland National, F&G, Aspida, and Nassau.
These were illustration results based on that specific couple, location, deposit, and income-start date. Available benefits can vary based on age, state, carrier, product, rates, and when the contract is issued.
Now consider what that income could mean.
If the couple also receives approximately $60,000 per year from Social Security, their combined income could be close to $190,000 per year.
Meanwhile, they would still have $1.8 million outside the annuity.
That remaining money could stay invested, remain available for emergencies, or be used for travel, family, healthcare, and other retirement goals.
👉 Want to see what a portion of your portfolio could produce? Use the calculators on my website or schedule a call.
How Does the Annuity Income Continue if the Account Value Runs Out?
This is an important distinction.
The illustration showed an 8% compounded roll-up on the benefit base. The benefit base is the number used to calculate future income. It is not necessarily the same as the contract’s cash value.
The contract also included a rider charge, which was deducted from the account value rather than directly from the annual income payment.
Depending on the credited growth, withdrawals, and fees, the account value could eventually decline to zero. In the example, it could be depleted around age 75 without growth or remain longer if the contract received credited interest.
However, the lifetime income would continue according to the contract, even if the account value reached zero.
That contractual income guarantee is the reason someone may choose this type of annuity.
Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.
Waiting Longer Could Increase the Income
The couple in the example planned to wait five years before activating income.
After five years, the illustrated benefit base had grown to approximately $1.763 million. When combined with the applicable withdrawal percentage, it produced roughly $130,000 in annual joint income.
However, the couple did not have to activate the income at that exact time.
The illustration showed approximately:
- $108,000 annually after three years
- $119,000 annually after four years
- $130,000 annually after five years
- $142,000 annually after six years
- $156,000 annually after seven years
- $171,000 annually after eight years
Waiting longer increased the illustrated income because both the benefit base and the withdrawal percentage increased.
If the couple waited until around age 70 and later received approximately $80,000 per year from Social Security, their combined retirement income could approach $250,000 annually.
The main benefit is knowing in advance what the contractual income could be at different starting dates.
You are creating a private pension that can be activated when you decide you need it.
The Real Value May Be Peace of Mind
Can someone retire successfully with $3 million without purchasing an annuity?
Absolutely.
But some people reach retirement and decide they are tired of managing every dollar, watching the stock market, and wondering whether the next downturn will disrupt their plan.
They want to transfer some of that responsibility to an insurance company.
With Social Security, a pension, and contractual annuity income covering their core lifestyle, they may feel more comfortable leaving the rest of their portfolio invested.
They can travel, spend time with family, and enjoy retirement without checking the market every day.
It is difficult to place a dollar value on that peace of mind.
An annuity is not the only way to generate retirement income. However, it can be an effective way to create substantial contractual income without depending entirely on market performance.
Should You Still Worry if You Have $3 Million?
Having $3 million gives you options, but it does not automatically create a retirement income plan.
You must decide how much risk you are comfortable carrying, how much income you need, how much money should remain liquid, and whether contractual guarantees would help you feel more secure.
You may decide that you do not need an annuity at all.
You may also decide that using a portion of your portfolio to create a guaranteed private pension allows you to enjoy the rest of your money more confidently.
My job is not to pressure you into buying anything. I can show you what is available, explain how the options work, answer your questions, and provide the illustrations so you can review them.
Need help with finding the best annuity for your retirement?
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On the call, I can help you:
- Determine what type of annuity is best for you
- Find the highest paying annuities for your unique situation
- Answer any other questions you may have