To Buy or Not to Buy: Do Annuities Have a Purpose in Your Portfolio?
There are two specific types of retirement savers for whom annuities make a lot of sense. See if you're one of them.


Investors have a love-hate relationship with annuities.
1. Annuities offer guaranteed income
I often meet with people who have no guaranteed income for retirement other than their Social Security benefits. They might have other savings, but it’s in the stock market or other investments with some risk.
So, let’s say a couple comes in with living expenses of $4,000 a month, and their Social Security checks will cover only $2,000 of that. Neither spouse has a pension, and they need and want another income stream guaranteed to pay out the remaining $2,000 every month.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
That’s where an annuity comes in. By positioning a portion of their savings into an annuity, they can potentially generate the extra $2,000 a month and bridge that income gap. Once that need is covered, they may be able to take some risk with the rest of the money in their portfolio — or they can use it any way they please through the years, for whatever need comes up.
If the same couple came in with plenty of fixed income — Social Security and a pension … and a desire to keep the rest in the market — we wouldn’t necessarily recommend an annuity, because they wouldn’t need it. But in this case, it serves a purpose, and they don’t have to worry that the ups and downs of the market will upend their lifestyle in retirement.
2. Annuities offer protection
Sometimes we have clients who have the guaranteed income they need, but they still don’t want their money in the stock market. They prefer to focus on preservation over accumulation, and they don’t want to take a risk with any part of their nest egg. They just want to put the money in a safe place where it can grow at a reasonable rate.
We often find a fixed indexed annuity is right under these circumstances. It’s designed to grow safely, and may earn anywhere from 3% to 6%. The purpose behind the purchase is a little different. It’s designed to help keep your money protected. But again, an annuity is a viable retirement planning vehicle.
Annuities can offer the protection and income many people need. You can’t lose your principal, and you’ll have guaranteed income coming from it. What’s not to like about that?
Kim Franke-Folstad contributed to this article.
Annuities are insurance contracts designed for retirement or other long-term needs. They provide guarantees of principal and credited interest, subject to surrender charges. Annuity guarantees and protections are backed by the financial strength and claims paying ability of the issuing insurer. The article is for general information only and is not intended to provide advice or recommendations for any individual. We suggest that you consult your accountant, tax, or legal adviser with regard to your individual situation.
Cornerstone Wealth Management offers securities through Kalos Capital, Inc. and investment advisory services through Kalos Management, Inc., both at 11525 Park Woods Circle, Alpharetta, Georgia 30005, (678) 356-1100. Cornerstone Wealth Management is not an affiliate or subsidiary of Kalos Capita, Inc. or Kalos Management Inc.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Jammie Avila is the managing partner/co-founder of Cornerstone Wealth Management in Las Vegas and Henderson, Nevada. Jammie has passed the Series 7 and 63 exams and is licensed to sell insurance products. Jammie and his wife, Danielle, have four children.
-
Ask the Editor — Tax Questions on "The One Big Beautiful Bill Act"
Ask the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on the new tax law.
-
The Anti-Prime Day Deals Guide to Everyday Essentials Worth Stocking up on at Walmart, Target and Sam's Club
Skip Amazon and shop these anti-Prime Day deals at Walmart, Target or Sam's Club to save on all of your household essentials.
-
I'm a Financial Planner: Here Are Some Long-Term Care Insurance Tips for Every Age
Strategies include adding riders to life insurance for younger individuals and considering hybrid or traditional long-term care policies for those in their mid-50s and 60s.
-
Engineering Reliable Retirement Income in 2025: An Expert Guide
For dependable income, consider using a bucket strategy and annuities in tandem to promote structure, flexibility and peace of mind.
-
Crazy Markets Shouldn't Derail Your Retirement if You Follow This Financial Pro's Plan
Being nervous about retiring in a volatile market is a red flag that you're relying too heavily on your investment portfolio, rather than a comprehensive plan.
-
Key to Financial Peace of Mind: Think 'What's Next?' Rather Than 'What If?'
Even if you've hit your magic number for retirement, it's hard to stop worrying about money. Giving it a clear purpose is one way to reduce financial anxiety.
-
Three Estate Planning Documents a Business Owner Can't Afford to Skip
A business owner's estate plan should protect the company and its employees as well as the entrepreneur's heirs. These three documents are critical.
-
Financial Fact vs Fiction: Why Your 'Magic Number' Isn't Actually Magical
Do you think you're diversified if you're invested in the S&P 500 and Nasdaq? Do you think your tax rate will fall in retirement? Think again — and read on for other myths that could be leading you astray.
-
Opportunity Zones: An Expert Guide to the Changes in the One Big Beautiful Bill
The law makes opportunity zones permanent, creates enhanced tax benefits for rural investments and opens up new strategies for investors to combine community development with significant tax advantages.
-
Five Ways Retirees Can Keep Perspective Through Market Jitters
Market volatility is a recurring event with historical precedents (the dot-com bubble, global financial crisis and pandemic), each followed by recovery. Here's how people who are near or in retirement can navigate economic uncertainty.