When your working years come to an end, the paychecks stop; but your need for reliable income doesn’t. Annuity solutions are designed to fill that gap, offering a guaranteed stream of payments for life. At Retire Well Dallas, we help you understand and implement strategies that ensure financial stability when you’re no longer earning a salary.
I’m Mark Gardner, an Annuities Expert in Dallas, Texas, and with my team’s decades of CPA-led expertise, we create tax-efficient plans that make your savings last, giving you confidence and peace of mind for the future.
1Product and features may differ depending on the state of issuance and may not be available in all states. Guarantees are backed by the financial strength and claims-paying ability of the issuing company.
Understanding the Different Kinds of Annuities
Not all financial products are the same, and picking the wrong one is costly. There are different kinds of annuities designed for various goals and risk levels. Some focus on immediate cash flow, while others focus on long-term growth. We take the time to explain how each one works in very simple, plain English terms.
Think of these tools like different types of tools in a toolbox. You would not use a hammer to turn a screw. Similarly, you must match the right financial tool to your specific needs. We help you sort through the Types of Annuities to find the perfect fit for your family. Understanding these differences is the first step toward a secure plan.
● Immediate Annuities
The “Instant Income” Tool — Designed to start payments right away, typically within a year of your investment. These offer a reliable, permanent income stream for those who need financial security immediately. Immediate fixed income annuities are ideal for replacing a paycheck quickly.
● Deferred Fixed Annuities
The “Predictable Growth” Tool — A long-term investment for people who want total predictability. You receive a guaranteed rate of return on your money, and when you are ready, you can convert it into a fixed income annuity for guaranteed payments. Deferred fixed annuities are perfect for those planning ahead.
● Fixed Index Annuities
The “Balanced Protection” Tool — This option provides a level of protection when the market underperforms while allowing you to benefit when the market performs well. Fixed Index Annuities combine a minimum guaranteed interest rate with potential growth tied to a specific index.
● Registered Index-Linked (RILA)
The “Market Shield” Tool A RILA allows you to take advantage of potential growth tied to a stock market index while explicitly limiting your losses during a market downturn. It’s built for those who want growth but need a “floor” for safety.
● Fixed Annuities
The “Steady Security” Tool — Fixed annuities guarantee a set interest rate and protect your principal. They offer predictable growth without market risk, making them ideal for conservative investors. At maturity, funds can be withdrawn or converted into guaranteed income payments for long-term financial stability.
● Multi-Year Guaranteed Annuities (MYGAs) – A Safety Haven
A Multi-Year Guaranteed Annuity (MYGA) is a type of fixed annuity that provides a guaranteed interest rate for a set period of time, typically ranging from 3 to 10 years. Similar to a Certificate of Deposit (CD), MYGAs offer safety and predictability, but often with higher interest rates than traditional bank CDs. They protect your principal and ensure steady growth without exposure to market volatility.
Comparing Your Options with an Annuity Comparison Chart
Feature | MYGA | Fixed Index | Immediate |
Growth Type | Fixed Rate | Market Linked | N/A |
Risk Level | Very Low | Very Low | Low |
Income Start | Deferred | Flexible | Immediate |
We provide a custom annuity comparison chart during our consultations to simplify your choice. Seeing the numbers side-by-side makes the benefits very obvious. You can quickly see which tool provides the most income or the best growth. This visual aid helps our clients feel much more confident in their final decisions.
Why Purchase an Annuity for Your Retirement?
You might wonder why purchase an annuity when you could just use a bank account. The answer lies in the unique ability to create a “magic mailbox” of checks. Bank accounts can run dry, but certain retirement tools provide income for life. This protection against living too long is something no other investment can offer you.
These strategies also help you avoid the “sequence of returns” risk in the market. If the market drops right when you retire, it can ruin your entire plan. An annuity acts like a shield, protecting your core income from these scary market drops. It allows you to sleep better at night knowing your basic bills are always covered.
Are Annuities a Good Investment for You?
A common question we hear is, are annuities a good investment for high-net-worth individuals? The truth is that they are insurance products designed for safety and income rather than high-risk growth. For those who have already built wealth, the focus usually shifts to protection. They are excellent for people who value certainty over gambling with their savings.
If you hate the idea of losing money when the stock market crashes, these are worth considering. They provide a predictable outcome in an unpredictable world. We help you determine if these tools belong in your portfolio based on your lifestyle needs. It is about creating a “worry-free” zone for your essential retirement expenses.
Why Choose Retire Well Dallas for Your Journey?
We believe that a good retirement plan should be easy to understand and follow. Our team at Retire Well Dallas combines financial advice with deep tax expertise. We do not use “cookie-cutter” plans because every family has different dreams. We listen first, then we build a strategy that fits your unique life goals.
