What Does an Annuity Protect You Against?

Quick Answer: Annuities protect against outliving your savings, market crashes, inflation, and sequence-of-returns risk. Learn how each type shields your retirement income.

Understanding Annuity Protections

Annuities are financial products designed to provide protection against several retirement risks. Since 2011, SafeMoney.com has been guiding individuals on how annuities can secure their financial future. By offering a guaranteed income, annuities ensure that retirees do not outlive their savings. This protection is crucial in maintaining a stable post-retirement lifestyle.

Protection Against Market Volatility

Market fluctuations can pose significant risks to retirement savings. Fixed annuities offer a safeguard by preserving the principal, even during market downturns. They provide interest based on a guaranteed rate or a financial benchmark, ensuring steady growth without exposure to market losses.

Guarding Against Sequence-of-Returns Risk

Sequence-of-returns risk is the danger of experiencing poor investment returns at the onset of retirement. This can severely impact the longevity of your savings. Annuities counter this risk by delivering consistent income, regardless of market conditions, thereby stabilizing your financial plan.

Inflation Protection with Annuities

While inflation can erode purchasing power, certain annuities, like fixed index annuities, offer growth potential that can help offset inflationary pressures. Although the rate of return is not guaranteed, these annuities provide an opportunity for higher interest earnings compared to traditional fixed annuities.

Annuity Type	Protection Offered
Fixed Annuity	Principal protection, guaranteed interest
Fixed Index Annuity	Potential for higher interest, inflation offset

Frequently Asked Questions

How do annuities protect against outliving your savings?

Annuities provide a guaranteed income stream for a set period or for life, ensuring you don't outlive your savings.

Can annuities shield you from market risk?

Yes, fixed annuities protect your principal from market losses while offering interest based on a guaranteed rate or financial benchmark.

What is sequence-of-returns risk and how do annuities help?

Sequence-of-returns risk refers to the impact of market losses at critical times. Annuities mitigate this risk by providing stable income regardless of market conditions.

Do annuities offer protection against inflation?

Certain annuities, like fixed index annuities, can offer growth potential that helps combat inflation, although the rate of return is not guaranteed.

Ready to protect your retirement savings? Connect with a SafeMoney certified advisor who can build a personalized strategy for your situation.