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About 60% of Americans have money invested in the stock market. Because markets always move up and down, that also means that on any given day most people are not quite sure how much money they have.
In recent times, this has worked out okay because the good days have tended to exceed the bad.
But right now, many people are concerned. According to the weekly survey of the American Association of Individual Investors, on February 5, 2026, almost a third (29%) of investors expect the market to fall in the next six months.
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While the market has been on an extraordinarily good run, downturns do happen and their effects can last. It took the stock market about five years to recover from the 2008 recession. It was a real challenge for people who needed access to money during that period.
In particular, the laws of economic gravity that influence the stock market have sizable implications for aspiring retirees. Anyone who has spent a lifetime gradually tucking savings into an equity-heavy 401(k) or IRA knows the feeling of watching an account balance sink. The closer one is to retirement, the deeper the pit in your stomach.
The thought of a shrinking nest egg forcing someone to work well past retirement age is demoralizing for many. One solution to this problem: An annuity.
Moving a portion of a nest egg into an annuity guarantees a lifetime income that protects retirees against running out of funds regardless of how the markets perform.
This can feel counterintuitive to people who think of retirement simply as the phase when savings are gradually spent down. Annuities bend this equation, providing a consistent paycheck while others see their savings balance dwindle.
Understanding annuities
Here’s how annuities work: Someone with $250,000 in savings, for example, can use a portion to purchase an annuity now. Upon commencement, the annuity will deliver monthly payments for as long as the person lives, no matter how long that may be.
This can be an important income stream for anyone who has spent their working years paying monthly into Social Security and expecting that money to eventually flow back to their checking account. But for many people, Social Security alone does not provide enough lifetime income.
There are many types of annuities designed to meet the diverse needs of individual retirement savers. However, not everyone is convinced that annuities are worthwhile.
Some advisers offer to manage retirement assets for a fee, with strategies that seek to maintain or grow savings and minimize withdrawals.
Other people raise objections over the costs, fees or restrictions of annuities but fail to compare them against the value of guaranteed payments.
Yes, annuities have costs, like all financial products. But as the only true lifetime income product available, they give people the peace of mind to focus on retirement and not the markets.
While you can outlive your savings, you can’t outlive your annuity.
The evidence for annuities
The obvious question for an aspiring retiree is whether an annuity is right for you. And, if so, how much of your nest egg should be used to purchase guaranteed monthly income.
The organization I lead, the American Council of Life Insurers, recently sponsored a study by two economists, Gaobo Pang and Mark Warshawsky. It found that the best strategy for the average investor having $1 million in assets, for instance, was a combination of stocks and annuities.
Alone, neither was perfect. But together, they provided the highest level of security, likely to provide adequate resources throughout life.
Many advisers push the 4% rule, which suggests taking 4% from investments in the first year and adjusting for inflation in future years. Pang and Warshawsky’s research, however, suggests there is a significant failure rate at older ages and that this approach provided the lowest level of income.
While useful at all levels they studied, Pang and Warshawsky used $250,000 in savings as a reference point and found that annuities tend to provide more value as people have less saved, making them especially helpful for households with fewer retirement assets.
There are pros and cons that everyone should consider. And, very importantly, everyone’s financial situation is different and there is no substitute for personal, expert guidance from a financial professional.
But as you think about the future, it might be a good idea to consider the option of locking in stock-market gains with an annuity’s guaranteed lifetime income stream.
