If you’re close to retirement—or already retired—you’ve probably been told to move into a 60-40 portfolio.
That usually means 60% stocks, 40% bonds, with the idea that you still get growth while reducing risk.
But here’s the real question many retirees are now asking:
Is an annuity a better alternative to a 60-40 portfolio in retirement?
Let’s break this down clearly, without hype or sales talk.
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 our annuity calculator
Why Retirees End Up in a 60-40 Portfolio
As we age, priorities change.
Most retirees want:
- Less market risk
- Fewer sleepless nights
- More predictable outcomes
A 60-40 portfolio can help soften the blow of market crashes.
- If the market drops 20%, maybe your portfolio drops 5–10%.
- But when the market rises 30%, you might only see 15–18%.
That’s the trade-off.
Historically, many 60-40 portfolios average around 7–9%, with ~8% often used as a reasonable long-term estimate.
That’s solid… but it still comes with market risk and emotional stress.
The Hidden Problem With a 60-40 Portfolio in Retirement
Even with reduced risk, a 60-40 portfolio still moves down when markets fall.
And in retirement, those down years hit harder because:
- You may be withdrawing income
- Losses early on can permanently damage your plan
- Emotional decisions become more likely
This is why many retirees start asking:
“Is there a way to get comparable returns… without market risk?”
That’s where annuities come into the conversation.
How Annuities Change the Risk Equation
With annuities—especially MYGAs and fixed indexed annuities—you are not invested directly in the stock market.
That means:
- No losses when the market crashes
- No emotional rollercoaster
- No sequence-of-returns risk
When markets drop, your account does not lose a dime.
That alone is a major difference compared to a 60-40 portfolio.
MYGAs: The “Boring but Beautiful” Option
A MYGA (Multi-Year Guaranteed Annuity) works a lot like a CD—but with better features.
Right now, MYGAs are offering:
- Fixed rates around 5–6%
- Guaranteed growth
- No market exposure
- Tax-deferred growth (even on non-qualified money)
💡 Pro Tip: MYGAs often work best at 5-, 7-, and 10-year terms, where rates are usually strongest.
Example:
- $500,000 at ~5.5–6%
- Grows to roughly $720K–$900K, depending on term
- 100% guaranteed
No volatility. No guesswork.
👉 Want help finding the best MYGA rates available today? Schedule a call below.
Can Indexed Annuities Compete With a 60-40 Portfolio?
This is where things get interesting.
A fixed indexed annuity (FIA) gives you:
- Market upside (through indexes like the S&P 500)
- Downside protection (you don’t lose money in bad years)
Instead of owning stocks, the insurance company uses call options to give you a portion of market gains.
Over time, well-designed indexed annuities have shown:
- Average returns around 7–8%
- Zero losses in down market years
That puts them side-by-side with a 60-40 portfolio—but without market risk.
The Big Mistake Most People Make With Indexed Annuities
Not all indexed annuities are created equal.
There are thousands of indexes, and many are:
- Back-tested only
- Brand new
- Designed to look amazing on paper
Some show “illustrated” returns of 20–30%… but only because:
- They haven’t existed very long
- They rely on assumptions
- Caps and participation rates often get reduced
That’s why expectations matter.
A realistic, conservative indexed annuity—using established indexes and disciplined carriers—is what actually delivers results.
This is where working with someone experienced matters.
A Realistic Comparison: Annuity vs 60-40
60-40 Portfolio
- Average return: ~7–9%
- Subject to market losses
- Emotional stress during downturns
- No guarantees
MYGA
- Return: ~5–6%
- Fully guaranteed
- No market risk
- Simple and predictable
Indexed Annuity
- Average return: ~7–8% (historically)
- No losses in down markets
- Growth potential + protection
- Designed for retirement, not accumulation hype
In 2000, 2008, and 2020:
- 60-40 portfolios fell
- Indexed annuities stayed flat
That difference matters in retirement.
Should an Annuity Replace Your 60-40 Portfolio?
For many retirees, the answer is yes—or at least partially.
Annuities can:
- Reduce overall portfolio risk
- Provide steadier growth
- Remove emotional decision-making
- Protect income sustainability
They’re not meant to “beat the stock market.”
They’re meant to:
- Compete with conservative portfolios
- Protect retirement income
- Let you sleep at night
And for many people, that’s the real goal.
Conclusion
If you’re thinking about replacing—or reducing—your 60-40 portfolio, annuities deserve a serious look.
There are good options and bad options.
The difference comes down to structure, expectations, and experience.
Need help with finding the best annuity for your retirement?
Click here to schedule a call with me.
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