Annuities for retirement
Get a guaranteed stream of income after you stop working.
Last updated January 27, 2026
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An annuity is a contract with an insurance company that can help ensure you don’t run out of money in retirement. You purchase it with a lump sum or a series of premiums, and in exchange the insurer guarantees stream of income over a set period, such as 10 or 20 years, or indefinitely — for as long as you are alive. And, annuities can provide an additional way to get tax-deferred investment growth.
Why consider an annuity
For most people, annuities are an additional way to plan for retirement, along with an IRA, 401(k), or pension. They can help simplify the task of turning a large retirement savings nest egg into regular income. And, by providing a lifetime guaranteed income stream, they can help ensure that you don't outlive your money.
How an annuity works
An annuity is a contract with an insurance company that can guarantee income for a set period of time (e.g., 10 years) or indefinitely (i.e., the rest of your life). Immediate annuity contracts begin paying within a year of purchase; deferred annuities let you build savings while you’re working and convert it to a stream of income later on.
Where it fits in your plan
An annuity can be an important part of your financial plan, along with life insurance and other investments. No matter where you are in your retirement strategy — or how much you need to save for other life goals — we can provide guidance on saving and investing to help you retire the way you want.
58% of American adults are concerned about outliving their retirement savings.1 Annuities can help.
Put simply, an annuity allows you to convert the money you contribute now into a guaranteed stream of income that starts now or in the future. Immediate annuities are typically bought around retirement age, and start paying within one year of purchase. Deferred annuities are usually purchased well before retirement, and have an “accumulation phase” where money is added and funds grow tax-deferred; later, in the “distribution phase,” the annuity starts making regular payment which may be taxable. There are more details, but those are the basics.
Some people think annuities are complex. While it’s true that you should consult a financial advisor before purchasing, when you break it down to the basics, annuities are actually no more complex than some other retirement savings vehicles.
Immediate annuities
Most types of annuities are "deferred" — you invest for several years and take the income later. Immediate income annuities (often called Single Premium Immediate Annuities or SPIAs) are designed to start payments right away, within a year of your purchase. Income annuities can be customized to provide income for a set period or for life, offering reliable income and financial security during retirement. Since they start payments so quickly, they are often preferred by those who are near to — or already at — retirement. If you want to put off payments for more than a year, you can do that too, with a Deferred Income Annuity.
Registered index-linked annuities (RILA)
These allow you to enjoy growth tied to the performance of a market index, while limiting (but not eliminating) losses during a downturn. These can provide more upside potential than fixed indexed annuities, but also expose you to more investment risk: Some RILA have “buffers” that protect from losses up to a certain point (e.g., 10%) and you absorb losses beyond that; or they have a “floor” that sets the maximum loss you agree to take, and the insurer absorbs any extra losses.
Variable annuities
If you want the chance for even more market growth, consider variable annuities, which invest your money directly in securities and grow in a tax-deferred manner. However, it’s important to note that with variable annuities your principal can decrease if the market drops, and relatively high fees — often 2% or more annually — can further erode your investment. That’s why variable annuities are best suited to those with a higher tolerance for risk.
Fixed deferred annuities
A fixed annuity is a long-term retirement investment for people who want predictability. You’ll receive a guaranteed rate of return on the premiums you contribute and tax-deferred growth. When you’re ready to retire, you can receive guaranteed income payments on the schedule you choose.
Fixed index annuities
These allow a portion of your money to track a market index like the S&P 500, which can provide more growth potential than a fixed annuity, without exposing you to a lot more risk. With a fixed indexed annuity you’ll benefit when the market does well and enjoy the downside protection of a minimum guaranteed interest rate when it doesn’t.
Annuity benefits comparison chart
Features: | Immediate income | Deferred income | Fixed deferred | Fixed indexed | RILA | Variable |
|---|---|---|---|---|---|---|
Can provide guaranteed income for life | yes | yes | yes | yes | yes | yes |
Mandated immediate start to income | yes | no | no | no | no | no |
Tax-deferred principal growth | no | no | yes | yes | yes | yes |
Potential for market-like returns on principal, tied to market or index performance | no | no | no | yes | yes | yes |
Potential for market-like returns on your principal amount that is tied to market or index performance | no | no | no | yes | yes | yes |
A level of protection against market losses | Yes Guaranteed stream of payments with no market exposure | Yes Guaranteed stream of payments with no market exposure | Yes Guaranteed fixed interest rate | Yes Minimum guaranteed interest rate | Yes Buffer or floor to limit losses | No Full exposure to market risk |
General fee and cost structure | No ongoing fees | No explicit fees | No explicit fees | Typically no explicit fees unless electing optional riders | Typically no explicit fees unless electing optional riders | Highest ongoing fees plus fund expenses |
Note: The benefits listed are generally available for the type of annuity noted, but may not be included in a specific annuity holder's contract: each annuity contract is unique and tailored to the owner's needs.
Who is an annuity for?
Whether you’re about to retire or still years away, if you want steady, guaranteed income in retirement you should consider an annuity. An annuity is one of the only investments that can guarantee income for life.
