People sometimes ask me a very fair question: “John, would you put your own retirement money into an annuity?”
My answer is yes. My wife and I plan to use several of them as part of our retirement income strategy, not just one.
I sell annuities for a living, so I believe I should be willing to use the same tools I recommend to other people. But that does not mean I think every dollar belongs in an annuity or that every annuity is right for every person.
For me, the value of an annuity is not about trying to get rich. It is about creating dependable, contractual income that can continue for the rest of my life and my wife’s life.
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1. Why I Would Use an Annuity for My Own Retirement
If I did not believe in annuities enough to use them for myself and my family, I would feel like a hypocrite selling them to other people. The truth is that annuities are an important part of my future income plan.
I do not plan to buy one annuity and expect it to accomplish everything. Instead, I like the idea of using multiple contracts for different stages of retirement.
For example, one annuity could begin paying income at age 65. I might purchase another later and activate its income at age 70.
That approach can create separate layers of income for different periods of life. Meanwhile, I can leave other money invested in the stock market for long-term growth and other opportunities.
💡 Pro Tip: An annuity should have a specific job. Before purchasing one, decide whether you want principal protection, fixed growth, future income, immediate income, or some combination of those benefits.
👉 Want to see what an annuity could pay based on your situation? Use my annuity calculators, and schedule a call if you would like help comparing the options.
2. Why I Prefer Contractual Income for Part of My Plan
There are many ways to create retirement income without an annuity. I could own dividend-paying stocks, use municipal bonds, build a portfolio of mutual funds, or periodically sell investments.
Those strategies can work, and I plan to keep money in the market. However, they do not provide the same kind of contractual lifetime-income promise that an annuity can provide.
When I buy a stock, I own part of a company and hope the investment increases in value over time. I may receive dividends, but the stock itself does not give me a contract promising a specific lifetime income.
An annuity is different. It is an insurance contract designed to provide specific benefits, which may include a guaranteed stream of income for one life or two lives.
That certainty matters to me. If I know my core income needs are already covered, I may be more comfortable taking appropriate risks with the rest of my money.
Of course, annuity guarantees depend on the claims-paying ability of the issuing insurance company. That is one reason I believe it is important to compare insurers, contract terms, income features, and available payouts instead of choosing a product based on one appealing number.
3. I Would Buy an Annuity for Income, Not to Get Rich
I like annuities, but I generally do not view them as the highest-growth tool available. I am not going to buy an annuity because I expect it to outperform the stock market and make me rich.
That does not mean an annuity cannot grow. Multi-year guaranteed annuities, commonly called MYGAs, can offer attractive fixed rates, and some fixed indexed annuities can also produce meaningful interest credits.
I have seen clients earn double-digit interest credits in fixed indexed annuities during favorable crediting periods. But those results are not guaranteed, and a fixed indexed annuity generally should not be expected to capture all the gains of the stock market.
The tradeoff is protection. With a properly structured fixed or fixed indexed annuity, clients may accept lower potential returns in exchange for knowing they are protected from direct stock market losses under the terms of the contract.
That can make it easier to sleep at night when the market drops.
I am younger than many of my clients, so I currently have a higher appetite for market risk. However, I also know that my willingness to accept risk will probably decrease as I get older and begin relying more heavily on my assets for income.
That is why annuity strategies are already in my retirement wheelhouse. I want growth assets, but I also want part of my future income to be contractual and predictable.
4. How Deferring Income Could Increase My Future Payout
One of the most important factors in an annuity income illustration is how long the contract can be deferred. In general, giving an income benefit more time before withdrawals begin can potentially produce a larger future payout.
In the example I reviewed in the video above, I started with a $500,000 annuity purchase. If I were 59, my wife was 55, and we wanted joint income to begin when I reached 65, one of the higher illustrated payouts was approximately $54,000 per year.
Several insurers appeared in the comparison, including North American, Midland, Global Atlantic, Corebridge, Clear Spring, and EquiTrust. The exact ranking and payout can change based on the available products and rates.
I then considered a longer deferral period. In that scenario, I was age 50, my wife was 46, we placed the same $500,000 into an annuity, and we waited until I reached 65 to begin joint lifetime income.
One illustration showed the income benefit base growing from $500,000 to approximately $1.25 million. Applying a 6.55% withdrawal rate to that benefit base produced an illustrated joint income of $81,875 per year for life!
