By Brent Matthew
You’ve lined up an annuity as part of your comprehensive retirement planning. What do you do now?
There’s a misconception about annuities. Some mistakenly believe annuities alone equal a complete retirement income plan. In reality, annuities should be only a part of comprehensive retirement planning, not the whole thing.
Here’s what else you need to make your retirement plan truly complete.
The Role of an Annuity in Retirement
An annuity provides a predictable, guaranteed income in retirement. It’s built for long-term reliance and certainty for those who want dependable cash flow. However, it’s not a catch-all, do-all income source.
Annuities are fairly illiquid. If an emergency arises, an annuity may not be the readiest source of funds. They are also agnostic to market exposure and aren’t a good hedge for inflation. Annuities can be tricky to plan for in terms of legacy.
For truly comprehensive retirement planning, you should take a more holistic, all-encompassing approach.
Holistic Financial Planning
Comprehensive retirement planning involves a lot of verticals. In addition to the income annuities produce, you have to consider the lifestyle you want, your risk tolerance level, and your emergency preparedness. That’s why a holistic approach is beneficial.
A solid financial plan features several components that work alongside each other to address various issues. Here are some additional elements of a strong retirement plan.
What Roles Annuities Don’t Cover and Why it Matters
In comprehensive retirement planning, pay attention to these focus areas:
Tax Planning
Annuities provide retirement income, but distributions are rarely, if ever, tax-free. Withdrawals are treated like taxable income.
Financial advisors suggest coordinating distributions from multiple investment vehicles to optimize tax exposure. The rule of thumb says this sequence of monthly withdrawals is best for limiting tax liability:
- Taxable accounts (brokerages) first
- Tax-deferred accounts (401(k)s, traditional IRAs, non-qualified annuities) next
- Tax-free accounts (Roth IRAs, Roth annuities) last
This strategy requires more than just one investment vehicle. It keeps more of the money you earn working for you.
Estate Planning
Annuities aren’t ideal for planning your legacy. Payouts may stop at death, beneficiary options are restricted, riders can hold growth back, or beneficiaries may be responsible for gift income taxes. They don’t grant planners a lot of flexibility or control.
Estate-planning tools like wills, trusts, beneficiary designations, living wills, powers of attorney, and others form a more complete legacy plan than annuities alone.
Investment Management
While annuities play an important role in a comprehensive retirement plan, they are primarily designed to preserve wealth rather than drive investment growth. Although annuities offer the benefit of tax deferral, distributions are taxed as ordinary income, not at the more favorable capital gains rates. Their strength lies in providing predictable income and safeguarding assets, not in maximizing portfolio expansion.
In contrast, brokerage accounts and IRAs are built for long-term growth, with investment strategies tailored to match each individual’s risk tolerance. A well-diversified, liquid portfolio can serve as the foundation for sustained capital appreciation. Ongoing portfolio management—aligned with your age, life stage, and financial goals—is essential to maintaining the flexibility and growth potential needed throughout retirement.
Insurance Planning
With some exceptions, annuities generally aren’t vehicles for managing insurance. Most don’t cover long-term healthcare, life insurance, or Medicare coverage gaps unless they’re coupled with riders or insurance policies.
Insurance is absolutely necessary in case of an emergency or unexpected health problem. Without updated insurance, a retirement plan restricted to non-insurance annuities and investment accounts could be depleted quickly. Insurance is an important instrument for risk mitigation across the board.
Comprehensive Retirement Planning With Scottsdale Wealth Advisory
You’ve already taken out an annuity. That’s a great first step. But truly comprehensive retirement planning goes beyond just one solution. What other opportunities might your current strategy be missing?
At Scottsdale Wealth Advisors, we take a holistic look at your entire retirement plan. Your annuity is an important piece, but we help you identify additional investment vehicles and strategies designed to protect your lifestyle, adapt to changing needs, and grow your wealth over time.
Contact us to learn more. To schedule your complimentary financial coaching session, call (480) 247-9090, email info@SWAFirm.com, or book directly at calendly.com/BrentMatthew.
About Brent
Brent Matthew is the founder, CEO, and portfolio manager at Scottsdale Wealth Advisory, a full-service fiduciary retirement planning firm serving pre-retirees and retirees across Arizona and multiple states. With a strong commitment to always putting clients first, Brent leads the firm in developing comprehensive, tax-efficient financial plans tailored to each family’s unique goals. As portfolio manager, he is responsible for researching investment, annuity, and life insurance strategies and building smart asset allocations that reflect both long-term growth and risk management.
Brent is driven by a core belief: “The success of this firm will be measured by the success of the families it represents.” That client-first approach has guided his work since the beginning. He is currently enrolled at the College for Financial Planning and is on track to earn his CERTIFIED FINANCIAL PLANNER® designation. He also holds his Series 65 license and Arizona Life and Health Insurance Producers License.
Outside the office, Brent embraces the Arizona outdoors with “lil B” and their two pomskies, Heimo and Kota. Whether he’s hiking, fishing, dirt biking, skiing, golfing, kayaking, or skeet shooting, Brent finds balance and joy in staying active. He’s also a fan of CrossFit, brunching, and cruising the Phoenix canal system on his beach cruiser—usually with classic tunes from the Marshall Tucker Band, Gordon Lightfoot, or Crosby, Stills & Nash playing in the background. To learn more about Brent, connect with him on LinkedIn.
