How Much of Your Savings Should You Put Into an Annuity?

When you start thinking about retirement, one word comes up again and again: guarantees.

You want guaranteed income you can count on, no matter what happens in the market or economy.

That’s why many retirees and pre-retirees turn to annuities — financial products designed to create steady, reliable lifetime income.

But one of the most important decisions you’ll face when shopping for an annuity is:

How much of your money should you put into it?

Let’s walk through it step-by-step.

Understanding the Role of an Annuity

An annuity should complement your overall retirement plan — not replace it.

Think of it as one leg of a three-legged stool, alongside Social Security and personal savings (like IRAs, 401(k)s, brokerage accounts, or cash).

The right annuity:

• Guarantees a stream of income for life (even if you live to 100+)

• Protects part of your portfolio from market downturns

• Reduces longevity risk (the risk of outliving your money)

But you still want liquidity (easy access to cash) and growth potential elsewhere.

That’s why balance is key.

General Rule of Thumb: 25–40% of Retirement Assets

Most financial experts recommend allocating between 25% to 40% of your overall retirement savings into an annuity.

Here’s why:

Scenario % Recommended for Annuity

Very conservative, seeking high guaranteed income 40%–50%

Balanced retiree, wants guarantees + flexibility 25%–35%

Aggressive investor, willing to take market risk 10%–20%

Example:

If you have $500,000 total in your 401(k), IRAs, and cash:

• Putting $150,000 (30%) into an annuity could create a secure base of lifetime income.

• The other $350,000 stays flexible for investments, emergencies, and legacy goals.

Factors to Consider Before Deciding

1. Income Needs

How much guaranteed income will you need beyond your pension and Social Security?

If you have a gap (say you need $5,000 a month but your pension + SS only covers $3,500), an annuity can close that gap safely.

2. Liquidity Needs

Never put 100% of your money into an annuity.

You need emergency cash — ideally 6–12 months’ worth of living expenses — outside of any annuity contract.

3. Age and Health

The younger you are when you buy, the longer the annuity has to grow if it includes an income rider.

If you’re older and closer to retirement, you may want to annuitize sooner for guaranteed payments.

4. Other Retirement Accounts

If you have large balances in IRAs, 401(k)s, or TSPs, you can roll a portion into a qualified annuity tax-free.

5. Legacy Goals

If leaving an inheritance is important, you’ll want to carefully structure your annuity with a death benefit or keep a portion of your savings outside the annuity.

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Types of Annuities to Consider

• Fixed Indexed Annuities (FIAs):

Protect your principal, grow with the market (up to a cap), never lose money in a downturn.

• Immediate Annuities:

Start monthly payments right away — ideal if you’re retiring now.

• Deferred Income Annuities:

Start payments later (like age 65 or 70) to lock in larger payouts.

Each one serves different needs based on your retirement timeline.

Final Thoughts: Balance is Everything

You’ve worked hard to build your savings — now it’s about preserving and maximizing it.

• Don’t put everything into an annuity.

• But don’t leave everything exposed to market risk, either.

Most retirees find that putting 25%–40% of their retirement savings into a properly selected annuity provides peace of mind, predictable income, and long-term financial security.

Ready to find out what works best for you?

Quotes are 100% free — no pressure, just information.

Call today: 407-925-3616

Email: info@robinsonjortiz.net

Let’s build a retirement income plan you can count on — for life.