Annuities often divide opinion. Some advisors argue they are unnecessary for the wealthy, while others present them as a critical layer of security. For high-net-worth investors, the truth lies somewhere between these extremes. Annuities can provide valuable benefits, but only when integrated thoughtfully into a broader financial strategy.
It is true that investors with significant assets may never face a risk of running out of money. Yet, the purpose of an annuity is not solely about survival — it is about stability. Guaranteed lifetime income offers a floor of certainty, freeing other assets to be invested more aggressively or reserved for legacy goals. Even households with large portfolios sometimes value the psychological and strategic comfort of knowing fixed expenses are permanently covered.
Annuities have a reputation for high fees. While some products do carry significant costs, others — such as immediate or fixed annuities—are relatively simple and inexpensive. High-net-worth individuals often dismiss annuities outright without distinguishing between the types available. The reality is that fees should be weighed against the guarantees received, much like paying for any form of insurance.
Liquidity is a valid concern. Most annuities impose restrictions on withdrawals. However, for wealthy investors, the issue is less about liquidity and more about allocation. Allocating a portion of assets to an annuity can make sense if it ensures predictable income and tax deferral, while leaving the remainder accessible. This balance can create both security and flexibility.
For ultra-high-net-worth individuals with portfolios far exceeding retirement needs, annuities can feel redundant. In these cases, the guarantees may not justify the fees or restrictions. The decision ultimately comes down to whether peace of mind, predictable cash flow, and tax deferral meaningfully improve the overall financial picture.
Annuities are neither a panacea nor a product to dismiss outright. For high-net-worth investors, they can provide stability, diversify income sources, and enhance estate planning when used selectively. The key is to evaluate whether the unique benefits of an annuity align with personal goals, rather than following myths or blanket advice.
Wealth alone does not eliminate the value of guaranteed income, as even affluent families benefit from the security of predictable cash flow to cover core expenses.
Annuities vary widely, and their costs and benefits depend heavily on the type and design — making careful evaluation essential to avoid unnecessary expenses or restrictions.
When used selectively, annuities can strengthen retirement income strategies and enhance legacy plans, complementing other investments and estate tools.