As you think about retirement, having a guaranteed paycheck is probably at the top of the list. But fewer employers are offering pensions and Social Security may provide only a small part of what you will need. Your desire for security can feel less and less probable. So, what exists that can help you achieve the level of financial certainty you want?
Many individuals rely on the 4% rule when planning for retirement. Following this rule, individuals withdraw 4% during the first year of retirement, then adjust that amount based on inflation for subsequent years.
But there are many ways to determine the right portfolio withdrawal rate. Instead of relying solely on the 4% rule, you may want to consider other strategies. Where suitable, annuities can be a tool that meets a variety of needs as part of your retirement plan.
Only 14% of Generation Xers have a pension plan, according to the National Institute on Retirement Security Opens in a new tab.1 You'll potentially face several other challenges to your retirement income, including:
Longevity — The average American lifespan has increased steadily since the early 1940s.2 In 1943, the average American could expect to live to age 63. By 2018, that age had risen to 79. Income must last until then (and, for many Americans, much longer). As you age, your living expenses as well as Medicare spending will also likely increase.3
Sequence of returns — Market volatility can negatively affect your retirement nest egg. This is sometimes true for individuals relying on the 4% rule. The 4% rule also fails to account for fluctuations in spending needs. Often, these needs are higher earlier in retirement.
Social Security — Americans are increasingly relying on Social Security for a larger part of their income. And an estimated 4 million Americans are expected to retire in 2026.4 However, Social Security benefits will be a shrinking part of the guaranteed income equation.5 Full retirement age is 67 for those born after 1960. If you file for benefits before then, your payouts can be reduced by up to 30%.6
These common retirement challenges make it even more important to increase your level of guaranteed retirement income, especially if you retire earlier than expected. Annuities are a valuable but often overlooked guaranteed income option for retirees. They can complement your Social Security benefits and other forms of retirement income.
Annuities can also help subsidize the cost of increased living and health care expenses. This will help reduce overall risk to your retirement income. For example, a life-with-period-certain annuity provides a lifetime income regardless of your life span, helping remove the longevity risk.
Annuities are a type of investment that can pay a regular income. And they can be a strategic addition to retirement plans to generate guaranteed income. Here’s a few ways annuities can help:
Cost — Annuities can provide valuable benefits where other sources of income fall short. Like other types of insurance, annuities have a range of options. You can choose one that provides the best balance between cost and benefits for your needs.
Flexibility — Some annuities give you the freedom to buy riders that can provide access to income for life’s uncertainties. If you become unemployed or need long-term nursing home care, you may be able to access some funds. There could be an annuity that suits your retirement goals, level of financial certainty, and preparation for the future.
Growth potential — Annuities can support accumulation goals and can be designed to fit your risk preferences. They can provide market exposure as well as fixed interest rates and options to help protect assets from inflation and market volatility. If you have a higher risk tolerance, you could consider purchasing variable annuities with a guaranteed lifetime withdrawal benefit rider that provides a minimum annual withdrawal amount.
Annuities, like any type of insurance option, have their pros and cons. But it's valuable to consider the potential this type of insurance could bring to your retirement strategy. An annuity can help provide a level of guaranteed income that you need to achieve greater financial certainty in retirement. And they can help give you the freedom to pursue your broader retirement aspirations safe in the knowledge that your basic living costs are covered.
Protective offers multiple types of annuities based on your needs. Talk with your financial professional to find out if an annuity fits into your retirement goals.
Explore these additional topics as you consider annuities:
As you determine what annuity might be right for you, remember they are intended as vehicles for long-term retirement planning, which is why withdrawals reduce an annuity’s remaining death benefit, contract value, cash surrender value and future earnings. Withdrawals from annuities may also be subject to income tax and, if taken prior to age 59 ½, an additional 10% IRS tax penalty may apply. Because Protective and its representatives do not offer legal or tax advice, it is important that you talk with your own legal and tax advisor about your specific tax situation.
This material contains statements regarding the availability of and details surrounding the Social Security program. These statements represent only our current understanding of Social Security in general and is not to be considered legal or tax advice by consumers. Details of the Social Security program are subject to change at any time.
2 CDC National Center for Health Statistics, “Life Expectancy,” 2026. Opens in a new tab
4 Kiplinger, “Is 2026 Your Year to Retire?” 2026. Opens in a new tab
6 Social Security Administration, Benefits. Opens in a new tab
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