Annuities in Retirement Planning: EDU #2523

June 4, 2025

Annuities in Retirement Planning: EDU #2523

Chris’s Summary:
Jim and I kick off our annual Annuity Awareness Month series by explaining how using annuities in retirement planning can help manage longevity risk and provide guaranteed income. We cover when they’re worth considering, what they actually solve for, and how they might fit into a plan—if at all. We also explain why many people are skeptical of annuities and why, in many cases, that skepticism is justified.

Jim’s “Pithy” Summary:
Chris and I launch our annual series for National Annuity Awareness Month with a foundational discussion on annuities: what they are, why they exist, and how we use them—sparingly but strategically—in retirement planning.

This episode lays out the key insurance roles of annuities: to protect against longevity risk and to provide principal guarantees. We explain the importance of matching secure income to the Minimum Dignity Floor™, especially for clients who worry about running out of money or spending too little early in retirement. We also touch on the emotional and cognitive benefits of predictable income streams—what I call “bottomless cup of coffee” money. It helps people feel secure, simplifies decisions as we age, and eases the burden on a less-involved spouse.

We explore the history of how annuities got such a bad rap—some of it deserved, especially when the industry prioritized commissions and free dinners over client outcomes. I also share how my own financial education at Boston University drilled anti-annuity rhetoric into my head, even while praising the “three-legged stool” of Social Security, pensions, and savings. It made no sense: the annuity was the obvious substitute for the lost pension leg. If you’re a regular listener, you already know we’re not annuity salespeople, and we certainly don’t hate them either. We see them as tools, and just like dogs, you match the tool to the task. You wouldn’t take a bichon duck hunting, and a Chesapeake Bay retriever doesn’t belong in a carry-on crate. Same principle with annuities.

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