Scenario
You’re 70 years old, retired or semi-retired, and wondering if it’s too late—or even worth it—to buy an annuity. You may already have Social Security, possibly a pension, and some savings in IRAs or 401(k)s. But the questions linger: Will my money last? How can I avoid market losses? Can I turn my savings into reliable income without giving up control?
At this stage, the decisions you make about your money can make or break your financial future. The good news: seniors over 70 are in the best position to get the highest guaranteed payouts and most favorable contract terms. Here’s why.
1. Guaranteed Income You Can’t Outlive
- How it works: Immediate annuities and deferred income annuities (DIAs) provide fixed monthly payments for life, solving the fear of outliving your money.
- Why it’s unique: The older you are, the higher your monthly income.
- Pros: Eliminates longevity risk, removes market uncertainty
- Cons: Less flexible once payments begin
- Who needs it: Retirees without a pension or concerned about running out of money
- Who doesn’t: Those with lifetime pension income already covering all expenses
2. Get the Highest Payouts Because of Your Age
- How it works: Annuity payouts increase with age, giving 70-year-olds significantly higher income for the same investment.
- Why it’s unique: You can lock in the best lifetime income now.
- Pros: Maximize retirement income
- Cons: Typically requires giving up access to principal
- Who needs it: Seniors looking to convert assets into income
- Who doesn’t: Seniors who want full liquidity or to preserve a lump sum
3. Protect Yourself From Market Volatility
- How it works: Fixed and fixed indexed annuities grow your money without exposure to losses. Indexed options offer market-linked gains with downside protection.
- Why it’s unique: You earn without worrying about crashes.
- Pros: Safety with growth potential
- Cons: Gains may be capped; surrender charges apply
- Who needs it: Seniors seeking safer growth and principal protection
- Who doesn’t: Aggressive investors seeking full upside potential
4. Defer Taxes and RMDs With a QLAC
- How it works: A Qualified Longevity Annuity Contract lets you delay RMDs until age 85 on up to $210,000 of retirement funds.
- Why it’s unique: Reduces taxable income now and ensures future income.
- Pros: Tax deferral and guaranteed future income
- Cons: No access to funds before income starts
- Who needs it: Seniors with surplus retirement funds and RMD concerns
- Who doesn’t: Those who rely on RMDs for living expenses
5. Cover Long-Term Care Without Paying for Something You May Never Use
- How it works: Long-term care annuities offer enhanced payouts if you need care—otherwise, they act as retirement income.
- Why it’s unique: Dual-purpose protection that avoids the “use it or lose it” risk.
- Pros: Provides income or care benefits
- Cons: May require health screening
- Who needs it: Seniors without long-term care insurance
- Who doesn’t: Seniors already covered or with substantial liquid assets
6. Lock in Simplicity and Peace of Mind
- How it works: Annuities automate withdrawals, remove budgeting stress, and eliminate the need for managing investments.
- Why it’s unique: Creates a stress-free retirement paycheck.
- Pros: No guesswork, predictable income
- Cons: Limited flexibility and investment control
- Who needs it: Seniors who want simple, guaranteed income
- Who doesn’t: Those who prefer to actively manage their funds
7. Still Leave a Legacy With the Right Features
- How it works: Annuities can include death benefit riders or return-of-premium options so your heirs don’t lose out.
- Why it’s unique: Combines lifetime income with inheritance protection.
- Pros: Ensures heirs receive remaining value
- Cons: Optional riders may reduce payouts
- Who needs it: Seniors with legacy goals
- Who doesn’t: Seniors solely focused on maximizing income
Other Insurance You Might Need
- Long-Term Care Annuities: Provide care coverage without wasting premium dollars
- Final Expense Life Insurance: Covers burial and medical bills
- Medicare Supplement Insurance: Reduces what Medicare doesn’t cover
Who Should Buy an Annuity at Age 70?
- Retirees without pensions
- Seniors with longevity in their family
- People who want predictable, guaranteed income
- Anyone tired of market risk or low CD rates
If you are deciding whether an annuity fits someone over age 70, request annuity quotes so the comparison reflects your age, state, premium amount, income start date, and the specific guarantee you actually want.
Who Shouldn’t Buy an Annuity at Age 70?
- Those with serious health conditions or low life expectancy
- High-income retirees with fully guaranteed income
- DIY investors needing unrestricted access to their money
Contact The Annuity Expert’s financial advisors and insurance agents for free quotes and comparisons. We’ll help you find the annuity that pays the most, costs the least, and fits your retirement goals—no obligation, no pressure.
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Questions From Our Readers
Can you withdraw from a retirement annuity?
Yes, you can withdraw money from a retirement annuity. However, surrender charges may apply if you withdraw too much money too early.
What is the difference between annuity and retirement?
There is no difference between an annuity and retirement; they are both financial products that can provide income during retirement.
Is a retirement annuity a good idea?
An annuity can be beneficial if you value steady income in retirement and worry about outliving your savings. However, they can be complex, expensive, and less flexible than other investment options.
What are alternatives to annuities for seniors?
Certificates of Deposit (CDs) provide a higher interest rate but require you to keep your money for a certain period, usually four or five years. Bond investments are also available.
Will my money be secure if I invest in an annuity?
Income and fixed annuities are two financial solutions considered to be very safe.
What are the downsides of a fixed annuity for an 82-year-old with sufficient income and no immediate financial needs?
The main downside is liquidity. A fixed annuity typically locks the money up for the duration of the term—three years in this case. Your MIL won’t be able to access the full $100k without paying surrender charges or potentially facing delays, especially with a company like Corebridge, which has had negative customer service reviews. If she has a sudden need for long-term care, in-home assistance, or a medical emergency, that money might not be readily available.
Another downside is that annuities are insurance products sold on commission. Advisors at banks like Chase often push these products for commission rather than suitability. While 4% Fixed annuities do offer principal protection and guaranteed interest, which is appealing. But at her age, access and simplicity should take priority. A high-yield savings account or a short-term Treasury ladder through a local bank or brokerage might be more appropriate, especially if she’s uncomfortable managing accounts online.
Does an annuity make sense for my parents, ages 80 and 65, with $687k in investments and about $69,000 per year from Social Security and a pension? They’re currently considering the Variable Percentage Withdrawal (VPW) method.
Yes, an annuity can make more sense than using the VPW method in their case. The VPW method involves withdrawing a calculated percentage of a portfolio each year based on age and life expectancy, aiming to balance income with portfolio longevity. However, it’s still subject to market risk and requires regular monitoring and adjustments.
A better approach may be Fixed Indexed Annuities (FIAs) with Guaranteed Lifetime Withdrawal Benefits (GLWBs). At age 80, your father could receive a 9% to 11% withdrawal rate for life. Your mother, at age 65, could get around 7% to 10% depending on deferral length. These withdrawal rates are contractually guaranteed and often exceed what the VPW method allows—especially when market performance is poor.
GLWBs also keep control of the account value, provide liquidity during the deferral and withdrawal periods, and pay out for life even if the account runs out. This makes them a safer and more predictable option than the VPW method for retirees who don’t want to worry about sequence-of-return risk or overspending.
Avoid using a joint-life GLWB. Since the income rate is based on the younger spouse (your mother), the payout would be lower. Instead, purchase individual GLWBs for each parent to maximize their guaranteed lifetime income.
Also, consider pairing this strategy with life insurance if they want to leave an inheritance or offset future care costs. Annuities can be funded using IRA rollovers or non-qualified assets, depending on their tax situation.