What You Give Up By Using Annuities As An Income Source.

Shawn Plummer

CEO, The Annuity Expert

This guide will go over what an investor will give up in retirement by using these specific types of annuity products for an income source, now or in the future.

If you’ve been reading The Annuity Expert to learn more about annuities, you’ll understand that there is no one type of annuity. Instead, there are 13 types of annuities, and each annuity serves a different purpose.

Consumers purchase annuities primarily to generate an income stream during retirement as if they were working.

The question is which annuity type fits your needs.

There are annuity companies like Blueprint Income and New York Life that are good but offer limited solutions that could affect your future retirement income situation. You could wind up buying a retirement plan that offers less income, less control, no death benefit, and no flexibility.

Let’s take a look.

What You Give up With Income Annuities

So income annuities are a group of annuity types that generate an income for either a guaranteed fixed period of time or lifetime(s).

The income generated by income annuities is distributed through annuitization only, which means once you start the income, there’s no stopping the income.

Another way of putting annuitization is to give an insurance company your retirement savings and give up control of your money in exchange for a guaranteed stream of income.

Ok, so why is it bad?

Well, first, you’re giving up all control of your money. Second, is it essential to fork over a large sum of money for guaranteed income when you can have the flexibility with an income rider? Again, I say no, it’s not worth it. 

Secondly, you earn little to no interest.  Currently, I believe interest in income annuities are between 0% – 1.5% per year.  With an income rider, you can earn more interest based on the contract’s performance. There have been scenarios where retirees actually get less income back than their initial investment.

Thirdly, if you choose the Cost of Living Adjustment (COLA) payout, you could be setting yourself back even further than keeping up with inflation.  In most COLA payouts, you’re basically taking a much lower payment upfront with a fixed increase to your paycheck each year going forward.  With an income rider, you’re taking between .50% and 1% less of a payout with increases based on index performance or the Consumer Pricing Index (CPI), an inflation measurement index. These increases could provide big leaps in your retirement paycheck through the years, maintaining your lifestyle.

Income Annuities Include:

Deferred Income Annuities Examples:

Immediate Income Annuities Examples:

What You Give up With Fixed Annuities

This is simple.  You generate less income than other annuity types.

The interest rates are so low in fixed annuities and MYGAs; the income can be half of the money you could generate from utilizing an income rider.

Fixed Annuity Examples:

The Cons of Income Annuities and Personal Pension Plans

  • Some income annuities/personal pension plans require you to give up all control of your assets.
  • There is little to no earning potential.
  • The payouts can be low compared to other annuities.
  • There might not be a death benefit.

The Cons of Fixed Annuities

  • Low interest rates equal low supplemental income.
  • Rates change after each term, which fluctuates your retirement income.
  • No inflation protection.


Income Annuities are irrevocable, meaning your income is locked in, and there is no liquidity nor refunds. They also generate minimal interest in growth.

Interest rates in fixed annuities are so low; your income could be half the amount from an income rider.

Why you can trust The Annuity Expert

At The Annuity Expert, we strive to help you make confident financial decisions regarding annuities. Content provided is created by an independent licensed financial professional.

The Annuity Expert is an online insurance agency that provides the widest variety of annuities in the United States. When you buy an annuity directly from us, we receive a predetermined commission from the insurance company (not you). While your annuity is active, clients are not charged any servicing or management fees. Learn more.

Shawn Plummer

CEO, The Annuity Expert

I’ve sold annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

Scroll to Top