Today’s Annuities: A Powerful Tool for Retirement Planning and a Recession Hedge

This article is reprinted with permission from Esq. Wealth Management, Inc.

For the past several months, you could not open the financial news without seeing articles about the looming recession.  As economists and financial advisors anticipate a recession around the corner, and some claim it’s already here, investors are becoming increasingly wary of market volatility.  However, there is one investment vehicle that is not only a powerful tool for retirement planning but can also offer protection from market downturns: annuities.

Annuities have a long history of providing a guaranteed stream of income in retirement, but over the years, they have developed a negative connotation due to their complexity and high fees.  However, in the past decade the insurance industry has worked to address these concerns and has made significant changes to the structure and design of annuities to meet the needs of today’s consumers.

Warren Buffett, one of the most successful investors of all time, is quoted as saying, “An annuity is a very serious promise.  It’s not just a promise to make a payment; it’s a promise to make a payment no matter what happens in the world.”  This statement highlights one of the key benefits of annuities: the ability to provide guaranteed income regardless of market performance.

How Annuities Have Evolved

In the past, annuities were often sold with high fees and complicated structures, making it difficult for investors to fully understand the product they were buying.  Additionally, some unscrupulous agents sold annuities to individuals who didn’t need them, resulting in consumers buying products that didn’t align with their financial goals.

However, over the years, annuities have evolved to become more consumer-friendly.  Insurance companies have developed new annuity products with simpler structures and lower fees.  In addition, there are now much more stringent regulations in place to protect consumers from unscrupulous agents.

Benefits of Owning an Annuity:

An annuity offers several benefits that can make it an attractive investment for those concerned about market volatility and for those seeking a steady income stream in retirement:

  1. Guaranteed income: An annuity provides guaranteed income for the life of the investor, ensuring a steady stream of income in retirement.
  2. Tax-deferred growth: The growth of an annuity is tax-deferred, which means the investor only pays taxes when they withdraw the funds.
  3. Protection from market fluctuations: An annuity can provide protection from market downturns, ensuring that the investor’s principal is protected.
  4. Customizable riders: Annuities offer the option to add customizable riders, such as a living benefit rider or long-term care rider, to tailor the contract to the investor’s specific needs.
  5. Peace of mind: An annuity provides peace of mind for the investor, knowing that they have a steady income stream for life.

Fixed Annuities and Index-Based Annuities

Fixed annuities and index-based annuities are two types of annuities that offer retirees a guaranteed stream of income during retirement.  Fixed annuities offer a fixed rate of return on the principal invested, and the income payments are also fixed and guaranteed.  This makes them an excellent low-risk option for those who want a predictable stream of income during retirement.

Index-based annuities, on the other hand, provide a return based on the performance of a stock market index, such as the S&P 500.  Unlike variable annuities, which are tied to the performance of individual securities, index-based annuities provide investors with a measure of market participation without the risks associated with individual stock picking.

Beneficial Riders

Riders are optional add-ons to an annuity contract that can help provide additional financial security and peace of mind during retirement.

A living benefit rider, also known as a guaranteed minimum withdrawal benefit rider, can provide a guaranteed minimum income stream during the lifetime of the annuitant.  This rider can be especially useful for retirees who are concerned about outliving their retirement savings.  The living benefit rider can also provide protection against the risks of market volatility and inflation, helping to ensure that the annuitant’s income stream remains stable and predictable.

A death benefit rider, on the other hand, can help provide financial protection for the annuitant’s beneficiaries in the event of the annuitant’s death.  This rider guarantees that the beneficiaries will receive a minimum amount, regardless of the market performance of the annuity.

Another rider that can be added to an annuity contract is a long-term care rider, which provides additional income to cover the costs of long-term care in the event that the investor requires it.  With the increasing cost of long-term care, this rider can be a valuable addition to an annuity contract.


In today’s volatile economic environment, we at EsqWealth are helping investors who are seeking safe and stable investment options.  An annuity is one such option.  It can provide a steady income stream while protecting the investor’s principal from market fluctuations.  By adding customizable riders, such as living benefit or long-term care riders, investors can further enhance the contract to meet their specific needs.  If you would like more information about annuities and whether they fit into your financial goals, please contact us.

The information above is not intended to and should not be construed as specific advice or recommendations for any individual. The opinions voiced are for general information only and are not intended to provide, and should not be relied on for tax, legal, or accounting advice. To discuss specific recommendations for any unique situation, please feel free to contact us.

Recent Articles