Are Annuities a Good Investment
Jason Stolz CLTC, CRPC
For many retirees and pre-retirees, the biggest financial question is simple: “Will my money last as long as I do?” Annuities exist to answer exactly that. But are annuities actually a good investment? The truth is that annuities can be one of the most effective tools for generating reliable income, protecting principal, and adding stability to your long-term financial plan—when they are chosen correctly and aligned with your goals.
At Diversified Insurance Brokers, we help individuals nationwide evaluate whether an annuity is appropriate based on risk tolerance, tax situation, retirement timelines, and income needs. With access to top carriers and both fixed and indexed annuity options, we show clients when an annuity strengthens their retirement plan—and when another solution may make more sense.
Before deciding if an annuity is a good investment for you, it’s important to understand how different types of annuities work, how they grow, and how they provide income. This page breaks it all down in clear, practical terms so you can make the most informed decision possible.
What Makes an Annuity a Good Investment for Some People?
Annuities are not traditional investments like stocks or mutual funds. Instead, they are long-term insurance contracts that provide guarantees in areas where market investments cannot. For people who want predictable growth, lifetime income, and downside protection, annuities often fill gaps that other financial tools simply can’t.
Here are several characteristics that can make annuities especially valuable:
- Principal protection: Fixed and indexed annuities shield your money from market loss. This appeals strongly to those nearing retirement who want stability.
- Guaranteed income for life: Income riders or annuitization options can turn a portion of your savings into a permanent monthly paycheck.
- Tax-deferred growth: Earnings are not taxed until withdrawn, similar to traditional retirement accounts.
- Higher fixed yields versus CDs: In many rate environments, MYGAs (multi-year guaranteed annuities) can outperform CDs.
- Protection against outliving savings: This is the core advantage—no other financial instrument creates lifetime income guarantees.
These features make annuities uniquely positioned for people who prioritize stability or longevity protection. For others—especially those who prefer liquidity, flexibility, or higher-growth market exposure—annuities may play only a supporting role.
Understanding the Types of Annuities
Whether an annuity is a good investment depends on the type you choose and the benefits you expect. Below are the main categories:
Fixed Annuities (Including MYGAs)
Fixed annuities offer predictable interest for a set number of years, similar to CDs but often at higher rates. These can be especially appealing if you’re comparing options like today’s current fixed annuity rates. For conservative savers, this structure can make a fixed annuity a strong, dependable choice.
Fixed Indexed Annuities (FIAs)
FIAs credit interest based on market index performance but never allow losses due to market declines. This can help investors balance upside potential with strong downside protection. For individuals exploring income-focused FIAs, our page reviewing the best fixed indexed annuities for income can provide additional clarity.
Income Annuities
These include immediate income annuities and deferred income annuities, both designed to convert savings into guaranteed lifetime income. Many retirees use these alongside Social Security to create a stable, predictable retirement foundation.
Bonus Annuities
Bonus annuities apply an up-front credit that boosts your initial contract value. While they can provide meaningful advantages, they typically include longer terms. To compare options, you can review today’s offerings on the bonus annuity rate page.
Are Annuities a Good Investment Compared to the Market?
Annuities are not designed to beat the stock market. Their purpose is different: to provide security, reliability, and protection from volatility. They are often most valuable when used to complement a diversified investment portfolio rather than replace one.
A balanced retirement strategy commonly includes a combination of:
- Growth assets (stocks, ETFs, mutual funds)
- Guaranteed income vehicles (annuities, pensions, Social Security)
- Liquid reserves (cash or short-term savings)
Many retirees find that using annuities for income allows their remaining investments to stay invested longer—with less pressure to withdraw during downturns. This interplay is what often makes annuities worth it from a long-term planning perspective. For deeper evaluation, many clients also reference discussions such as how lump-sum windfalls are managed or how retirement accounts work, including required minimum distributions.
How Much Does an Annuity Cost?
The cost of an annuity depends on your premium, optional riders, and the annuity structure itself. Some annuities have no annual fees at all (such as MYGAs), while others—especially income riders—carry explicit annual charges. Our guide on how much an annuity costs provides a detailed breakdown for comparison.
Overall, when used correctly, the “cost” of an annuity is not about fees—it’s about the value of the guarantees you receive in return.
Where Annuities Fit into a Retirement Strategy
Annuities can excel in several areas:
- Replacing a missing pension by creating predictable income
- Protecting beneficiaries through death benefits and structured payouts
- Smoothing volatility during market downturns
- Strengthening long-term planning by ensuring income cannot run out
For households comparing annuities to retirement plans such as 401(k) rollover options or pension payouts, annuities often serve as a stabilizing force—reducing risk and securing income.
Try the Annuity Income Calculator
Note: The calculator accepts premiums up to $2,000,000. If you invest more, results scale proportionally.
How to Decide if an Annuity Is a Good Investment for You
The right annuity can be incredibly beneficial—but only when matched to your objectives. Here are signs an annuity may be a good fit:
- You want reliable, predictable income in retirement.
- You prefer lower risk and downside protection.
- You want tax-deferred growth outside traditional retirement accounts.
- You want to avoid sequence-of-returns risk in early retirement.
- You have cash or rollover funds sitting in low-yield accounts.
Alternatively, an annuity may not be ideal if you require unrestricted liquidity, very short time horizons, or aggressive growth goals.
Your Next Step
If you want to explore whether an annuity is appropriate for your situation, complete the secure form below. Our advisors compare top-rated companies and help identify which annuity aligns best with your financial goals.
Request Your Personalized Annuity Review
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FAQs: Are Annuities a Good Investment?
Are annuities good for long-term retirement income?
Yes. Annuities can provide guaranteed lifetime income, which helps protect against outliving your savings. They are especially useful when paired with other income sources like Social Security.
Do annuities offer good returns?
Annuities are designed for stability, not aggressive returns. Fixed and indexed annuities can outperform CDs in certain rate environments while providing principal protection.
Are annuities risky?
Fixed and indexed annuities carry minimal risk because your money is protected from market loss. Variable annuities involve investment risk since they are tied to market performance.
When is an annuity not a good investment?
An annuity may not be ideal if you need full liquidity, want short-term access to funds, or prefer high-growth investments like stocks.
How do I know which type of annuity is right for me?
The best annuity depends on your goals: growth, safety, tax deferral, or guaranteed income. A personalized comparison helps identify the right contract for your needs.
About the Author:
Jason Stolz, CLTC, CRPC, is a senior insurance and retirement professional with more than two decades of real-world experience helping individuals, families, and business owners protect their income, assets, and long-term financial stability. As a long-time partner of the nationally licensed independent agency Diversified Insurance Brokers, Jason provides trusted guidance across multiple specialties—including fixed and indexed annuities, long-term care planning, personal and business disability insurance, life insurance solutions, and short-term health coverage. Diversified Insurance Brokers maintains active contracts with over 100 highly rated insurance carriers, ensuring clients have access to a broad and competitive marketplace.
His practical, education-first approach has earned recognition in publications such as VoyageATL, highlighting his commitment to financial clarity and client-focused planning. Drawing on deep product knowledge and years of hands-on field experience, Jason helps clients evaluate carriers, compare strategies, and build retirement and protection plans that are both secure and cost-efficient.