With different growth strategies, you can choose the level of investment risk and reward that appropriately meets your long term goals. And if you’re maxing out your 401(k) or IRA, and want to save taxable non-qualified dollars too, you can save even more — with the potential for tax-deferred growth — by purchasing a non-qualified annuity with no contribution limits.
If you’re 5-10 years away from retirement and you want to take advantage of the time to strengthen your savings, consider a fixed indexed annuity or a registered index-linked annuity (RILA). Both can speed principal growth by linking your money to market returns the market and protecting it from downturns.
If you’re already retired — or will retire this year — you can purchase an immediate annuity that will start generating income within one year. Choose to receive payments for the rest of your life, or a set time, for example 10 years to ensure a mortgage obligation is paid off in retirement.
Annuities can provide three significant benefits for your retirement
Fixed income annuities turn your contributions into a steady stream of guaranteed retirement income — for your lifetime or a specific number of years.
Fixed deferred annuities provide a guaranteed rate of return, while variable annuities provide potential growth based on increases in the stock market.
If you’re ready to retire, immediate annuities can start providing income soon after your premium payment; deferred annuities give you time to save more — and get more income down the road.
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Frequently asked questions about annuities
The five common types of annuities include:
Income annuities: These provide a guaranteed stream of income beginning within a year of your single lump-sum investment (for an immediate income annuity), or you can make ongoing contributions into a deferred income annuity where payments start more than 1 year from purchase.
Fixed deferred annuities: Your money grows at a predictable fixed interest rate, and you can use it to provide guaranteed income in the future..
Fixed indexed annuities: These provide market-linked growth potential and downside protection. Growth is tied to a market index, and a minimum guaranteed interest rate protects you from losses.
Registered index-linked annuities (RILA): These annuities offer market growth potential for your retirement assets, while providing a level of downside protection to limit losses during market downturns.
Variable annuities: These are annuities that grow based on market investments, and provide income at a future date, usually through an optional rider that comes with an added annual fee. Variable annuities may decrease in value.
Annuities can provide lifetime income benefits that protect against outliving one's money, but they aren't for everyone. They can be harder to understand than other investment vehicles and may have higher fees and other limitations, included reduced access to your money once periodic payments have started. Some annuities (specifically, variable annuities) can lose value. And while annuitization can make it easier to convert retirement assets into a lifetime stream of income, not everyone needs that. For example, if you have lifetime income from a pension you may want to choose other investments.
Annuities can provide lifetime income benefits that protect against outliving one's money, but they aren't for everyone. They can be harder to understand than other investment vehicles and may have higher fees and other limitations, included reduced access to your money once periodic payments have started. Some annuities (specifically, variable annuities) can lose value. And while annuitization can make it easier to convert retirement assets into a lifetime stream of income, not everyone needs that. For example, if you have lifetime income from a pension you may want to choose other investments.
Yes, depending on the annuity contract. One of the many available annuity payout options is to elect lifetime income for two spouses, so income payments only stop when the last surviving spouse passes away. And since annuities share certain features with life insurance, many contracts include a death benefit provision which allows the owner to pass assets to their children or other beneficiaries.
A 401(k) is an employer-sponsored retirement savings account, while an annuity is an insurance product that can provide guaranteed income later in life.
Most annuities grow tax-deferred, so you don’t pay tax on the earnings each year. When you withdraw from your account you’ll pay ordinary income tax on any gains in the withdrawal. A qualified annuity is funded with pre-tax money, so withdrawals are generally taxed on the full amount, while a non-qualified annuity is funded with after-tax money — and unlike 401(k) or IRA accounts there are no IRS contribution limits. When you take money out of a non-qualified annuity in retirement, only the earnings are taxed, your original investment is returned tax-free — even if you take all the money out in a lump sum payment.
In terms of investment risk, fixed and variable annuities represent opposite sides of the spectrum: fixed annuities have no exposure to market downturns because you're paid a guaranteed rate of interest as long as the insurance company is solvent, while a variable annuity lets you invest in market securities and you assume all downside exposure. Fixed indexed and RILA annuities fall somewhere in between: fixed index annuities provide a level of market participation with total principal protection, and RILA provide a level of market participation with a level of downside risk protection (but principal can decline). In terms of guaranteeing your future stream of monthly income, annuities are generally considered a conservative option but, like all investments, they are not risk free. They are backed by the insurance company issuer, and should the issuing insurance company fail, state guaranty associations may protect some or all your money up to state limits. That’s why it is very important to inquire not only about the issuer’s financial strength ratings, but also about your state’s coverage.
Annuities can provide significant benefits for your retirement
1. Guaranteed income for retirement
If you’re concerned about outliving your savings, annuities are among the only financial vehicles that can guarantee a stream of retirement income for life.
2. Customizable solutions for different risk tolerances
Looking for a more conservative option and predictability? Consider a fixed deferred annuity with stable guaranteed growth. Don’t mind full exposure to market ups and downs? Consider a variable annuity. Somewhere in between? Consider a RILA or fixed indexed annuity tailored to your appetite for risk and market rewards.
