Financial PlanningRetirement

Utilizing Annuities as You Get Closer to Retirement

By March 21, 2023 No Comments

As you get closer to retirement, it can be a good idea to explore multiple options to protect and grow your accumulated savings.

Retirement is a such an important and significant milestone in a person’s life, and proper planning is essential to ensure that one has the best chance to maintain a comfortable and ideal lifestyle without running out of money. Market fluctuations and declines, however, can make planning for retirement difficult. Luckily, financial and retirement planners can often look at problems through a more experienced lens to offer solutions they’ve seen work for other clients.

In this case study, we’ll explore how an annuity can be used to help a couple on the cusp of retirement protect their most important assets during periods of market volatility. This example is purely hypothetical and is only used to explain features of an annuity and how one can be used in a holistic financial plan. Your situation may vary, and we always recommend speaking to your advisor about how different investment and insurance products can affect your portfolio.


Elizabeth and Eugene are a couple in their early 60s. They’re right on the edge of retiring and have been planning for their post-career lives for decades. They have saved diligently and faithfully, contributing to their various retirement accounts and investing in a diverse portfolio of stocks, bonds, mutual funds and other conventional vehicles for growth. However, as they approach retirement, they have become concerned about recent stock market declines, such as the ones we’ve seen in recent years, and the impact those declines might have on their savings.

Elizabeth and Eugene have been closely monitoring and following the stock market and their portfolios for many years and have seen how quickly their investments can fluctuate in value. They’re particularly worried that continual declines in the market may affect their ability to fund their ideal retirement lifestyle. Knowing that they have to take action to protect their assets while still not wanting to sacrifice the potential for growth, they consult their financial advisor.

Typical Potential Solution

The typical solution for retirees concerned about the stock market is to adjust their portfolio to take a more conservative approach. They may opt to invest in less risky investments, such as bonds or dividend-paying stocks, or they may allocate a portion of their portfolio to cash. While these strategies can help reduce risk, they also come with tradeoffs. For example, investing in bonds or holding cash can provide lower or no returns, which may limit the potential for valuable growth that could support their retirement needs, especially in the face of skyrocketing inflation.

Proposed Potential Solution

After consulting with a financial advisor, Elizabeth and Eugene decide to purchase an annuity to protect their assets. Rather than an investment in the market, an annuity is a insurance product that provides principal protection and a rate of growth, both of which are guaranteed by the claims-paying ability of the issuing insurance company. It also provides stream of income for a set period or for life. By purchasing an annuity, Elizabeth and Eugene can provide themselves with another vehicle for retirement income that isn’t impacted by fluctuations in the market or their own longevity.

For their unique situation, the couple was given a recommendation to purchase a type of annuity called a fixed indexed annuity, or an FIA, which guarantees a fixed rate of growth that is linked to a market index such as the S&P 500. Growth may be capped at a certain rate for some annuity policies, but an FIA provides principal protection even if the index drops the way it did in 2022. Fixed indexed annuity features vary by contract, but most offer optional additional riders, such as income for life, death benefit for heirs, or coverage for long-term care or critical illness, giving an annuity even more potential value in retirement.


Retirement planning can be challenging without the proper direction, especially when market fluctuations and volatility cause uncertainty. Understandably, risks like market risk and sequence of returns risk loom over the heads of retirees, and while many may opt to adjust and redistribute their portfolios to reduce risk, this may not always be the best solution. An annuity has the potential to offer protection from market declines, stock market upside and a dependable income stream for life, regardless of market conditions. After speaking with their financial advisor, Elizabeth and Eugene decided that purchasing an annuity was the most advantageous option to achieve their unique goals and provide a comfortable retirement.

To learn more about incorporating annuity products into your retirement plan, please give Sylvan Financial Advisors a call at (201) 282-5332.

Keep in mind, this article is for informational purposes only and not to be construed as financial or investing advice, nor is it a replacement for real-life advice based on your unique situation. Investing and retirement account rules are constantly changing, and it is recommended that you work with your financial professional to assess and invest based on your unique situation.