
May 7, 2025
Corporate
By Ian Laverty, Vice President of Product Strategy, Group 1001
When the economy is as unpredictable as it is now, individuals often look for ways to protect their assets from market volatility, especially when in or approaching retirement. Annuities are products specifically suited to providing this protection, offering a unique mix of stability, predictability, and potential for growth. Now is a great time to explore how annuities can help you navigate a volatile market while securing your savings.
Understanding Annuities
Annuities are contracts sold by insurance companies that give individuals a future payout in regular installments. Payouts can be immediate or deferred. With an immediate annuity, the payouts begin as soon as the individual makes a lump-sum payment to the insurance company. A deferred annuity is not intended to exchange a lump sum for an immediate income stream but rather provide a savings vehicle to help accumulate assets. As financial planning products, deferred annuities receive beneficial tax treatment on income, which makes them a very tax-efficient way to accumulate assets.
Many varieties of deferred annuities provide ways to grow the account value. Fixed annuities credit a fixed rate of interest, like a bank CD. Variable annuities offer a menu of investment funds that participate in the stock and bond markets like a 401(k). Indexed annuities offer accumulation strategies that fall somewhere in between, providing income linked to the growth in equity or bond markets while providing protection against losses in equity or bond markets.
In addition to their value as tax-efficient savings products, deferred annuities stand apart from other financial planning products because of the variety of additional guarantees they offer that are specifically designed to protect retirement savings from the impact of volatile markets.
While each type of annuity has unique features and benefits, they share a common benefit: they provide financial security and stability in growing your savings and preparing for retirement.
Benefits of Annuities in a Volatile Market
Annuities offer a level of certainty and predictability. For some annuities, this comes in the way that the deposit in the annuity accumulates. For example:
Fixed credited interest: Fixed annuities offer strong guaranteed rates of return, which typically exceed rates on similar guaranteed savings products like CDs. They provide a safer savings solution when markets are uncertain. Unlike CDs, however, interest earned in a fixed annuity is tax-deferred, which enhances the accumulation potential.
Downside protection: Indexed annuities offer returns tied to the stock market but have downside principal protection, so your return in any given year is floored at zero. Maintaining some market exposure can be critical to accumulating sufficient retirement savings, but this kind of downside protection can help you sleep at night during volatile markets.
For other annuities, certainty and predictability come by guaranteeing your retirement outcome, regardless of the accumulation performance of the annuity. For example:
Guaranteed income: One of the primary benefits available on many annuities is a guarantee that allows you to draw a certain amount from your account value each year in retirement. If volatile markets and poor performance lead to your account value running out before you die, the insurance carrier will begin paying you that amount for the rest of your life. This helps protect against volatile markets and outliving your assets, ensuring peace of mind in retirement years. Both indexed and variable annuities commonly offer this benefit, called a Guaranteed Lifetime Withdrawal Benefit.
Protection for beneficiaries: Variable annuities, which offer investments that participate in equity and bond markets that can go up or down, have Guaranteed Minimum Death Benefits. A Guaranteed Minimum Death Benefit ensures that beneficiaries receive at least a predetermined minimum amount upon the annuitant’s death, regardless of the annuity's performance. This protects beneficiaries from potential market downturns. Some products offer enhanced death benefits that may pay your beneficiaries more than the initial deposit.
Markets are unpredictable, and volatility can impact the amount of money you have saved for retirement, how long that money will support you during retirement, and how much of your savings will be available to your beneficiaries if you pass. In addition to being tax-efficient savings vehicles that provide significant flexibility, annuities can help protect your retirement savings and income from market volatility. They help establish a reliable financial base leading up to and during retirement that no other retirement products can match.
Before delving into annuities, always consult a financial advisor to determine the most suitable annuity for your needs and circumstances. This communication is for informational purposes only. It is not intended to provide, and should not be interpreted as, individualized investment, legal, or tax advice.
The opinions expressed herein are my own and not necessarily those of my employer.
©2025 Group 1001 IP Properties, LLC | Group 1001. All Rights Reserved
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