3. Tax-deferred growth
Want your money to have the opportunity to grow without an annual tax drag? Most annuities grow your money on a tax deferred basis, so earnings compound and you only pay tax when you withdraw the money.
4. Not subject to IRS contribution limits
Maxed out your 401(k) or IRA contributions? While annuities may have their own contribution guidelines, they are not subject to IRS annual contribution limits.
5. Get income when you choose
If you’re ready to retire, immediate annuities can start providing income right after your premium payment. Deferred annuities give you time to save more — and potentially get more income down the road.
Considerations and tradeoffs
Like all other financial products, annuities have pros and cons. The opportunity to enjoy tax-deferred growth — and receive guaranteed income for life — may be a significant advantage, but it comes at a cost. Potential downsides to investing in an annuity can include:
Surrender charges and periods. Many annuities have surrender charges (5-10%) and surrender periods (averaging seven years).2 If you withdraw funds before the end of the surrender period, you may have to pay a surrender charge. Some annuities offer an annual free withdrawal amount before charges would be applied.
Limited liquidity. In addition to imposing surrender charges, many annuities limit the amount you may withdraw once annuity payments start. This can be a problem should you need cash quickly.
Fees and charges. Many annuities contain underlying fees and charges — including administrative fees, mortality and expense charges, and optional rider costs — which can lower your overall return.
Risk of losing value. Some annuities, including variable annuities and Registered index-linked annuities (RILAs) can lose value.
Risk of lagging behind inflation. The fixed payouts offered by an annuity may not keep up with the rate of inflation.
Complicated features. Annuities may have features that can be complex, which is why working with a financial professional to understand them is so important.
Find out more about the pros and cons of annuities, and talk about them with a trusted financial professional before making the decision to invest in an annuity.
4 common myths about annuities — dispelled
“You lose all your money if you die.”
Actually, many annuities include a death benefit, joint payout, or other payout options that help pass value on to a spouse or beneficiary in the event of your death.
“Annuities are only for wealthy people.”
No! Annuities may be appropriate for all sorts of average investors who want to ensure they’ll have a steady income later in life.
“All annuities have high fees.”
Not true. Some annuities have high costs — especially variable annuities that allow you to invest directly in the financial markets. But others have few or even no explicit annual fees but other costs may apply.
“Annuities are always complicated.”
In fact, some are very straightforward, with simple features like guaranteed income and tax-deferred growth. Plus, a trusted financial professional can explain the essentials in plain language.
Important considerations about annuities
This material is intended for general public use. By providing this content, The Guardian Life Insurance Company of America, The Guardian Insurance & Annuity Company, Inc. and their affiliates and subsidiaries are not undertaking to provide advice or recommendations for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact a financial representative for guidance and information that is specific to your individual situation.
This material is for information use only. It should not be relied on as the basis to purchase a variable, fixed, or immediate annuity or to implement a retirement strategy.
The information provided herein is not written or intended as investment, tax, or legal advice and may not be relied on for purposes of avoiding any federal tax penalties. This information supports the promotion and marketing of annuities.
There are no additional tax benefits if you purchase an annuity to fund an IRA or qualified retirement plan. Therefore, an annuity should only be purchased in an IRA or qualified plan if you value some of the other features of the annuity and are willing to incur any additional costs associated with the annuity to receive such benefits.
Current tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary, depending on the particular set of facts and circumstances. Entities or persons distributing this information are not authorized to give tax or legal advice. Individuals are encouraged to seek specific advice from their personal tax or legal counsel.
Variable annuities (VA) and registered index-linked annuities (RILA) are long-term investment vehicles designed to help investors save for retirement and involve certain contract limitations, fees, expenses, and risks, including possible loss of the principal amount invested. The investment return and principal value may fluctuate so that the investment, when redeemed, may be worth more or less than original cost. As with many investments, there are fees, expenses, and risks associated with these contracts. These contracts are sold by prospectus only. Please read the prospectus carefully before investing or sending money. All guarantees, including the death benefit payments, are dependent upon the claims-paying ability of the issuing company and do not apply to the investment performance of the underlying funds in the VA. Assets in the underlying funds are subject to market risks and may fluctuate in value. You can not invest directly in an index with a RILA.
Withdrawals of taxable amounts from a variable or fixed deferred annuity will be subject to ordinary income tax and possible mandatory federal income tax withholding. If withdrawals are taken prior to age 59½, a 10% IRS penalty may also apply. Withdrawals may also be subject to a contingent deferred sales charge.
Variable annuities and their underlying variable investment options are sold by prospectus only. Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. This and other information are contained in the prospectus or summary prospectus, if available, which may be obtained from your investment professional. Please read it before you invest or send money.
Fixed and variable annuities are issued by The Guardian Insurance & Annuity Company, Inc. (GIAC). All guarantees are backed exclusively by the strength and claims-paying ability of GIAC. Variable annuities are issued by GIAC, a Delaware corporation, and distributed by Park Avenue Securities LLC (PAS). Both GIAC and PAS are wholly owned subsidiaries of The Guardian Life Insurance Company of America, 10 Hudson Yards, New York, NY 10001.
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