Fixed index annuities, in combination with traditional retirement portfolio strategies, significantly improve the chances of creating sustainable income throughout retirement, according to "Planning with Certainty: A New Strategy for Retirement," a white paper prepared by Security Benefit Corp.
As part of its research, the company conducted tests on various joint and single life retirement scenarios. The tests were designed to determine the best allocation among a range of investment choices to optimize chances for retirement planning success, specifically not running out of money and leaving assets behind.
The white paper examined allocations between three modern strategies: Mutual fund systematic withdrawal, variable annuities combined with mutual fund systematic withdrawals and fixed index annuities (FIAs) combined with mutual fund systematic withdrawals.
Recommended For You
Based on the research's optimal retirement income allocation, the point along the efficient frontier that best reduced the risk of failure and heightened the odds of success included an FIA with a Guaranteed Lifetime Withdrawal Benefit (GLWB) in the portfolio mix. The analysis further suggested that combining FIAs with a GLWB and conventional mutual fund spend-down strategies produced higher potential for achieving the goals of a personal retirement income plan.
"We can see that FIAs that include a GLWB rider can offer retirees a predictable income they can never outlive," said Doug Wolff, president of Security Benefit Life Insurance Company. "While there are a number of vehicles in the marketplace that can generate guaranteed income in retirement, including highly popular variable annuities, FIAs are able to generate attractive income from retirement assets without having to annuitize or give up control of the assets."
FIAs are a type of annuity that grows at the greater of a guaranteed minimum rate or interest that is linked to the return of a specified market index, like the S&P 500. By design, FIAs include the potential for some market-linked interest credits with no risk of loss of principal because of market downturns and volatility, a feature made more compelling by the volatile markets of the last decade.
"When trying to create sustainable retirement income, feeling comfortable about where your money is invested is as important as how it's invested," says Wolff. "An FIA can provide a foundation for a retirement income portfolio that creates safe income potential for life. Other investments can then cover expenses that may grow or be less predictable during the course of your life. Retirees and pre-retirees should consult with an advisor to determine the right combination of guarantees and investments."
While the analysis strongly suggests that retirees will not be able to finance a sustainable retirement income with only one traditional product class, it also suggests that implementing a framework that mixes and matches mutual funds and FIAs in various combinations can be an effective way to utilize available resources to generate lifetime income, protect against expenses related to unforeseen events, and help maintain purchasing power over the life of a retiree.
"The market volatility of the last decade has not only affected investors, it's had tremendous impact on companies offering retirement products. We have long suspected there was a better way to generate sustainable retirement income and help advisors succeed in their planning," said Wolff, "and the analysis suggests we were right. The papers are must-reads for any financial adviser in the business of building retirement portfolios."
Security Benefit Corporation, a Guggenheim Partners Company, provides savings and income solutions for America's pre- and post-retirees.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
