Is Buying an Annuity at 65 Worth It When Markets Feel Riskier?

By Marc Gilman

Questions? Call (800) 927-9326 or email marc@gilmanagency.com

This article was first published on gilmanagency.com.

Key Takeaways

• The years right around retirement are when a market drop can do the most lasting damage, because you may be withdrawing money while your portfolio is down.

• Wall Street is signaling caution. The Wall Street Journal reported on November 1, 2026 that investors are buying more protection against a sharp fall in AI-related stocks, after the Nasdaq lost 2.9% on Friday and had its worst month since March 2025. No one knows what comes next, but the report is a useful reminder to check how exposed your retirement income is.

• A fixed annuity can turn part of your savings into income that does not depend on market returns. The guarantee is backed by the insurance company, so the insurer's financial strength matters.

• Annuities are not for everyone. They can limit access to your money, and some carry surrender charges and fees.

• The right question is not "annuity or no annuity." It is "how much of my essential spending needs a guarantee?"

Why Does Market Risk Matter More Around Age 65?

It comes down to the order of returns. Two retirees can earn the same average return over 20 years and end up in very different places. If the market falls early in retirement while you are taking withdrawals, you sell more shares at lower prices to cover the same spending, and those shares are not there when the market recovers. Planners call this sequence-of-returns risk. A 35-year-old can wait out a downturn by continuing to contribute. A 65-year-old drawing income has less room to wait.

What Is the Market Telling Us Right Now?

According to the Wall Street Journal, demand for downside protection is rising among investors and technology executives who hold large positions in the companies that have powered recent market gains. Trading in put options on at least one heavily borrowed AI infrastructure company hit a record in October. The cost of insuring against default on the debt of several of the largest technology companies rose to its highest level since 2021. One trading firm president quoted in the story said, "You don't need to be bearish to want some insurance."

That last point applies to retirement planning too. You do not have to predict a downturn to decide that your essential expenses should not depend on one. If your portfolio is concentrated in a handful of large technology stocks, either directly or through index funds that hold them heavily, it is worth looking at how much of your retirement income depends on that group.

How Can an Annuity Reduce That Risk?

A fixed annuity is a contract with an insurance company. In exchange for your premium, the company promises either a set interest rate or a stream of income. Common types include:

• Multi-year guaranteed annuity (MYGA): a fixed rate for a stated number of years, similar in concept to a certificate of deposit but issued by an insurer.

• Single premium immediate annuity (SPIA): you pay a lump sum and begin receiving income right away, for life or a set period.

• Deferred income annuity: you pay now and income begins on a future date you choose.

• Qualified longevity annuity contract (QLAC): a deferred income annuity purchased with IRA or similar funds that can delay part of your required minimum distributions, within IRS limits.

• Fixed indexed annuity (FIA): interest is linked to a market index with a floor that protects against index losses, but credited interest is limited by caps, participation rates or spreads, so you do not receive the full market gain.

Variable annuities are different. Their value rises and falls with investment subaccounts, so they do not remove market risk.

What Are the Trade-Offs?

• Liquidity. Many annuities have surrender charges if you withdraw more than the allowed amount during the early years. Money you may need for emergencies or large expenses should not be locked up.

• Inflation. A fixed payment buys less over time unless the contract includes an inflation feature, which usually lowers the starting payment.

• Insurer risk. Your guarantee is only as strong as the company behind it. Check the insurer's financial strength ratings from independent rating agencies. In New Hampshire, the state guaranty association backstop covers up to $250,000 in present value of annuity benefits per person, within an overall $300,000 per-life cap under RSA 408-B:5. That is a safety net, not a reason to skip the research.

• Taxes. Earnings are generally taxed as ordinary income when withdrawn, and annuity income may raise your modified adjusted gross income, which can affect income-related Medicare Part B and Part D premiums (IRMAA). Ask a tax professional how it would apply to you.

• Opportunity cost. Money placed in a guaranteed contract cannot also be invested for growth, and fees on optional riders add up.

How Much of My Savings Should Be Guaranteed?

There is no single percentage. A common starting point is to look at your essential spending: housing, food, utilities, insurance, health costs and taxes. Then compare it with income that is already reliable, such as Social Security, a pension, or other lifetime income. If reliable income covers the essentials, you may not need an annuity, and you can keep more in growth investments. If there is a gap, a guaranteed income source can be one way to fill it, while the rest of your savings stays invested for growth and for the unexpected.

Questions to Ask Before You Buy

1. What essential expenses am I trying to cover, and what covers them today?

2. How much can I afford to lock up, and for how long?

3. What are the surrender charges, fees, caps or participation rates, and can they change?

4. How financially strong is the insurance company, and how long has it been paying claims?

5. How will this income be taxed, and how will it affect my Medicare premiums?

6. If I die early, what happens to the money? Is there a death benefit or a joint-life option for my spouse?

7. Am I replacing an existing policy, and if so, what do I give up?

Where Does Insurance Planning Fit In?

Our approach is to discover first, illustrate second, and recommend last. We start with your essential spending, your reliable income and how much market risk you can tolerate, then show how different strategies would work in your situation, including keeping what you have. An annuity is one tool, and sometimes the right answer is a smaller amount than you expected, or none at all. Turning 65 also brings Medicare decisions, so it helps to plan your coverage and your income together.

What To Do Next

1. List your essential monthly expenses and your guaranteed income sources.

2. Review how much of your portfolio is concentrated in a few stocks or one sector.

3. Gather your account statements and any existing annuity contracts.

4. Write down your questions from the list above.

5. Call us for a no-cost conversation: (800) 927-9326 or marc@gilmanagency.com.

Questions? Call (800) 927-9326 or email marc@gilmanagency.com

This article is for general information only and is not tax, legal or investment advice. Guarantees depend on the claims-paying ability of the issuing insurance company. Annuities are not FDIC insured, may have surrender charges, and are not suitable for everyone. Speak with a licensed professional about your situation.