Plans & Coverage
Annuities
An annuity is a contract with an insurance company: you hand over a sum, and it pays you income — either immediately or starting later — often for life. The problem it solves is longevity risk, the chance of outliving your savings. It is not the right tool for everyone, the fees and surrender terms matter enormously, and the income it creates can affect what you pay for Medicare.
The main types
| Type | How it works | Suits |
|---|---|---|
| Immediate (SPIA) | Lump sum converts to income starting now | Covering a fixed monthly gap in retirement |
| Deferred fixed | Grows at a stated rate, income later | Predictable growth without market risk |
| Fixed indexed | Credited based on an index, with a floor and a cap | Some upside participation with downside protection |
| Variable | Invested in subaccounts; value fluctuates | Growth focus with higher risk and fees |
What an annuity is genuinely good at
- Turning a portion of savings into income that cannot run out while you live.
- Covering fixed essential expenses so market swings don't threaten your groceries.
- Removing sequence-of-returns risk from part of the portfolio.
- Deferring taxes on growth until you take income.
The sensible use is to cover your baseline expenses that Social Security doesn't, and to invest the rest — not to annuitize everything.
The trade-offs, stated plainly
- Liquidity — surrender charges typically apply for several years. Money you may need soon does not belong in an annuity.
- Complexity — indexed products have caps, participation rates, and spreads that materially change the outcome.
- Fees — variable annuities and optional riders carry real ongoing costs.
- Inflation — a level payment loses purchasing power over a long retirement unless you buy an increasing option.
- Credit risk — the guarantee is only as strong as the issuing carrier.
No annuity guarantees a market return, and any presentation implying otherwise should be treated with suspicion.
How income decisions affect your Medicare costs
This is the connection most advisors miss. Medicare's income-related monthly adjustment amount (IRMAA) uses your modified adjusted gross income from two years prior. Taking a large distribution, converting to a Roth, or triggering a taxable event can push you into a higher tier — and in 2026 the Part B premium ranges from $284.10 up to $689.90 a month at the top tier, against a standard premium of $202.90 (CMS 2026 fact sheet).
If your income dropped because of a life-changing event — retirement, widowhood, divorce — you can ask Social Security to use current income instead via the IRMAA reconsideration process. Our premium estimator shows which tier you'd land in.
Who an annuity isn't for
If you may need the money in the next few years, if you already have enough guaranteed income from Social Security and a pension to cover essentials, or if you don't understand the contract after it's been explained twice, the answer is no. We would rather tell you that than place a product.
Not sure which of these fits you? A free 15-minute call with a licensed local advisor sorts it out — no pressure, and no cost to you. We do not offer every plan available in your area. For a complete list of every plan in your county, use Medicare Plan Compare or call 1-800-MEDICARE.
Questions, answered
Are annuities safe?
Fixed and fixed indexed annuities protect your principal from market loss, but the guarantee depends on the issuing insurance company's financial strength — so carrier ratings matter. Variable annuities carry market risk and can lose value.
Can I get my money back out of an annuity?
Usually with limits. Most contracts allow a penalty-free withdrawal each year, with surrender charges on larger amounts for a set period. Never put money you may need soon into an annuity.
Will an annuity raise my Medicare premium?
It can. Medicare's IRMAA surcharge is based on your income from two years earlier, and in 2026 the Part B premium ranges from $284.10 to $689.90 a month depending on tier. We plan income with that in mind rather than discovering it afterwards.
Do annuities guarantee a market return?
No. Fixed indexed annuities credit interest based on an index subject to caps and participation rates — that is not the same as earning the index return, and anyone presenting it that way is misleading you.
Sources
- CMS — 2026 Medicare Parts A & B Premiums and Deductibles
- SSA — Request to lower an IRMAA
- Medicare.gov — Medicare costs
Figures are for 2026 and come from the official sources above. Plan-specific costs vary by county and carrier — confirm yours on Medicare Plan Compare or with a licensed agent.
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Content reviewed by Brian Penner, Independent Medicare advisor — no pressure.