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Annuities can provide an added layer of financial security in retirement, generating a predictable flow of funds to help pay the bills regardless of how well other investments perform.
That’s true for all retirees, of course. But the value of an annuity income stream could potentially be greater for women, who face bigger risks on the road to retirement readiness.
“Due to factors like career interruptions for caregiving and the gender pay gap, women often have less saved for retirement,” said Abbe F. Large, managing director of Lenox Advisors in New York City. “The guaranteed income from an annuity can help supplement potentially lower retirement account balances and Social Security benefits.”
Indeed, women typically:
- Live longer in retirement. The average life expectancy for women is 80.2, compared with 74.8 for men.1
- Have less saved for retirement. Women still typically earn roughly 85 percent of what men earn for the same job.2 They also have less access to workplace retirement savings plans and are more likely to take time out of the workforce to care for children and aging parents — all of which make it harder to save and build wealth. The average account balance of female participants in defined contribution retirement plans, such as a 401(k), was $112,401 in 2023 compared with $157,489 for men, according to Vanguard.3
- Incur higher health care costs as they age. Longer lifespans mean that women typically pay more in total health insurance costs — an average of nearly $200,000 more during their lifetime than men.4 They are also more likely to develop chronic health conditions during their twilight years, and incur long-term care costs as they outlive their partners (and would-be caregiver).
“Women need their retirement savings to last for a more extended period,” said Large. “Annuities, particularly those offering lifetime income, can provide a stream of payments that continues for as long as the annuitant lives, reducing the risk of outliving their savings. This can help women cover their essential expenses throughout retirement.” (Related: Why women should be financially selfish)
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What is an annuity?
An annuity is a contract, typically between you and an insurance company, that offers a guaranteed payment stream either for life or for a specified period of time in exchange for an upfront payment or series of payments. (Learn more: Different types of annuities explained)
Depending on how they are structured, annuities may also allow for tax-deferred growth, meaning you don't pay taxes on the interest you earn until it’s withdrawn in retirement, at which point you may be in a lower tax bracket.
Annuity contracts come in many varieties, but the basic categories are:
- Fixed annuities, which offer a fixed minimum interest rate for a defined accumulation period. These are designed to be more conservative for those looking to offset the effects of market volatility.
- Variable annuities, in which you invest your money into subaccounts for growth. Variable annuities provide market exposure and may enable you to achieve greater gains than in a fixed annuity, but their growth and your resulting payout are tied to market performance, which exposes you to more risk — including the risk of losing value.
- Income annuities, which can be either immediate or deferred. As the name implies, an immediate income annuity provides payments that begin shortly after you purchase the annuity, while a deferred income annuity is designed to delay payments until a future date. With a deferred income annuity, you are guaranteed your future income payments on the date of purchase, whereas with other annuities, you don’t know until you annuitize.
“Annuities offer a guaranteed rate of return or level of income,” said Large. “This can provide peace of mind and protect savings from potential market downturns, which can be especially important for those relying on their savings for a longer duration.”
Another annuity feature that may disproportionately benefit women? Some deferred annuities offer long-term care benefits to help pay for costs associated with nursing homes, assisted living, and in-home care.
Is an annuity right for me?
Determining which type of annuity is right for you depends on your unique financial goals, when you’d like payments to begin, and the amount of risk you are willing to incur.
Those who can cover most of their bills with Social Security, pensions, and any other guaranteed income sources may not be a candidate for annuities at all.
But Lisa Frankovich, a financial professional with GoldBook Financial in San Diego, California, cautions seniors to at least consider the effects of inflation as they age.
Frankovich, who works primarily with female clients, said many of her clients are teachers or public sector employees who still receive a pension benefit.
“In many cases, if they worked long enough, their pension pays out close to what they were making while working,” she said. “But the biggest issue for them is that the cost-of-living adjustment is often only 2 percent.”
If their retirement lasts 30 years, she noted, their pension may not be enough to cover them due to inflation and the loss of purchasing power.
“An annuity can help fill that space perfectly,” said Frankovich. “I try to get my clients to have at least 50 percent to 70 percent of their monthly living expenses covered by guaranteed income, and if they aren’t getting that much from Social Security, then they can use annuities to cover the gap. That’s especially true for women, who tend to live longer and need additional sources of guaranteed income. Relying on investment returns alone can be difficult.”
For women looking to insulate themselves against market downturns and longevity risk, guaranteed income annuities are “a good starting point,” said Frankovich, adding that she also often recommends deferred annuities that can kick in when her client expects that their other income sources (such as personal savings and investments in taxable brokerage accounts) might get spent down. (Related: Financial protection tactics as you near retirement)
The potential downsides of annuities
That said, annuities are not necessarily the right financial solution for everyone.
Depending on the type of annuity product you choose and what your circumstances are, an annuity may be too expensive or inflexible for your needs and potentially provide lower returns than some other investments. (Related: The pros and cons of annuities)
Also, while annuities are regulated by state insurance commissioners, they are not backed by the federal government. Their principal and interest guarantees as well as other guaranteed features are based on the financial strength of the issuing insurance company. As such, consumers should research the financial strength of any insurance company they are considering doing business with. (Check out MassMutual’s financial strength here)
A financial professional can offer valuable guidance on whether an annuity might be right for your situation.
Conclusion
The value of an annuity income stream during retirement is potentially greater for women, for whom the threat of outliving their assets is very real.
By supplementing their Social Security and pension payments with another source of predictable income, they can help ensure that they can cover their living expenses no matter how their stock portfolio performs or how long they may live.
Discover more from MassMutual…
5 reasons why you may need an annuity
How can an annuity work for your retirement goals?
Need a financial professional? Find one here
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1 U.S. Centers for Disease Control and Prevention, “Life Expectancy,” Oct. 25, 2024.
2 Pew Research Center, “Gender pay gap in U.S. has narrowed slightly over two decades,” March 4, 2025.
3 Vanguard, “How America Saves 2024,” June 2024.
4 HealthView Services, “Addressing the Women’s Longevity Gap,” March 7, 2023.
