Annuities play an important part in a well-constructed retirement income plan. Most investors own annuities for two reasons: 1) Income insurance and 2) protection from loss.
Income Insurance: You may live into your 90’s, so you need to plan as if you will. An annuity is a way to ensure that you will have an income for as long as you live even if you outlive your savings. Like Social Security, the longer you defer the income the more income you will receive.
Protection from Loss: A fixed index annuity is unique in that it credits interest based on the positive gains in the stock market while protecting your money from loss when the market corrects or has a negative return.
The combination of income insurance and protection from loss provides a significant benefit to most retirees who must depend on their savings to get them through a retirement that can easily last 25 to 30 years.