Retirement Savings Insights

When it comes to saving for retirement, most folks share a common objective: to build a solid nest egg that ensures financial stability for the years ahead.

One way to achieve this is through a reliable income source that, much like a paycheck, gets deposited into your bank account monthly for the rest of your life, although it may not last forever.

As traditional workplace pension plans become less common, many financial advisors suggest that modern pensions could represent an appealing option for retirees seeking dependable income.

However, financial experts note that the types of annuities typically most suitable, like deferred income annuities (DIAs) and single premium immediate annuities (SPIAs), aren’t frequently purchased by consumers.

Scott Witt, an actuary and fee-only insurance advisor from New Berlin, Wisconsin, attributes this trend primarily to consumer behavior, stating, “Americans have a hard time accepting pensions as a form of insurance. They still view it as an investment.”

Pension Sales on the Rise

Lee Baker, a certified financial planner and founder of Claris Financial Advisors in Atlanta, anticipates that anxiety stemming from factors like the Iran war and stock market fluctuations could push annuity sales higher.

“Whether we like it or not, the prevailing uncertainty is contributing to the uptick in pension sales,” he noted.

Understanding SPIAs and DIAs

Both immediate lump sum annuities and deferred income annuities operate on a similar principle. Essentially, you pay a lump sum—possibly hundreds of thousands—to an insurance company, which in return guarantees regular payments for life.

With SPIAs, you begin receiving payments right away, while DIAs kick in at a designated future age, perhaps 70 or 75.

Baker describes these as among the “easiest” and “cheapest” annuities available, generally offering better monthly payouts compared to other types, like variable and indexed annuities.

“For those worried about outliving their income, both SPIA and DIA options make a lot of sense,” he adds, highlighting their affordability and lifestyle-enhancing benefits in retirement.

That said, they remain the least popular choice among consumers.

Popularity of Variable Index Annuities

According to Rimura, approximately $5 billion was spent on DIAs and $14 billion on SPIAs in 2025. In contrast, variable annuities saw sales of $63 billion, and indexed annuities reached a record $128 billion.

Variable and indexed annuities function more like investment accounts—variables tend to resemble stocks, while indexed products are closer to bonds, offering limited but balanced returns.

Financial planners suggest that consumers often select these products with an optional rider for later income. Although this adds complexity and cost, flexibility is an appealing feature. However, it’s important to remember that there are restrictions, often resulting in fees and penalties if you’re not careful.

Witt points out that the fees associated with these options can be substantial, potentially leading to significant financial repercussions.

In contrast, SPIAs and DIAs typically do not allow for access to funds once the initial payment has been made, a factor that planners emphasize.

“Americans have a hard time accepting pensions as a form of insurance. They continue to think of insurance as an investment.”

Scott Witt

Many people are understandably hesitant to engage with options that feel irrevocable. For instance, the prospect of giving a large sum to an insurance company and potentially passing away with little benefit can be daunting, as pointed out by Zach Teutsch from Values Added Financial.

“When navigating pension decisions, the notion of surrendering your life savings for uncertain returns is a challenging perspective for many,” he notes.

Reframing Pension Decisions

Witt suggests that rather than viewing SPIA and DIA selections merely as financial investments, consumers should think of them in terms of insurance. “You’re not going to run out of money,” he adds.

He recalls feeling secure in knowing he would not outlive his funds, though it’s worth noting that while the longevity benefits of SPIAs and DIAs are remarkable, they don’t always promise the greatest payouts. Income riders on other products might yield better returns in certain cases.

Experts highlight that these options have additional uses too. For instance, individuals concerned about future long-term care costs can seek income riders that offer similar benefits without the complexities of traditional long-term care insurance.

“We recognize that some products with lifetime income benefits feature additional complexities,” Blanchett remarks, “but we shouldn’t allow this complexity to act as a deterrent.”

For reliable lifetime income, he suggests ensuring that basic living expenses are covered, always keeping inflation in mind.

The first step? Consider postponing your Social Security claim, as benefits increase by 8% for each year you delay until age 70, which locks in a higher amount for life.

“But if you’re looking for the next simplest action to take, purchasing SPIA or DIA could be that step,” Blanchett concludes.