Seeking Stability with Annuities
Amid this year’s market volatility, certain high-net-worth individuals and families who have historically been comfortable with risk are shifting their behavior. Some are now expressing increased interest in annuities to manage uncertainty and protect future income.
In 2024, total annuity sales were $432.4 billion, up 12% from the prior year. Overall sentiment appears to be driving long-term portfolio decisions, and investors who are anxious about experiencing lower average market returns than in the past might feel safer with locking in a fixed income stream today.
Annuities can provide a guaranteed future income stream and shield some assets from market swings. While annuity products offer a measure of safety, there are tradeoffs. Purchasers forego some or all of the market’s upside potential in exchange for stability. Annuities should be viewed as a de-risking strategy rather than a vehicle for growth.
Although annuities can offer an attractive solution for certain financial goals, it’s important to consider the associated fees – which may reduce overall performance. Read the fine print of the contract or seek guidance. Understand what happens if you begin early withdrawals. In the case of a joint annuity, understand what happens if one spouse passes away before the guaranteed payouts start. It’s critical to size the annuity product within the context of the overall investment portfolio. Often, annuity products are illiquid for a certain period of years, and those who need access to cash sooner should consider other options (such as more liquid cash alternatives or fixed income). Additionally, early withdrawals from annuities may be taxed unfavorably.
Annuities may be worth considering for those approaching retirement or in retirement, who are concerned about the long-term effects of today’s economic and policy environment or simply seeking greater portfolio stability.
Please contact your Wealth Manager to discuss whether an annuity strategy may complement your long-term wealth plan.
Weekly Commentary
Wealth Planning Commentary – April 21, 2025
Mallon FitzPatrick
Seeking Stability with Annuities
Amid this year’s market volatility, certain high-net-worth individuals and families who have historically been comfortable with risk are shifting their behavior. Some are now expressing increased interest in annuities to manage uncertainty and protect future income.
In 2024, total annuity sales were $432.4 billion, up 12% from the prior year. Overall sentiment appears to be driving long-term portfolio decisions, and investors who are anxious about experiencing lower average market returns than in the past might feel safer with locking in a fixed income stream today.
Annuities can provide a guaranteed future income stream and shield some assets from market swings. While annuity products offer a measure of safety, there are tradeoffs. Purchasers forego some or all of the market’s upside potential in exchange for stability. Annuities should be viewed as a de-risking strategy rather than a vehicle for growth.
Although annuities can offer an attractive solution for certain financial goals, it’s important to consider the associated fees – which may reduce overall performance. Read the fine print of the contract or seek guidance. Understand what happens if you begin early withdrawals. In the case of a joint annuity, understand what happens if one spouse passes away before the guaranteed payouts start. It’s critical to size the annuity product within the context of the overall investment portfolio. Often, annuity products are illiquid for a certain period of years, and those who need access to cash sooner should consider other options (such as more liquid cash alternatives or fixed income). Additionally, early withdrawals from annuities may be taxed unfavorably.
Annuities may be worth considering for those approaching retirement or in retirement, who are concerned about the long-term effects of today’s economic and policy environment or simply seeking greater portfolio stability.
Please contact your Wealth Manager to discuss whether an annuity strategy may complement your long-term wealth plan.
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