Most people don’t know this, but there are really only four reasons anyone ever buys an annuity. Just four. It doesn’t matter who you are, where you live, or how much money you have—the reasons to buy an annuity are the same. I didn’t come up with the acronym myself, but I sure use it a lot:
P.I.L.L.
That stands for:
| Letter | Stands For | What It Means |
| P | Principal Protection | Keeping your money safe from market losses |
| I | Income for Life | Guaranteed monthly income you can’t outlive |
| L | Legacy | Passing money to your loved ones or charity |
| L | Long-Term Care | Using your money to help cover future care costs |
Let’s walk through each one and talk about when it makes sense to use an annuity for that reason.
1. The Four Reasons Anyone Buys an Annuity: P.I.L.L.
Principal Protection
If you want to protect your retirement savings from market crashes, an annuity can help. Two types are best for this:
- Fixed Indexed Annuities (FIAs): Your money isn’t in the stock market, but it can still grow based on how the market performs.
- Multi-Year Guaranteed Annuities (MYGAs): These are more like CDs, giving you a set interest rate over a fixed number of years.
Both options make sure your principal (the money you put in) is never lost due to market downturns.
Income for Life
You can use annuities to guarantee monthly income for the rest of your life—no matter how long that is. Options include:
- Fixed Indexed Annuities with Income Riders: These provide steady monthly income starting at a future date you choose.
- SPIAs (Single Premium Immediate Annuities): Income starts right away.
- DIAs (Deferred Income Annuities): You wait at least a year before taking income, but the longer you wait, the higher your payments.
Legacy
Some people want to leave money behind for their family or a cause they care about. Life insurance is usually the best way to do that. But if you don’t qualify for life insurance, a fixed indexed annuity with a bonus or guaranteed death benefit growth can help.
- Some annuities offer yearly increases to the death benefit.
- These may come with a fee, and often have age limits (usually up to 83 or 85 years old) to qualify.
Long-Term Care
If you’re worried about needing care later in life, some annuities can help cover those costs:
- Asset-based long-term care annuities are built specifically for this.
- Other types, like FIAs and DIAs, can also work if structured the right way.
This part of the strategy depends a lot on your health, your age, and your goals, so it’s good to get help designing it.
2. Why Lifetime Income Is So Critical Today
Here’s something many people don’t think about: you might live longer than you ever expected. A lot longer.
A study published in the journal Nature suggested the human lifespan may top out at around 115 years. That might sound crazy, but we’re already seeing people live that long. And each year, medical technology helps people live even longer.
Look at these numbers:
| Year Prediction Made | “Maximum” Life Expectancy Predicted | Reality |
| 1928 | 64.75 years | Already surpassed at the time |
| 1990 | 85 years | Broken by Japanese women in 1996 |
| 2016 | 115 Years | One woman already lived to 122 |
Today, people 85+ are the fastest growing age group. And the number of people turning 100 will increase over 1,000% by 2050.
That’s exciting—but it brings a challenge:
What if you run out of money before you run out of life?
That’s why lifetime income is such a key part of retirement planning. You need a stream of income that keeps going, no matter how long you live.
3. A Retirement Income Analogy You Won’t Forget
Let’s make this simple. Imagine you’re driving from California to Las Vegas. The car shows you only have 50 miles of gas left, but Vegas is still 100 miles away.
Someone told you not to worry—you’d have more than enough fuel. But now you’re in the middle of the desert and starting to panic. You shut off the AC, slow down, and stop thinking about detours or sightseeing. What was supposed to be a fun trip is now just stressful.
That’s how a lot of people feel in retirement. They know how much they’ve saved, but they don’t know how far it will take them.
Now imagine your car is a hybrid:
- The battery helps stretch your gas.
- The engine recharges the battery as you go.
- And if everything fails, a solar panel on the roof kicks in to keep you moving.
You’d feel a lot better, right?
That’s what an income annuity can do. It gives you peace of mind. It keeps the income coming, month after month, no matter what. Even if you live a long life—and I hope you do—you’ll still have income to rely on.
4. What to Do If You’re New to Annuities (Or Still Unsure)
If this is your first time hearing about annuities, don’t worry. There’s a simple way to learn more.
I created a video series that shows you how annuities can give you up to 20% more spendable income in retirement. You’ll see real-life examples and easy-to-follow explanations. It’s a great way to understand how all these pieces can work together.If you already know a bit about annuities but want help deciding if they fit your situation, the next step is simple:
Schedule a short phone call with me. I’ll answer your questions and help you figure out what’s right for you.
All The Best,
Marty Becker
Podcast Episode 75: 4 Reasons to Buy an Annuity
Download Episode 75: 4 Reasons to Buy an Annuity on Apple Podcast