Whether you are a business owner or a long-time employee, we have the tools to help. We offer educational workshops to keep you informed about changing laws and strategies. Our commitment to you is a long-term partnership built on trust and results. Let us help you navigate the complexities of post-retirement finance with ease and clarity.
Record-Breaking Sales and Market Growth
Overall Sales: The annuity market is experiencing a significant boom. Total U.S. annuity sales hit a new record of $223 billion in the first half of 2025, a 3% increase over the previous year’s record. This marks the third consecutive year of record-setting performance for both quarterly and year-to-date sales.
Quarterly High: The second quarter of 2025 was particularly strong, with sales reaching $116.6 billion, the highest quarterly total ever recorded.
Future Outlook: Despite a potential slight softening in the second half of the year due to stabilized interest rates, experts predict that total annuity sales will likely surpass $400 billion for the full year of 2025.
FAQs
What is an annuity for retirement?
An annuity is a financial contract between you and an insurance company. You pay money (one lump sum or several payments) and later receive regular income. The insurer pays you for life or a set period according to the contract’s terms.
What Annuity Really Is?
An annuity is essentially a financial product designed to turn your savings into a predictable income stream, often used during retirement. Think of it as a way to “pensionize” your money.
How It Works
- You contribute: Either a lump sum or a series of payments.
- The insurance company invests: Your money grows tax-deferred.
- You receive payouts: Either immediately or at a future date, depending on the type.
What Annuity Really Is
An annuity is essentially a financial product designed to turn your savings into a predictable income stream, often used during retirement. Think of it as a way to “pensionize” your money.
How It Works
- You contribute: Either a lump sum or a series of payments.
- The insurance company invests: Your money grows tax deferred.
- You receive payouts: Either immediately or at a future date, depending on the type.
Are annuities a good investment?
They provide reliable, lifetime income and tax deferred growth, ideal for income certainty. However, they can have high fees, limited liquidity, and inflation risk—so they work best as part of a diversified, tax smart retirement strategy.
Why Annuities Can Be a Good Investment
- Lifetime Income: They shine when it comes to guaranteeing income you won’t outlive, especially useful if you’re worried about longevity risk.
- Tax-Deferred Growth: Your money grows without being taxed until withdrawal, which can be a strategic advantage.
- Peace of Mind: For people who value stability over market volatility, annuities offer a sense of financial security
Smart Strategy
Annuities work best when they’re part of a diversified retirement plan:
- Combine them with 401(k)s, IRAs, Social Security, and investment accounts.
- Use them to cover essential expenses, while letting other assets grow or flex with market conditions.
- Consider laddering annuities or choosing inflation-adjusted options to balance risk and reward.
So, are they a good investment? For the right person, in the right situation, absolutely. But they’re more of a financial tool than a blanket solution. Want help figuring out if one fits your retirement goals
What is a fixed annuity?
A fixed annuity is an insurance contract offering a guaranteed interest rate and predictable payouts post retirement. It delivers principal safety and tax deferred accumulation, but typically comes with surrender charges and limited liquidity.
A fixed annuity is a contract between you and an insurance company where:
- You pay a lump sum or series of payments.
- The insurer guarantees a fixed interest rate during the accumulation phase.
- You receive predictable income payments later—either for a set period or for life.
It’s like putting your money into a high-yield savings account that eventually turns into a personal pension.
How are annuities given favourable tax treatment?
Annuities grow tax deferred—no taxes on earnings until withdrawal—and portions of each payout may return your tax basis tax free. Some death benefits bypass probate and estate taxes when properly structured.
Tax-Deferred Growth
- No annual taxes on earnings: Unlike regular investment accounts, gains inside an annuity aren’t taxed each year. This allows your money to compound more efficiently over time.
- Tax deferral continues until withdrawal: You only pay taxes when you start taking money out—typically during retirement, when your income (and tax bracket) may be lower.
Taxation at Withdrawal
- Ordinary income tax: When you withdraw, earnings are taxed as ordinary income—not capital gains. That’s a key distinction, and it can be a downside for high-income investors.
- Exclusion ratio (for non-qualified annuities): Part of each payment may be considered a return of your original investment (your “basis”) and is not taxed. Only the earnings portion is taxable
Estate Planning Benefits
- Death benefits: Many annuities offer a death benefit that can pass directly to beneficiaries, potentially bypassing probate.
- Estate tax advantages: With proper structuring—like using irrevocable trusts—annuities can help reduce estate tax exposure.
