Modern Retirement Planning: The Case for Lifetime Income Annuities in Portfolios
Annuity sales exceeded $200 billion in the first half of 2025 and are set to break all-time records by year-end. There are several factors driving financial advisors to incorporate lifetime income annuities into client portfolios:
Planning: Today's 65 year old can get nearly 8% cash flow guaranteed for life from an annuity.
Advisors recognize the opportunity to use the annuity for cash flow, be more aggressive with the rest of the clients portfolio, and can see the material benefit this strategy provides long-term to a client's portfolio. If you'd like to read a case study built in RightCapital that looks at a client portfolio with vs without an annuity, click HERE
Economic: Higher rates and the shift from defined benefit plans to defined contribution plans.
Higher interest rates have made today's annuities more attractive than they've been in decades. Today's 65 year old can get nearly 8% cash flow for life. Less than a decade ago, that rate was only 5%. Advisors who have seen both sides are locking in today's guarantees.
A long-term factor is the US shifting away from defined benefit plans to defined contribution plans. 30 years ago, almost half of retirees had a pension. Today, only 15% are retiring with a pension, but many still benefit from guaranteed income to supplement social security.
Psychological: Retirees' #1 fear is running out of money.
Forbes' research indicates retirees who generate a portion of their remaining income needs from guaranteed sources will worry less, spend more, and have a more enjoyable retirement. If you'd like to read Forbes' research on why annuities are "healthy" for retirees click HERE
Spotlight Client Solution*
7.6% Immediate Income at Age 65
A 65 year old would need to earn a net return of 6.55% each year until they're 90 if they wanted to use $100k to generate $7,600 of income without running out of money.
It's possible to do this in the market, but many advisors are using F&G's Safe Income Advantage to provide their clients with baseline income to supplement social security.
Notable Client Solutions*
11% Cash Flow at Age 65
F&G's Safe Income Advantage tops the charts for deferred income. A 60 year old depositing $100k is guaranteed $11,000 of income starting at age 65.
$11,000 income/year for life
$286,000 total income at age 90
6.94% IRR at age 90
8.75% Guaranteed S&P Cap
Revol One's Enduris 6 has become the go-to guaranteed S&P cap product after recent decreases from MassMutual Ascend and Global Atlantic.
S&P annual cap guaranteed at 8.75% for all 6 years of the surrender schedule.
10% liquidity available years 2-6.
Former CEO of Allianz is their CEO.
*Rates may be subject to premium banding. Products may not be available in all states. Replacement must be suitable and meet all requirements.
At Foundational Income, we strive to bring relevant topics and solutions to your fingertips in a straightforward way. We don’t see the need to keep products nor carriers a mystery. If you’d like to discuss any of this in more detail, give us a call!