What are Annuities?

Annuities are contracts with insurance companies that provide guaranteed income, typically in retirement. You pay money in—either as a lump sum or over time—and the insurer promises to pay you income later, often for the rest of your life.

For business owners whose wealth is tied up in their businesses, annuities provide something the business cannot: income that doesn’t depend on finding a buyer, maintaining customers, or market conditions.

Why Business Owners Need Annuities

Many entrepreneurs have a retirement plan that consists of “sell the business.” But businesses don’t always sell when planned, for the price expected, or at all. Market conditions change. Health issues arise. Industries shift. Putting all retirement hopes in a business sale is risky.

Annuities provide a guaranteed floor—income you can count on regardless of what happens to the business. Combined with eventual business sale proceeds, they create a more secure retirement.

Types of Annuities

Fixed annuities provide guaranteed interest rates and predictable accumulation. The insurance company takes the investment risk; you receive stable growth. For business owners dealing with enough uncertainty already, this predictability can be welcome.

Fixed indexed annuities tie returns to market indexes while protecting principal. You participate in some market gains without risking losses. The upside is capped, but so is the downside.

Variable annuities offer investment options similar to mutual funds. Returns depend on investment performance, creating more growth potential with more risk. Tax-deferred growth is a key advantage.

Tax Advantages

Annuities grow tax-deferred—you pay no taxes on gains until withdrawal. For business owners in high-income years who expect lower income in retirement, this deferral can create significant tax savings.

Unlike 401(k) plans, annuities have no contribution limits. Business owners who’ve maxed out other retirement vehicles can continue tax-advantaged saving through annuities.

Income Options

When you’re ready for income, annuities offer options: income for a set period, income for life, income continuing to a surviving spouse. The right structure depends on your situation and goals.

Lifetime income options provide longevity protection—you can’t outlive a lifetime annuity, regardless of how long you live.