Strategic Use
Annuities can be especially useful for:
- Tax-bracket management in retirement
- Deferring taxes when you’ve maxed out other retirement accounts
- Creating predictable income while minimizing tax surprises
Are fixed annuities a good investment?
They suit risk-averse retirees seeking guaranteed growth and income. Their predictability is valuable, but high fees and early withdrawal penalties mean they should complement—not replace—other diversified, tax efficient holdings.
It depends on your needs. Annuities can provide reliable income and help ensure you don’t outlive your savings. However, regulators warn that annuities often carry commissions and fees, and historically, they may earn less than stocks and bonds. Choose carefully: for instance, California’s consumer guide suggests treating annuity purchases cautiously and ensuring agents treat you fairly
Why Fixed Annuities Appeal
- Guaranteed Growth: You lock in a fixed interest rate, which means no surprises from market swings.
- Reliable Income: Ideal for retirees who want a steady stream of payments they can count on.
- Principal Protection: Your initial investment is safe, making it attractive for the risk-averse.
- Tax-Deferred Accumulation: Earnings grow without being taxed until you withdraw, which can be a strategic advantage in retirement planning.
Can you cash out an annuity?
Yes—but early withdrawals often trigger surrender charges; only non taxable cost recovery is free from income tax. Withdrawals before age 59½ may also incur penalties and ordinary income taxation on earnings.
You Cash Out? Yes, But…
You can withdraw funds from an annuity, but the timing and type of annuity determine how much you’ll keep.
Common Pitfalls to Watch For
- Surrender Charges: Most annuities have a surrender period (often 5–10 years). If you withdraw during this time, you’ll likely pay a penalty—sometimes up to 10%.
- Taxable Earnings: Only your original investment (the “cost basis”) comes out tax-free. Any earnings are taxed as ordinary income, not capital gains.
- Early Withdrawal Penalty: If you’re under age 59½, the IRS may hit you with an
additional 10% penalty on the taxable portion.
- Loss of Future Benefits: Cashing out early may forfeit guaranteed income, death benefits, or other riders you’ve paid for.
Smarter Alternatives to Full Cash-Out
- Partial Withdrawals: Many annuities allow you to take out a portion each year penalty-free (often up to 10%).
- Annuitization: Instead of cashing out, you can convert your balance into a stream of income—often more tax-efficient.
- 1035 Exchange: You can roll your annuity into another annuity without triggering taxes, if you’re looking for better terms.
Example Scenario
Let’s say you invested $100,000 and it grew to $130,000. If you cash out:
- The $100,000 is your cost, not taxed.
- The $30,000 in earnings is taxable as income.
- If you’re under 59½, that $30,000 may also face a 10% IRS penalty.
How are annuities taxed?
Are annuities safe? Do banks insure them?Annuities are tax-deferred. You don’t pay taxes on the investment growth until you withdraw money. If you bought the annuity with pre-tax retirement funds (e.g. from a 401(k) or IRA), then all withdrawals are taxed as ordinary income. If it was bought with after-tax dollars, only the earnings portion of withdrawals is taxed
Are annuities safe? Do banks insure them?
No, annuities are not insured by the FDIC. Your safety depends on the insurance company’s solvency. Always check the insurer’s credit ratings (look for A-rated companies). Most states have guaranty funds as a backstop, but these cover limited amounts (generally around $250K–$300K per person)
What fees or charges come with annuities?
Fees vary by annuity type. Variable annuities (which invest in sub-accounts) usually have the most fees: mortality & expense fees, administrative fees, and investment management fees. Also almost all annuities have a surrender charge if you withdraw money during the initial term. Read the contract carefully for any hidden costs.
What’s the difference between fixed, indexed, and variable annuities?
Fixed annuities guarantee a fixed interest rate (the insurer credits a minimum rate in the accumulation phase). Variable annuities let you invest in market accounts; payments can rise or fall with the investment performance (the owner assumes market risk). Indexed (fixed-indexed) annuities credit interest based on a market index (e.g., S&P 500) but usually include a guaranteed minimum rate. In short, fixed offers stability, variable offers growth potential, and indexed offers a hybrid of both.
Can I withdraw my money anytime?
Most annuities have a surrender period (often 5–10 years). During this time, early withdrawals incur a significant surrender charge. After the surrender period ends, you can usually withdraw without penalty (though any earnings will still be taxed). Always check the contract’s surrender schedule.
What if the insurance company fails?
If an insurer becomes insolvent, state guaranty associations step in up to their coverage limitscbsnews.com. For example, Indiana law covers annuities up to $250,000 per personinlifega.org. (Other states like California have similar limits around $250K–$300K.) These guarantees reduce losses but don’t protect amounts above the state cap. To stay protected, avoid putting more than the guarantee cap with a single company.