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Why RIAs Should Give Annuities Another Look

By Matt Ohme

Managing risks can be critical to seeking desired retirement outcomes. While personal decisions like retirement age or initial withdrawal rate can help manage some risks, others are outside an individual’s control.

Uncontrollable risks to a retirement portfolio include inflation, longevity, and market volatility. Right now, the top worry for Americans is the rising cost of living. More than half (52%) of respondents to the 2022 Allianz Life New Year’s Resolutions Study1 said rising inflation is the first or second most worrisome threat in the next year. This is up from 38% in 2021.

Clients want to know they will have enough money to last a lifetime, and they understand how uncontrollable factors may affect their wealth preservation and the income they can expect from their assets. Managing their risk exposure is a key element of financial planning, and clients recognize that advisors have those skills. More than 40% (44%) of Americans said making sure they have enough money is one of the most important services a financial professional can provide.2

The Fragile Decade

Navigating risk may be particularly important during a time often called “the fragile decade”—the five years before and the first five years after retirement. The macroeconomic environment during that decade and the rate of return in each of those 10 years can have a profound effect on the overall outcome of a retirement plan because they affect a client’s ability to sustain a withdrawal rate throughout retirement and preserve their overall wealth.

While these 10 years are a small part of a 60-year retirement plan—30 years of accumulating and 30 years in retirement—effectively navigating these years is critical. RIAs should consider sequence-of-returns risk during this period and take advantage of new strategies for them to help mitigate the risk. Financial planning software allows professionals to analyze retirement plans—with and without an annuity—to assess the annuity’s impact on risk reduction. If an annuity makes sense, Fee-Only advisors now have a full range of commission-free annuities to meet a client’s desired outcomes.

New Risk Management Solutions Built for RIAs

Optimizing client portfolios for generating income during their retirement requires a different approach than advising clients on how to contribute to a portfolio during their working years. Strategies for income generation need to incorporate contingencies for navigating increased longevity, lower equity returns, higher inflation, and a volatile market.

As part of an overall portfolio, an annuity can help reduce exposure to uncontrollable risks by providing lifetime income (which may be available through an additional-cost income benefit rider) that has the potential to increase in retirement. Allianz research published in “Controllable Factors and Uncontrollable Risks in a Retirement Spending Plan: Using a Registered Indexed Linked Annuity to Mitigate Risk Exposure” found that allocating 30% of a client’s assets into a registered index-linked annuity (RILA) with guaranteed lifetime income payments could reduce a client’s exposure to these four major risks to a retirement strategy, compared to portfolios without a RILA.3

This research used a base client who is a 55-year-old who has an approximately $3 million portfolio. This base client wants to make an initial-year withdrawal of 4% and leave a $250,000 legacy at age 90. Success was measured by the ability to meet both the spending and the legacy goals of the client. The probability of success is measured by how many Monte Carlo simulations out of 20,000 would meet the client’s goals.

This research found clients with a portfolio comprising 40% equity, 30% bond, and 30% annuity had a 96% probability of success at age 90. At the same time, a portfolio with 80% equity and 20% bonds had a 90% probability of success in the same analysis. That means that a client would achieve their spending and legacy goals in 1,200 more scenarios if 30% of their assets were allocated to an annuity than with a portfolio comprising 80% equity and 20% bonds.

Asset allocation Base probability of success
40% equity / 60% bond 93%
60% equity / 40% bond 92%
80% equity / 20% bond 90%
40% equity / 30% bond / 30% annuity 96%

These examples are provided for illustrative purposes only and are not intended to represent a specific product or investment. An individual’s results may differ from those shown.

Incorporating Annuities into Your Practice

Most insurance carriers now offer commission-free annuity products offering a range of options on growth, protection, and income. These offer low-cost lifetime retirement income, short surrender periods (or no surrender charge), and seamless fee-billing capabilities. For advisors, it means not having to refer clients to a separate insurance professional—keeping yourself at the center of all of their key financial decisions.

It’s easier than you think. Financial technology has been integrated to help provide a smooth experience for clients, advisors, and RIA back offices. Using planning software that incorporates annuities analysis, advisors can create the best portfolio to address retirement objectives like optimizing cash flow, asset protection, and wealth transfer.

With all of these advances, adding annuities to portfolios can help strengthen an RIA’s client outcomes and client relationships. RIAs should take another look to see the impact adding these products could have on client retirement income portfolios and their business.


1 Allianz Life conducted an online survey, the 2022 New Year’s Resolutions Study, in November 2022 with a nationally representative sample of 1,000 respondents.

2 Allianz Life conducted an online survey, the 2022 Retirement Risk Readiness Study, in February 2022 with a nationally representative sample of 1,000 individuals age 25-plus in the contiguous U.S. with an annual household income of $50,000-plus (single)/$75,000-plus (married/partnered) OR investable assets of $150,000.

Retirement Management Journal, Vol. 10, No. 1, 2021, pp. 59-66.

Matt Ohme is the senior vice president and channel head for RIA and institutional markets at Allianz Life Insurance Company of North America. His email is

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