Annuities for Income —
Tool or Trap?

Annuities have a reputation problem. Some types are great tools for converting savings into guaranteed income. Some are over-priced products sold for commissions. The label "annuity" covers very different things. Knowing which type is which matters.

0% floor

The defining feature of Fixed Indexed Annuities

In a bad market year, you don't lose money — your return is just zero. In a good year, you participate up to a cap (often 8-12%). The trade-off: no losses, but limited upside. For risk-averse retirees, this can be powerful.

Four main types

Fixed Annuity

Like a CD with the insurance company. Guaranteed interest rate for a term.

Best for

Conservative savers wanting principal protection and predictable growth.

Fixed Indexed Annuity

Returns linked to a market index (S&P 500, etc.) with a floor (usually 0%) and a cap.

Best for

People wanting market-like returns without downside risk.

Immediate Income Annuity (SPIA)

Single lump sum in exchange for guaranteed monthly income — usually for life.

Best for

Retirees wanting to convert a portion of savings into a personal pension.

Variable Annuity

Cash value invested in subaccounts (like mutual funds). Can gain or lose. Higher fees.

Best for

Risk-tolerant investors comfortable with market exposure inside a tax-deferred wrapper.

The case for guaranteed income

Most retirees fear running out of money more than they fear missing market gains. An annuity that covers essential expenses (mortgage, healthcare, groceries) for life turns retirement from a math problem into a behavioral question — even if the market falls 50%, the basics are covered.

The rest of the portfolio can be invested more aggressively for growth, gifts, or legacy — because it's not the only thing standing between you and survival.

When annuities are wrong

Variable annuities with high fees and complex riders are often a bad deal. So are annuities sold to people without dependable income needs. So are annuities that lock up too much of someone's liquid net worth. The product isn't bad — the misapplication is. Work with a fiduciary who isn't paid by the carrier.