You’ve probably heard that annuities are great if you’re worried about running out of money. But here’s something many people don’t realize: annuities aren’t just for worst-case scenarios. If you retire when the market is up, you might have more money than expected. But many people still don’t spend it because they’re afraid of future market drops.
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- Worst-case scenario thinking: “What if the market crashes?”
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- Best-case scenario thinking: “What if I retire when the market’s doing great and don’t enjoy it?”
Why Income Annuities May Be the Key to Enjoying Retirement
So, how do we get over this fear? Income annuities. With an income annuity, you know your money will keep coming, no matter what. There’s even a new research paper from economists David Blanchett and Michael Finke that proves this. They don’t sell annuities; they study retirement strategies. Their research shows that retirees with guaranteed income feel confident to spend more in retirement.
The “Annuity Puzzle” and How to Solve It
Here’s the deal: People save for retirement, but once they get there, they’re afraid to spend. Economists call this the “annuity puzzle.” Why? Because people fear outliving their savings. But annuities solve that problem. They give you the peace of mind to spend more in retirement without fear of running out.
Here’s how annuities help:
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- Guaranteed lifetime income: You get paid regularly, no matter how long you live.
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- Psychological “license to spend”: You’ll feel confident spending your savings because the income keeps coming.
The Cultural Shift Away from Leaving Inheritances
Another myth that keeps people from spending is thinking they need to leave a big inheritance. Most baby boomers I talk to don’t have that plan anymore. Today’s retirees want to focus on enjoying retirement, not hoarding money for their heirs.
If you do want to leave something behind, consider this:
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- Life insurance: Provides a tax-free payout.
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- Annuities with a death benefit: Offer a smart, low-cost way to leave money.
Guaranteed Income vs. Investments: The Spending Difference
Here’s where annuities make a big difference. Studies show that retirees with guaranteed income spend more in retirement each year compared to those who rely on investments alone.
Let’s break it down:
| Type of Retirement Savings | Spending Confidence | Annual Spending |
| Investments (401k, IRAs) | Low confidence | Spend conservatively |
| Guaranteed Income (Annuities) | High confidence | Spend more freely |
With guaranteed income, you’re not afraid to spend because you know that paycheck will keep coming.
How Income Annuities Provide a 20% or More Spending Boost
Here’s the kicker: Income annuities can boost your retirement spending by 20% or more each year. That’s a huge difference!
Why this matters:
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- People without pensions: 89% of retirees don’t have pensions, so income annuities are the only way to guarantee lifetime income.
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- More spending freedom: You’ll spend more confidently when you know your income won’t run out.
Advisors Could Be Undermining Your Retirement Enjoyment
Unfortunately, not all financial advisors will recommend annuities. Some might not bring it up because they cannot continue to charge management fees, or they simply don’t understand how annuities work.
Here’s what to ask your advisor:
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- Are you showing me options for guaranteed income?
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- How does this strategy compare to income from investments?
If they aren’t talking to you about annuities, it could be hurting your retirement plans.
Your Next Steps Toward Financial Freedom in Retirement
So, if you haven’t explored income annuities yet, now’s the time. Schedule a call with me, and let’s talk about how the Atlas Annuity Strategy can work for you. If you’re not ready to chat, at least check out my video series, “20% More Spendable Income in Retirement.”
Podcast Episode 46: Spend More in Retirement with Guaranteed Income Annuities
Download Episode 46: Spend More in Retirement with Guaranteed Income Annuities on Apple Podcast