Stacking Annuities

A Practical Approach to Retirement Income Planning

Planning for retirement can feel overwhelming, especially when you’re trying to ensure your savings last as long as you do. One strategy that can help is stacking annuities. It's a way to spread your investments across multiple annuities to create a steady, flexible income stream. If you’re exploring ways to secure your financial future, this approach could be worth considering. In this post, we’ll explain what it means to stack annuities and how it works.

What Does Stacking Annuities Mean?

Stacking annuities is a retirement strategy where you purchase several annuities with different start dates or features to meet your income needs over time. It’s similar to how you might spread out investments in CDs or bonds to balance access to funds and returns. By diversifying your annuities, you can create a plan that provides income now, later, or both, while managing risks like inflation or outliving your savings.

For example, imagine you have $300,000 allocated towards safe money strategies. Instead of putting it all into one annuity, you might split it into three:

• One annuity that starts paying you immediately to cover daily expenses.

• Another that begins in five years to help with rising costs.

• A third that grows for 10 years, giving you a larger payout down the road.

This approach lets you tailor your income to different stages of retirement, offering both stability and flexibility.

Why Stacking Annuities Makes Sense

Retirement often means shifting from saving to generating income you can rely on. Stacking annuities can help because it:

• Provides Steady Income: You can set up payouts to cover essentials now and increase later as your needs change.

• Manages Inflation: By delaying some payouts, you can secure higher payments in the future to keep up with rising costs.

• Reduces Risk: Spreading your money across different annuities or terms can protect against interest rate changes.

• Grows Tax-Deferred: Your annuity earnings grow without taxes until you withdraw them, potentially boosting your savings.

How Stacking Annuities Works

Here’s a simple look at how you might build a stacking strategy:

1. Pick the Right Annuities:

   • Fixed Annuities: These pay a guaranteed interest rate for a set time, making them great for predictable income.

   • Fixed Indexed Annuities (FIAs): These tie returns to a market index (like the S&P 500) but protect your principal, offering a balance of growth and safety.

   • Deferred Annuities: These grow your money tax-deferred and start paying out later, ideal for future income needs.

2. Spread Out Payouts:

   • Buy annuities that start paying at different times. For example, one could begin now, another in 5 years, and a third in 10 years. This creates a “stack” of income that grows as you age.

   • Example: With $400,000, you might put $100,000 into an immediate annuity for current income, $150,000 into a 5-year deferred annuity, and $150,000 into a 10-year deferred FIA for growth.

3. Consider Optional Features:

   • Some annuities offer riders, like guaranteed income for life, that can boost your payouts. These might include a fixed growth rate plus potential market-linked gains.

4. Plan for Rising Costs:

   • Delaying some annuities or choosing ones with cost-of-living adjustments can help your income keep pace with inflation.

A Real-Life Example of Stacking Annuities

Let’s say you’re 65 with $300,000 to invest for retirement. You want income now but also want to plan for higher expenses later. Here’s one way to stack annuities:

• $100,000 Immediate Annuity: Pays $500/month starting now to cover bills.

• $100,000 5-Year Deferred Annuity: Starts paying $650/month at age 70 to help with rising costs.

• $100,000 10-Year Deferred FIA: Grows with market potential and pays $900/month at age 75.

This creates a rising income stream: $500/month now, $1,150/month at 70, and $2,050/month at 75. An income calculator can help you adjust these numbers based on your savings or goals.

Tips for Building Your Stacking Strategy

1. Talk to an Advisor: An advisor can help you pick annuities that match your needs and avoid high-fee products.

2. Use a Calculator: An income calculator can show you how different choices impact your income.

3. Balance Your Needs: Make sure your overall portfolio is diversified.

4. Check Terms Carefully: Understand fees before signing any contract.

5. Shop Around: Compare annuity rates from different insurers, as payouts can vary.

Why Explore Stacking Annuities?

If you’re nearing retirement, stacking annuities can offer a way to create reliable income that adapts to your life. It’s not about quick wins or flashy promises, it’s about building a plan that gives you peace of mind. By spreading your safe money across different annuities, you can cover today’s expenses, plan for tomorrow’s costs, and protect against running out of money down the road.

Final Thoughts

Retirement planning is about finding what works for you, and stacking annuities is one tool to consider. It’s not a one-size-fits-all solution, but it can provide stability and flexibility if used thoughtfully. Take your time, explore your options, and talk to a trusted advisor to ensure your plan fits your goals. If you’re curious about how much income you could generate, schedule a call with one of our advisors below. It’s a small step that could make a big difference in planning a retirement you feel good about.