That higher payout was possible because the annuity had approximately 15 years before income began. The purpose of the contract in this example was not maximum account-value growth, it was maximum future lifetime income.
It is also important to understand that an income benefit base is generally an accounting value used to calculate income. It is not necessarily the same as the contract’s cash value, and it is usually not an amount that can be withdrawn as a lump sum.
In the illustration, the account value could eventually fall to zero, potentially around my mid-70s depending on contract performance and withdrawals. However, the contractual income would continue for life as long as the contract requirements were met.
That is why I described the strategy as being similar to buying a pension. I would be using a defined amount of money today to create a much larger cumulative stream of income over two lifetimes.
These figures are illustrations, not universal quotes. Your results could be higher or lower based on your state, age, deferral period, premium, product availability, and whether you choose single-life or joint-life income.
👉 If you are considering an annuity, use my calculators to see the highest available payouts for your specific situation.
5. Why I Would Use More Than One Annuity
I like to compartmentalize my money. Rather than asking every dollar to provide growth, safety, income, liquidity, and legacy benefits at the same time, I prefer to assign different assets to different jobs.
For example, I could purchase one annuity earlier and activate its income at age 65. At age 60, I might place another $500,000 into a different annuity and plan for that income to begin at age 70.
That would give me one contractual income stream for an earlier stage and another for later years. The rest of my assets could remain invested for growth, liquidity, or other opportunities.
Once I know my income needs are met, I may feel comfortable investing in a private company, starting another business, or purchasing a higher-risk stock. If that investment does not work out, it does not have to threaten the income my wife and I depend on.
This is the central reason I would put my own retirement money into annuities. I want a protected income foundation so I can make decisions with the rest of my portfolio from a position of confidence rather than fear.
My legacy goal also affects this decision. I have five children, and I do intend to leave them an inheritance, but my primary goal is not to make them rich.
The first job of my retirement money is to take care of me and my wife, Holly. I want to make sure our income can continue for as long as either of us is alive.
6. The Best Annuity Depends on Your State and Personal Details
There is no single annuity payout that applies to everyone. Your options can vary according to several details, including:
- Your current age
- The age when you want income to begin
- Whether the income covers one person or a married couple
- How much money you place into the annuity
- The state where the contract is issued
- The insurer and product available at that time
- The contract’s income rider, withdrawal rate, and deferral features
Product availability and insurance rules can also differ by state. Some states may offer different rider options, while other forms of lifetime-income annuities such as single premium immediate annuities or deferred income annuities may be available instead.
An income rider, a single premium immediate annuity, and a deferred income annuity can all create lifetime income, but they do not work exactly the same way. Their payouts, liquidity, account values, death benefits, fees, and timing can differ.
That is why I do not recommend selecting an annuity by looking at one company or one advertised rate. I believe you should compare the available contracts based on the outcome you actually want.
💡 Pro Tip: The annuity offering the highest account-value growth may not provide the highest lifetime income. Compare products according to the job you need the money to perform.
7. How I Would Decide Whether an Annuity Belongs in a Retirement Plan
Before placing money into an annuity, I would ask a few direct questions:
- How much dependable income will I need each month?
- When do I want that income to begin?
- Does the income need to cover only me or both spouses?
- How much money must remain liquid and accessible?
- Is my priority income, growth, principal protection, or legacy?
- How does this contract compare with other insurers available in my state?
If my goal were maximum long-term growth and I could tolerate market losses, I would likely keep that portion invested in growth-oriented assets. If my goal were predictable lifetime income, I would seriously consider an annuity designed specifically for that purpose.
The answer is not to put everything into one product. For me, it is about balancing contractual income with market-based growth.
Would an Annuity Be Right for Your Retirement Money?
Yes, I would put some of my own retirement money into annuities. I am not doing it because I expect an annuity to make me rich; I am doing it because I value certainty, lifetime income, and the ability to protect the lifestyle my wife and I want.
My plan is to combine multiple contractual income streams with assets that remain invested for growth. When my essential income needs are covered, I can take calculated risks elsewhere without putting our retirement security on the line.
Your ideal strategy may look different. The amount of income available will depend on your age, state, premium, deferral period, and whether the payout is for one person or two.
Need help with finding the best annuity for your retirement?
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- Determine what type of annuity is best for you
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