Who Should Consider an Annuity — and Who Should Probably Avoid One?

The fear is real—and you are not alone in feeling it

Worry about outliving your money is one of the most common fears among people in their late 50s, 60s, and 70s. It is not a sign of poor planning. It is a sign of living in uncertain times.

Markets go up and down. Prices at the grocery store keep rising. And none of us knows exactly how long we will live. Put those things together and it is easy to understand why so many people lie awake wondering: will the money last?

The good news is that this fear is manageable. Not by burying it, but by looking at it clearly and making a simple plan. That is what this article is here to help you do.

*Figures are illustrative and based on publicly available research. Individual results vary.

→ Deep dive: how much of your savings should be in guaranteed income

---

How does retirement income actually work?

Most of us spent our working years focused on saving money. Retirement asks a different question: how do you turn that pile of savings into steady, reliable income for the rest of your life?

Think of your retirement income like a three-legged stool. Each leg plays a different role:

• Guaranteed income — things like Social Security and pensions that pay you no matter what the stock market does
• Invested growth — money still working for you in the market, designed to outpace inflation over time
• Safe reserves — money you can reach quickly in an emergency, without having to sell investments at a bad time

A stool with all three legs is stable. A stool missing a leg tips over. Many people enter retirement with a strong first leg (Social Security) but have never thought clearly about the other two.

---

How much should I keep safe versus invested?

This is one of the most common questions I hear, and there is no single right answer. But there is a sensible framework.

Start by asking yourself two things:

1. What are my fixed monthly expenses? (Mortgage or rent, utilities, groceries, medications, insurance)
2. How much of that is already covered by guaranteed income? (Social Security, pension, any other guaranteed source)

The gap between what you spend each month and what is already guaranteed is your “income gap.” Filling that gap with something reliable is the foundation of a calm retirement.

As a rough starting point, many planners suggest keeping at least one to two years of living expenses in safe, easily accessible accounts—separate from your invested money. This gives you a cushion so you are never forced to sell investments during a market downturn just to pay your electric bill.

---

What happens if I live longer than I planned for?

Longevity is the risk that does not get enough attention. People plan to age 85 and then live to 92. That is not a failure of planning—it is just life. But it is a reason to plan for a longer horizon than feels comfortable.

Consider this: a woman turning 65 today has about a 50% chance of living past age 88. A married couple, both age 65, has roughly a 50% chance that at least one of them will live past age 92.

That is potentially 25 to 30 years of retirement to fund. For most people, that changes how they should think about their money.

The most straightforward protection against outliving your money is income that cannot run out—income that keeps coming in for as long as you live, the same way a paycheck or Social Security does.

---

What does “guaranteed income” really mean—and should I trust it?

The word “guaranteed” gets used loosely. Here is what it actually means in the context of retirement income:

• Social Security is guaranteed by the federal government. Barring legislative change, it pays for life.
• Pensions (if you have one) are guaranteed by your former employer, often backed by a government insurance program.
• Annuities can provide a guaranteed income stream for life, subject to the claims-paying ability of the insurance company that issues them.

What all three have in common: they pay you regardless of what the stock market does on any given day. That predictability is what makes them valuable for covering your fixed monthly expenses.

What guaranteed income does not do

It does not grow the way invested money can. It does not always keep perfect pace with inflation. That is why most people benefit from having some money that stays invested—to handle rising costs over time.

The goal is not all-or-nothing. It is finding the right balance for your situation.

---

What mistakes do people most often make with retirement income?

I have reviewed a lot of retirement situations over the years. The same patterns come up again and again.

• Planning only to age 80 or 85. Longevity is unpredictable. A plan that runs out at 87 is not a plan.
• Taking Social Security too early. Claiming before your full retirement age permanently reduces your monthly benefit. Waiting, if possible, typically increases it.
• Spending from investments when the market is down. Selling low locks in losses and accelerates the depletion of your savings.
• Ignoring inflation. Prices have historically risen each year. What costs $4,000 a month today may cost $6,000 or more in 20 years.
• Having no income plan at all. A savings account is not an income plan. Guessing how much to withdraw each month is not a plan either.
• Not updating the plan after major life changes. Divorce, a spouse’s death, a health diagnosis, or moving to a new state can all affect your income picture significantly.

None of these mistakes are permanent. Most can be addressed at any age, even in your 70s.

---

How do I know if I actually have enough?

This question does not have a single number answer. “Enough” depends on your specific expenses, your health, your family situation, and how you want to live in retirement.

But here is a practical checklist. If you can answer “yes” to most of these, you are likely in good shape:

• Your guaranteed income covers at least your basic fixed monthly expenses
• You have at least one to two years of expenses in safe, accessible savings
• You have a plan for healthcare costs, including long-term care
• Your plan accounts for living to at least age 90
• You are not counting on returns that require everything to go right
• Your spouse or partner (if you have one) would be financially okay if you passed away first

If your honest answer to several of those is “not sure,” that is not a reason to panic. It is a reason to get a clearer picture.

---

What should my next step be?

If any part of this article made you think “I should look at that more carefully,” that feeling is worth acting on.

You do not need to overhaul everything at once. The single most useful next step for most people is a straightforward review of where their retirement income will actually come from—and whether it will last.

Whether or not you reach out, I hope this article gave you a clearer way to think about the question that brought you here. Retirement is a long chapter. It deserves a plan built for the whole thing.

— The Mysterious Author