Understanding Immediate Annuities: Are They Right for You?

Residents of Lubbock, Plainview, New Deal, Snyder, Post, and Levelland often ask: “Are immediate annuities a smart retirement strategy?” In this Q&A, we break down how they work, who they benefit, and how to avoid common pitfalls—especially in light of popular criticisms from firms like Fisher Investments.

Q: What is an immediate annuity, and how does it work?

An immediate annuity is a financial product you purchase—typically with a lump sum—from an insurance company. In return, the insurer begins paying you a guaranteed monthly income, usually starting within 30 days to one year. These payments continue for a specific period or for the rest of your life, depending on the option you choose.

For example, a 68-year-old retiree in Levelland might use $150,000 from a retirement account to buy an immediate annuity. In return, she receives a stable monthly income, regardless of market swings or how long she lives.

Q: Who benefits the most from immediate annuities?

Immediate annuities are especially helpful for:

• Retirees without pensions who want predictable income.
• Risk-averse investors worried about outliving their money.
• People who value simplicity over active management.
• Widows, single retirees, or couples in smaller towns like Post or New Deal, where cost of living is modest and predictability matters.

They’re a strong fit for those who want to “retire from worrying” about market volatility or investment timing.

Q: What about the criticisms—like those from Fisher Investments?

Fisher Investments often argues that annuities are expensive, inflexible, and inferior to long-term market investing. Here’s the other side:

• Flexibility concern: Yes, immediate annuities are not liquid. But that’s the point—they convert risk into guaranteed income. Many retirees appreciate knowing that part of their income is “locked in.”
• Cost argument: Immediate annuities don’t have the high internal fees some deferred annuities carry. They’re straightforward: you pay a lump sum, and the insurer calculates your monthly payout based on life expectancy and interest rates.
• Growth potential: Fisher emphasizes long-term growth, which is valid. But if you’re retired in Snyder or Plainview, you’re likely prioritizing income and safety, not 20 more years of equity growth.

A balanced retirement plan can include both market investments and annuities.

Q: How can I avoid potential pitfalls of annuities?

• Don’t put all your money in one: Annuities should be one piece of your retirement pie.  Typically, they are best to pay your monthly fixed bills plus a little extra.
• Work with a trusted advisor: Someone who works in your best interests, not just someone trying to sell a product.
• Understand your options: Immediate annuities can come with inflation riders or joint-life payouts for couples in Lubbock or Post.

Q: Final thoughts?

Immediate annuities aren’t for everyone, but for many retirees in West Texas towns—where simplicity and steady income are valued—they can be an effective, stress-reducing tool.

Still unsure? Consult with Dan Baze Agency to find out if an immediate annuity fits your retirement puzzle.