Annuity Education
Annuities vs. Bonds — Which Provides Better Retirement Income?
For conservative retirees, annuities often provide more predictable income and better principal protection than bonds — without interest rate risk.
The Problem With Bonds in Retirement
Bonds have long been considered the "safe" part of a retirement portfolio. But bonds carry two risks that many retirees overlook: interest rate risk (when rates rise, bond prices fall) and credit risk (the issuer could default). The 2022 bond market decline — one of the worst in history — reminded many retirees that bonds are not risk-free.
Fixed annuities eliminate both of these risks. Your principal is guaranteed regardless of interest rate movements, and you are protected by the insurance company's financial strength and state guaranty associations.
Annuity vs. Bond — Side-by-Side Comparison
| Feature | Fixed Annuity | Bond |
|---|---|---|
| Principal Risk | No market risk — principal guaranteed | Subject to interest rate risk and credit risk |
| Interest Rate Risk | None — rate is locked in or has a floor | Bond prices fall when interest rates rise |
| Credit Risk | Low — backed by insurance company + state guaranty | Varies by issuer (corporate bonds carry default risk) |
| Tax Treatment | Tax-deferred growth | Interest taxed annually (except municipal bonds) |
| Lifetime Income | Yes — guaranteed income for life option | No — bonds mature and stop paying |
| Predictability | Highly predictable — guaranteed rate or floor | Predictable coupon, but market value fluctuates |
| Liquidity | 10%/year penalty-free; surrender charge for more | Can sell on secondary market (at market price) |
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Protect Your Retirement Savings From Market Risk
Learn how fixed annuities can provide the safety and income of bonds — without interest rate risk.