Should You Buy an Annuity for Retirement?

1. What Type of Annuity Is It?

There are many types of annuities, including:

• Fixed
• Variable
• Indexed
• Immediate
• Deferred

Each variation comes with unique rules, payout structures, and risks. Some are simple, while others have layers of fine print that can be easy to miss.

If you’re considering an annuity, it’s vital to understand the type that best fits your goals. This makes the expertise of an advisor that much more valuable. Before committing, connect with an expert to be sure it suits your financial plan.

2. Can You Afford to Lock Up Your Money?

Locking up your money in an annuity might sound safe—until life throws you a curveball. Many annuities come with surrender periods, early withdrawal penalties, or limited access to your savings. This can create major issues if you need liquidity later on, such as for healthcare, emergencies, or unexpected life changes.

Unlike during your career, your retirement relies on several sources of income, including your investments and savings. Committing a lump sum of money to an annuity may squeeze your cash flow and put you in a position of unnecessary financial strain.

Before investing, an advisor can help stress-test your plan and verify you’re not tying up funds you may need down the road.

3. Is This Solving a Real Retirement Gap?

Marketers often label annuities as a catch-all solution for retirement income. However, without a clear purpose, they can become an expensive crutch rather than a smart strategy.

The idea of “guaranteed income” is tempting, but what specific need is it solving? Consider:

• Do you already have predictable income from Social Security, pension, or 401(k)?
• Is your portfolio already capable of sustaining withdrawals?
• Are you concerned about longevity, market risk, or overspending?

If you can’t clearly define the gap you’re trying to fill, you may end up overpaying for a benefit you don’t need. An experienced fiduciary advisor can help clarify your retirement income plan, run projections, and determine whether an annuity solves a real issue.

4. How Does an Annuity Compare to Other Income Strategies?

Annuities can feel like a “safe” bet, but that protection often comes at a price. Commissions, mortality and expense charges, optional rider fees, and lower returns can erode your future income.

Compare that to alternative income strategies, like:

• A structured withdrawal plan from a diversified portfolio
• Bond ladders or dividend-paying investments
• Building a buffer of cash and short-term assets
• Roth conversions to reduce future tax drag

Each has its pros and cons, but they tend to offer greater flexibility, transparency, and liquidity—all of which annuities can lack. Qualified financial advisors can help you compare your options side by side, factoring in your risk tolerance, taxes, estate planning goals, and cash needs to determine which income approach gives you the most control and confidence.

5. Are You Getting Objective Financial Advice?

An annuity might be the right call—but how can you be sure the recommendation is truly about your needs, not someone else’s commission?

Many people are surprised to learn that not all financial professionals are held to the same ethical standard. Insurance agents and brokers can sell annuities based on what’s “suitable,” not necessarily what’s best for you.

That’s why working with a fiduciary advisor is so important. Fiduciaries are legally required to act in your best interest, without commissions influencing their recommendations. They:

• Take time to understand your long-term goals and values
• Walk through the pros and cons of an annuity in the context of your holistic plan
• Suggest only what aligns with your needs—even if that means choosing a different path entirely

Before you lock in a long-term financial product, getting objective guidance from a fiduciary can give you the clarity and confidence you deserve.

How to Find the Right Financial Advisor

Choosing the right advisor is just as important as deciding to hire one. Look for a fiduciary, someone legally obligated to put your interests first. The best advisors are transparent, hold credentials, and offer guidance tailored to your unique needs—not just generic advice.

To make it easier, our free matching tool helps you find a vetted fiduciary financial advisor who aligns with your needs. Just select your state below and complete the form to get matched with a professional in minutes: