Lifetime income options
Explore fixed, variable, and fixed-indexed annuities as part of a retirement income strategy, featuring transparent guidance from an independent licensed financial advisor.
Overview
An annuity is a contract between you and an insurance company. You contribute a lump sum or a series of payments, and the insurer provides a stream of income, either immediately or at a future date, based on the terms of the contract. Certain annuity products are designed to provide income for life, which may help retirees address the concern of outliving their savings. All annuity benefits and protections are subject to the claims-paying ability of the issuing insurance company and the specific terms of the contract.
There are three primary types of annuities, each suited to different goals and risk tolerances. Fixed annuities offer a guaranteed interest rate for a defined period. They are predictable, conservative, and appropriate for funds you cannot afford to lose. Variable annuities allow you to invest in sub-accounts similar to mutual funds, with growth potential tied to market performance and corresponding investment risk. Fixed-indexed annuities offer a middle ground: participation in market upside based on a market index like the S&P 500, subject to caps and participation rates, combined with a floor that limits downside exposure. Each type has appropriate use cases, and each comes with its own cost structure, surrender charges, and income rider terms. All investments carry risk, including the possible loss of principal for variable annuities.
Annuities are frequently misunderstood, and sometimes misrepresented, which is exactly why working with an advisor who explains all costs, surrender periods, and income rider terms clearly and completely is essential. Michael Schroder provides a thorough, transparent review of any annuity product before recommending it, and he ensures it genuinely fits into your overall retirement strategy rather than being recommended in isolation. An annuity that is appropriate in one financial context can be entirely inappropriate in another. Suitability, matching the product to the client's actual needs, timeline, and financial picture, is the foundation of every annuity conversation Michael has.
Important: Annuity products are designed to provide retirement income and other benefits subject to the contract terms and conditions. All benefits, including income riders, are subject to the claims-paying ability of the issuing insurer. Withdrawals taken prior to age 59½ may be subject to ordinary income tax plus a 10% federal tax penalty. Surrender charges may apply during the surrender charge period. Consult a qualified tax professional for tax-related guidance.
Key Benefits
Lifetime Income Options
Certain annuity products with income riders are designed to provide income payments for life, regardless of how long you live, subject to contract terms and the insurer's claims-paying ability.
Tax-Deferred Growth
Annuity earnings grow tax-deferred until withdrawn. This allows the full account value to compound without annual tax drag, which is a meaningful benefit for long accumulation periods. Ordinary income tax applies upon withdrawal.
Principal Protection Options
Fixed and fixed-indexed annuities offer protection of principal from market downturns, making them an important consideration for the portion of retirement assets you cannot risk losing.
Death Benefit for Heirs
Most annuities include a death benefit that passes account value to named beneficiaries outside of probate, ensuring your heirs receive value from the contract. This is subject to contract terms.
No Contribution Limits
Unlike IRAs and 401(k) plans, annuities have no IRS-imposed contribution limits. This makes them a potential option for individuals who have maxed out other tax-deferred vehicles and want additional tax-deferred accumulation.
Transparent Suitability Review
Michael reviews every annuity product, including all costs, surrender periods, and income rider mechanics, to ensure it genuinely fits your situation before any recommendation is made.
Who It's For
Pre-Retirees Concerned About Outliving Their Savings
If the prospect of depleting retirement assets in your 80s or 90s is a real concern, certain annuity products with lifetime income riders may address that risk, subject to contract terms and insurer claims-paying ability.
Retirees Without a Pension Seeking Predictable Income
For those without a defined benefit pension, an income annuity can serve a similar function, providing a predictable monthly income stream alongside Social Security to cover essential retirement expenses.
High Earners Who Have Maximized Other Tax-Deferred Vehicles
For individuals who have already maximized their 401(k) and IRA contributions, a deferred annuity may provide additional tax-deferred growth, though the absence of an upfront tax deduction is an important distinction.
Individuals Without Family to Rely On for Care
Not everyone has adult children nearby who can provide or coordinate care. For those without a strong family support network, LTC insurance provides a funded plan for professional care when family isn't available.
Common Questions
A surrender charge is a fee charged if you withdraw more than the free withdrawal amount from your annuity contract during the surrender charge period, which is typically 5 to 10 years depending on the product. Surrender charges are highest in the early years and typically decrease each year until the surrender period ends. Most annuities allow penalty-free withdrawals of 10% of the contract value per year. Michael explains the full surrender charge schedule of any product before recommending it, and only recommends annuities with surrender periods appropriate for the client's actual liquidity needs and timeline.
An income rider is an optional feature added to a deferred annuity that provides a guaranteed income benefit when you're ready to begin withdrawals, without requiring you to annuitize (give up control of the account value). Income riders typically come with an annual fee and provide a benefit base that grows at a specified rate. The benefit base is used to calculate your future income payment, not the contract value itself. The income payment continues for life regardless of how the underlying account value performs, subject to the terms of the rider and the claims-paying ability of the insurer. Michael walks clients through the specific mechanics of any income rider under consideration.
This is one of the most important questions in annuity suitability. A qualified annuity funded with IRA or 401(k) dollars already benefits from tax deferral through the IRA wrapper, so the additional tax deferral provided by the annuity contract itself is redundant. In those cases, the primary reason to use an annuity would be for the insurance features, such as income riders, death benefits, and principal protection, rather than the tax deferral. Using a non-qualified annuity funded with after-tax dollars preserves the tax-deferral benefit more meaningfully. Michael discusses this distinction explicitly before recommending any annuity product for IRA assets.
State insurance guaranty associations provide a layer of protection for annuity contract holders if a licensed insurer becomes insolvent. In Nebraska, the Nebraska Life and Health Insurance Guaranty Association provides coverage up to certain limits per contract holder. However, guaranty association coverage is limited and should not be the primary basis for selecting an annuity product. Michael emphasizes carrier financial strength ratings as a key criterion in product selection, and does not recommend products from insurers with questionable financial stability.
Related Services
Retirement Planning
Annuities are most effective when integrated into a comprehensive retirement income plan alongside Social Security, IRAs, and other income sources. Explore the full retirement planning picture.
Learn More →Investments & Wealth Management
Annuities are one piece of a retirement income strategy. Market-based investments in taxable and tax-deferred accounts play a different but complementary role in building retirement wealth.
Learn More →Life Insurance
Some permanent life insurance policies have characteristics similar to annuities. Explore how life insurance fits into your financial plan alongside, or instead of, annuity products.
Learn More →Michael provides complete transparency on every annuity product, costs, surrender terms, income rider mechanics, and whether it genuinely fits your situation. No pressure. No surprises.
