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Retirement planning can be a daunting task, especially when it comes to ensuring a steady income that will last throughout your golden years. As a nurse, you work hard to care for others, and it’s important to take care of your own financial well-being as well. One common concern among retirees is the fear of outliving their money. Annuities can help play an important role in retirement planning.  In this blog post, we will explore the different types of annuities, including their pros and cons.  And we’ll look at how annuities can help ease the fear of running out of money in retirement.

What are Annuities?

Annuities are insurance products that can give you a reliable stream of payments to help support your retirement income.  They are contracts between you and an insurance company.  You pay a premium in exchange for a series of payments from the insurance company.  You and the insurance company make money by investing your money.  Annuity contracts have two phases.  Accumulation is the first phase.  During the accumulation phase, the goal is to grow your contributions through investments.  The second phase is distribution.  During this phase, the insurance company pays you according to the terms of your annuity contract.

Annuity Fees and Expenses

Besides the premium, annuities carry fees and expenses.  The fees and expenses vary by contract and insurance company.  Examples of annuity fees and expenses include:

  • Commission fees are the cost paid to the salesperson. Commission fees can range from 1% to 7% of your initial investment, depending on the type of annuity you choose.
  • Administrative fees cover the cost of managing the annuity contract. Administrative fees are charged either as a percentage of your annuity’s total value or as a flat rate.
  • Underwriting fees cover the cost of managing the risk associated with providing insurance benefits. These fees help guarantee the cost of insurance benefits remains stable.
  • Fund Management fees cover the cost if the annuity invests in a mutual fund.
  • Surrender charges occur if you withdraw money before the terms of the contract allow. Typical surrender periods range between the first seven to ten years.  Surrender charges vary by contract and usually decline over time.
  • Investment Management fees cover managing the sub-accounts of your invested money.

Fees can vary by annuity and insurance company.  A Financial Advisor or insurance professional can help clarify the fees and expenses.  A financial professional can also help you understand the terms of the annuity contract.

Annuity Distributions

You may choose how you want to receive your payments.  The two main types of annuity payments are immediate and deferred.  Let’s look at how you can receive your income payment.

Immediate Annuities

With immediate annuities, you give a lump sum premium to the insurance company and   you receive income payments immediately, usually within 12 months of buying the annuity.  Immediate annuities are ideal for those who want to start receiving income right away.  Immediate annuities aim to give you a guaranteed income that can last for the rest of your life.  Immediate annuities can give you a steady income to help cover your living expenses, healthcare costs, and other financial needs.  The downside of an immediate annuity is the potential for lower returns because of the short accumulation phase.

Deferred Annuities

Deferred annuities allow you to accumulate funds over time before receiving payments.  Your regular income starts after a certain date when the deferment period ends.  Deferred annuities can be a good choice if you’re planning for retirement in the future and want to build up your savings.  The accumulation phase is longer, allowing your money time to grow.  Also, your money grows tax free.  Deferred annuities aim to offer guaranteed income that can last the rest of your life.  A downside to deferred annuities is the lack of liquidity.  This means you cannot access your money before the terms of your contract without penalties.

Types of Annuities

The three most common types of annuities are fixed, indexed, or variable.  You can choose between immediate or deferred distributions for these annuities.  Let’s break down the specifics of these annuities.

Fixed Annuities

Fixed annuities offer a guaranteed income with a fixed return.  This means you will receive a set amount of money regularly.  Fixed annuities help give you a stable and known income.  Fixed annuities are often regarded as a conservative investment.  The downside of a fixed annuity is the potential for lower returns compared to other types of annuities.  Also, the set return of a fixed annuity may not keep up with inflation.  This can erode the buying power of your payments over time.

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Variable annuities allow you to invest your premium in various investment choices, such as stocks and bonds.  The income you receive from variable annuities depends on the performance of your investment choice.  Variable annuities offer the potential for higher returns compared to fixed annuities.  The downside is that variable annuities are riskier.  Because the size of your payments depend on how well your investments perform.  Variable annuities also may have higher fees and expenses compared to other types.  Also, variable annuities can be complex and difficult to understand.  This may make it challenging to compare to other annuity products.

Indexed Annuities

Indexed annuities offer a return tied to the performance of a specific market index, such as the S&P 500.  Indexed annuities aim to give the potential for higher returns while also offering some protection against market downturns.

The downside to indexed annuities is they may have caps or participation rates.  These may limit your return.  Like variable annuities, an Indexed annuity may have complex terms and conditions, making the contract difficult to understand.  Indexed annuities may also have high fees and expenses.

Addressing the Fear of Outliving Money in Retirement

A big concern for retirees is the fear of outliving their money.  Nurses also may worry about running out of money in retirement and needing to change your lifestyle.  Annuities help lessen this fear by providing a reliable income that can last for the rest of your life.  This helps reduce your longevity risk.  Annuity income can help cover your living expenses, healthcare costs, and other retirement financial needs.  Annuities can help create a steady source of retirement income.  Adding annuities to your retirement plan can help supplement your other money sources like your savings, Social Security benefits, and 401(k) or IRA.


As a nurse preparing for retirement, it’s essential to address concerns about outliving your money to help ensure a financially secure future.   Annuities can help add income to your retirement plan.  By understanding the different types of annuities and seeking guidance from a Financial Advisor, you can make an informed decision about whether an annuity aligns with your financial goals and risk tolerance.  Each type of annuity has its own set of pros and cons.  A clear understanding of how annuities can help support your retirement income is important for you to make an informed decision.  A Financial Professional can explain the different types of annuities, review the terms and conditions of the contract, and clarify the fees and expenses.   With a clear understanding, you can decide if an annuity fits your retirement plan.

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Georgene Collins

Georgene Collins, RICP®, RN, PhD, MBA is a registered nurse turned Financial Advisor at Airey Financial Group. Georgene helps other nurses take control of their finances and prepare for retirement. Georgene began her career with Airey Financial Group in 2017 after retiring from 30 years in healthcare. Georgene holds the Retirement Income Certified Professional (RICP®) designation from The American College of Financial Services. She holds health and life insurance licenses and a long-term care certificate in Indiana and Illinois. Georgene is a Registered Representative and Investment Advisor Representative and has earned the FINRA Series 63 and 65 registrations.