I’m 64 with a large nest egg in my 401k and IRA funds – should I buy an immediate-term annuity to give my younger wife steady income?
With Trump’s tariff recently causing a sudden spike in stock market volatility, it’s not hard to imagine that many folks are looking away from stocks and toward cash, gold, T-Bills, CDs, and annuities. Undoubtedly, older investors and retirees should not feel the need to take on more risk than they can handle, especially in today’s […] The post I’m 64 with a large nest egg in my 401k and IRA funds – should I buy an immediate-term annuity to give my younger wife steady income? appeared first on 24/7 Wall St..

With Trump’s tariff recently causing a sudden spike in stock market volatility, it’s not hard to imagine that many folks are looking away from stocks and toward cash, gold, T-Bills, CDs, and annuities.
Undoubtedly, older investors and retirees should not feel the need to take on more risk than they can handle, especially in today’s grueling market climate. Of course, if tariffs and a recession are up ahead, the stock market rout could worsen. It’s hard to gauge just how much of the tariff risks are priced into the market. After all, a correction shouldn’t be anything all too out of the ordinary. If anything, the latest market correction is a good thing for the market, as valuations come in and Wall Street hits the reset button on expectations moving forward.
If you’ve been kept up at night worrying about the potential for your portfolio to sink 25% or more, there’s no shame in rotating towards lower-return assets that have low or no risk. Indeed, gold shines as a way to score solid returns (especially of late), but there are downside risks, and of course, it doesn’t generate any passive income. For many, moving back to a traditional annuity makes sense, given the protection of one’s principal and their fairly decent rates.
Key Points
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Annuities could shine again as market volatility surges. However, derisking may not be the magic solution for everyone, especially as valuations move lower and yields (on dividend stocks) inch higher with every market plunge.
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Annuities have their place in retiree portfolios, especially as volatility strikes back.
Annuities are an asset class that boomed just a few years ago as older; risk-averse retirees took advantage of higher interest rates. While the popularity (and rates) of annuities may now be well past their peak, they can still make sense as a safe-haven asset for retirees who’ve had enough of the market chop and want something stabler but still bountiful.
In prior pieces, I warned investors of the high management fees, commissions, and surrender fees that annuities entailed and how some nervous investors may be better served with a mix of alternative low-risk instruments. Indeed, they’re complex instruments that can be rather difficult to understand without the help of a financial professional, like an advisor or retirement planner.
Despite the shortcomings of annuities, they may still outshine other asset classes for some of the more conservative investors who want predictable income and the security of their principal and wouldn’t mind sacrificing liquidity and growth while paying up a handsome fee.
Of course, a mix of other assets can get the job done just as well, if not better than an annuity. That’s why consulting an advisor at such a stage is a smart move rather than going it alone and signing up for a product without reading every last line of the fine print (and understanding it).
Do annuities make sense when looking to build an income stream for a younger spouse?
Let’s look at the case of a 64-year-old Reddit user with a sizeable nest egg who’s looking to set their wife, who’s 54, up with a steady income. Undoubtedly, intermediate-term annuities can make sense for such a case with a loved one who’s 10 years younger.
While the age gap is notable, I’d argue that someone who’s 64 may wish to maintain financial flexibility, especially given inflation risks ahead. Indeed, if tariffs bring forth inflation, the value of fixed payments from an annuity could take a hit as the purchasing power of the dollar takes a hit.
Additionally, I’d argue that a strong case could be made for investing in more liquid, higher-growth dividend stocks, given the relatively young age of the wife. Indeed, at 54, one can afford to take on a bit more risk than someone who’s old enough to be drawing down from Social Security.
If I were in the shoes of the Reddit user, I’d explore constructing a diversified passive income portfolio (comprised of low-beta dividend stocks, REITs, and bonds) that could allow one to score a decent yield alongside better growth prospects and, of course, better liquidity. Of course, market volatility could persist for some time, but with a longer time horizon, there are added benefits of not derisking entirely, at least in my view.
In any case, someone in a similar situation should ask an advisor before committing to any low-liquidity investments so that one can know if one’s taking too little risk.
The post I’m 64 with a large nest egg in my 401k and IRA funds – should I buy an immediate-term annuity to give my younger wife steady income? appeared first on 24/7 Wall St..