Annuity income eases retirement anxiety and market fear, advisors say

Financial advisors say clients almost never ask for an annuity by name. What they ask for is the confidence to travel more, help their kids, or stop checking their account balance every time the market drops — and a growing body of research suggests guaranteed income is one of the more direct ways to get there.

According to BlackRock's 2024 retirement research report "Been There, Valued That," 84% of annuity owners surveyed said guaranteed income makes them feel less vulnerable to financial fraud or poor investment decisions as they age, while 53% said owning an annuity makes them more comfortable spending non-guaranteed assets on things they want or need. LIMRA's "Path to Purchase" research on deferred annuity buyers examines a related question: what separates clients who fold an annuity into their financial plan from those who remain anxious and never do. 

For advisors, the challenge is translating that vague anxiety into a concrete recommendation without it feeling like a sales pitch.

Start with the plan, not the product

Jesse VanValin, senior vice president and private wealth advisor at Procyon, said the process begins well before any product enters the conversation. When a client says they want to travel more or stop checking their balance every time the market drops, he backs out the investment values and puts a number on the desired income, then calculates the monthly lifestyle cost and how much of it Social Security or a pension already covers.

"If there's a gap, we walk through the ways to fill it, and a guaranteed income annuity is simply one option next to a bond ladder or a cash bucket that helps to determine what fits best in their case," VanValin said. "If the client sees the gap themselves and chooses the tool, it never feels like a sales pitch; it just feels like the option they were looking for."

Troy Randall, director of insured solutions at RBC Wealth Management – U.S., frames the conversation around an income clients cannot outlive. Certain annuities are designed to limit or avoid losses while paying out for a set number of years or for life, and for many clients that echoes something familiar: a parent's pension.

"They go from paycheck to what I call 'mycheck,'" Randall said. "Clients that have created an income floor based on annuity income protections just add to their sense of financial confidence. Clients are also more engaged in their overall wealth planning since they have been relieved of trying to understand where their income is coming from."

What changes once guaranteed income is in place

VanValin said the most consistent behavioral shift he observes is that clients actually spend the money they had already set aside to spend. People who could afford the trip or the down-payment gift for a child, but couldn't bring themselves to pull the trigger, tend to loosen up once their essentials are covered regardless of what the market is doing. He also sees fewer panicked calls during downturns and fewer requests to move everything to cash.

"The other benefit is that the rest of the portfolio gets to do its job, since we're not forced to sell growth assets at a bad time to cover the everyday expenses," VanValin said.

Randall sees a similar pattern: clients with guaranteed income spend less energy worrying about markets and more time on family and travel. He added that having a client explain the purchase back to the advisor — and eventually to their own family — deepens the relationship and their understanding of what they bought.

"When a client owns the decision-making process, they become more engaged with the advisor and their wealth planning," Randall said. "The risk, as with any financial transaction, is the lack of knowledge and understanding. Overselling something is simply creating an environment where something is not understood. It does not matter if it's an annuity or any other financial product."

Guarding against overselling the benefit

Both advisors were candid that the emotional framing carries a risk of overselling what an annuity can actually deliver. VanValin said an annuity covers a specific slice of a financial plan and comes with real tradeoffs in liquidity, cost, and flexibility — meaning it isn't the right fit for every client, and higher-net-worth households often solve the same problem with other tools.

"The peace of mind comes from having a plan where the essentials are handled, not from any one product, and the annuity is only as good as the planning around it and the strength of the insurer behind it," VanValin said. "Framing it as an emotional cure-all sets the client up for disappointment; framing it as one way to manage the speed we're driving is more accurate."