When your paycheck stops, what replaces it?
You may have spent decades building your retirement savings. Once you retire, those savings take on a new responsibility: helping pay your bills for as long as you live. The size of your portfolio matters. So does the plan for turning it into dependable income. A fixed indexed annuity with a lifetime income rider may help cover a portion of your retirement spending, provided its costs, withdrawal rules, and guarantees fit your needs.
Why Market Returns Matter Differently in Retirement
While you are working and contributing to your investments, a market decline may create opportunities to buy at lower prices. When you are withdrawing money, that same decline can make your income plan more vulnerable. Your investments may be worth less, but your bills still need to be paid.
Selling investments during a downturn leaves fewer assets available to participate in a recovery. This is called sequence-of-returns risk: the order of investment returns matters when you are taking withdrawals.
J.P. Morgan's 2026 Guide to Retirement illustrates this on page 27. Its hypothetical example starts with a $1 million portfolio and an initial $40,000 annual withdrawal, increased each year for inflation. The illustration compares how different sequences of returns affect a portfolio while withdrawals are being taken. See the guide for its assumptions and illustrated outcomes.
These examples are not forecasts. They show why an average return alone cannot establish whether a retirement withdrawal plan will last.
How an Annuity Can Help Create Retirement Income
An annuity is a contract with an insurance company. Depending on the contract, it can help you accumulate money, receive income, or do both.
Different annuities work differently. Fixed annuities credit interest under the insurer's stated terms. Variable annuities offer investment options that can lose value. Here, the focus is a fixed indexed annuity with an optional lifetime income rider.
A fixed indexed annuity can credit interest based partly on changes in a market index. You do not own shares in that index, and the interest credited may be limited by caps, participation rates, or other contract terms. A zero-percent floor on index credits means a negative index period does not produce a negative index interest credit. Fees and withdrawals can still reduce your account value.
The lifetime income rider is a separate feature, which may carry an additional charge. The insurer’s current contract and rider disclose the fee, calculation basis, withdrawal restrictions and benefit conditions. Under its conditions, it can provide withdrawals for the rest of your life, or for two covered lives if you choose that option. Payment amounts depend on the contract, your age, when income begins, and the coverage selected.
Understand the Difference Between Cash Value and Income Benefits
An annuity's account value and its income benefit base may be different numbers. The account value is the money remaining in the contract. The amount available if you surrender the contract may be lower after applicable charges or adjustments.
The income benefit base is used to calculate the rider's payments. It generally is not a lump sum you can withdraw. A percentage used to increase that benefit base is not the same as interest earned on spendable cash. Likewise, an 8% payout rate is not an 8% investment return. Payments may include your own principal.
With a qualifying lifetime withdrawal rider, permitted withdrawals may eventually reduce the account value to zero while the covered lifetime payments continue, provided you follow the rider's conditions. Extra withdrawals can reduce or terminate that benefit. All guarantees depend on the issuing insurance company's financial strength and claims-paying ability.
Start With Your Retirement Income Gap
Before choosing a product, compare your essential monthly expenses with your expected income from Social Security and any pension. For example, suppose your essential expenses are $5,000 a month and those income sources provide $2,500. That leaves a $2,500 monthly gap, or $30,000 a year. These are hypothetical numbers; your calculation should account for taxes and your actual spending needs.
You then need to decide how to cover that gap. Some retirees are comfortable relying on portfolio withdrawals. Others want more of their essential expenses covered by dependable income. An annuity may cover part of the gap while other assets remain available for emergencies, growth, and changing expenses. The appropriate allocation depends on your entire financial situation.
Page 38 of J.P. Morgan's guide discusses matching dependable income sources with regular spending and keeping cash available for variable expenses. Pages 34 and 35 also show that households with more guaranteed income tend to spend more at similar levels of total retirement wealth. That research includes Social Security, pensions, and annuities; it does not prove that purchasing an annuity causes higher spending.
The useful question is personal: would knowing that more of your essential bills are covered help you feel comfortable using the savings you have worked to build?
Review the Tradeoffs Before Committing Money
An annuity is a long-term commitment. Review how it would affect your access to money and the rest of your retirement plan. Surrender charges may apply if you withdraw too much during the surrender period. Some contracts also have a market value adjustment. An income rider may preserve access to remaining account value, but that access comes with limits and can affect guaranteed benefits.
Inflation also matters. A level payment buys less over time as prices rise, even when its dollar amount is guaranteed. Ask what your beneficiaries would receive, particularly after withdrawals reduce the account value. A lifetime income guarantee does not automatically preserve your original premium for your heirs.
If you need the money soon or already have sufficient dependable income, an annuity may not fit. Its costs and restrictions should be weighed against the benefit you want it to provide.
Could an Annuity Fit Your Retirement Plan?
Start with these four questions:
- Are you primarily seeking growth, retirement income, or both?
- When would you want income to begin?
- Would you like a portion of your income guaranteed for as long as you live?
- How important is access to the money remaining in the contract, knowing withdrawals have limits and can affect the guarantee?
Your answers can help determine whether a fixed indexed annuity with a lifetime income rider deserves a closer look. Request a no-obligation retirement income review using the contact link on this website. We can begin with your monthly expenses, Social Security and pension income, and the gap you want to cover. Then we can review whether an annuity fits, what a current illustration shows, and how fees and withdrawal rules would affect you.
Understand the numbers and the contract before making your decision.
Educational information only; not an individual recommendation. Examples are hypothetical. Features, fees, availability, and guarantees vary by contract. Guarantees depend on the issuing insurer's financial strength and claims-paying ability. Withdrawals may trigger charges, adjustments, taxes, and reductions in benefits. Annuities are not FDIC insured. References to J.P. Morgan research do not imply endorsement of an annuity or this article.