A Steadier Retirement Story: What a Fixed Indexed Annuity Offers That the Market Can’t
August 25, 2026
The years right around retirement carry a risk that looks nothing like an ordinary bad quarter in the market. A downturn that would barely register during someone's working years can permanently reshape a retirement plan if it lands at the wrong moment. For people within five to 10 years of stopping work, that moment is closer than it feels. A fixed indexed annuity gives savers a way to move a slice of their savings out of that risk window before it opens, rather than scrambling to react once it does.
The Risk That Appears Right Before Retirement
Financial professionals call this “sequence-of-returns risk,” and it has a specific mechanism worth understanding before deciding what to do about it. Portfolio assets typically peak in the years around retirement, and adverse market conditions coinciding with planned withdrawals can permanently limit a portfolio's ability to fund retirement, according to research compiled by MIT Sloan. The analysis notes that losses in the first several years of withdrawals do outsized damage, with the average return over just the first 10 years of retirement accounting for roughly 77% of the final retirement outcome.
Two people can retire with identical portfolios, take the same withdrawals, earn the same average annual return over time, and still end up with different outcomes purely because of when the losses hit. A downturn during someone's accumulation years gives the portfolio time to recover before withdrawals begin. The same downturn hitting right before or right after retirement forces withdrawals from a shrinking account, which locks in losses and leaves less money to benefit from any recovery that follows.
The critical detail is timing, not size. A portfolio can absorb plenty of volatility over a 30- or 40-year working career. The same portfolio has far less room to absorb a downturn in the narrow window when withdrawals start.
Why a Principal Floor Matters More Than Upside Right Now
For someone still a decade from retirement, the conversation around annuities often centers on growth potential and market participation. That conversation changes for someone entering the five- to 10-year runway. A fixed indexed annuity offers growth tied to a market index. However, the feature that matters most for this specific risk window is the principal floor: The account value doesn't decline due to market performance, no matter what the index does in any given year.
That protection doesn't need to apply to an entire portfolio to be useful. Moving even a portion of retirement savings into a financial vehicle with a principal floor removes that portion entirely from the risk window. If a downturn hits in year one or two of retirement, the money sitting in the annuity isn't part of the math that determines how badly that downturn damages the plan. It's already sitting outside it.
This decision is more about repositioning than growth. Someone in this window isn't necessarily trying to earn more, but rather trying to ensure a single bad year doesn't cause lasting damage to a plan built over decades.
Who This Approach Fits Best
This strategy tends to fit two overlapping groups particularly well.
- People within five to 10 years of retirement: Enough time remains to plan deliberately, but not so much time that a downturn would simply resolve itself before withdrawals begin.
- People who have built savings but haven't yet stress-tested the timing: Contributing consistently for years is different from asking what happens if the market drops the year withdrawals start. Many savers in this window have never run that specific scenario.
The goal isn't to abandon growth-oriented investments altogether. It’s to identify the portion of savings that needs to remain intact through a bad sequence and give that portion a floor to stand on.
Fixed Indexed Annuity FAQ
What is sequence-of-returns risk in retirement?
Sequence-of-returns risk is the risk that a market downturn hits in the years right before or right after retirement, permanently reducing how long savings last, even if the portfolio's long-term average return is reasonable. The order in which gains and losses arrive matters as much as the average itself.
How can I protect my retirement savings from a market downturn right before I retire?
Common approaches include holding a cash buffer to cover near-term expenses, adjusting withdrawal amounts during down years, and moving a portion of savings into financial vehicles that protect principal, such as a fixed indexed annuity, so that a downturn doesn't force withdrawals from a shrinking account.
Does a fixed indexed annuity protect against sequence-of-returns risk?
A fixed indexed annuity protects the portion of savings held in it from market losses, as the account value won't decline with index performance. Money held in the annuity during a downturn stays intact rather than getting drawn down at reduced values, which directly addresses the timing problem at the center of sequence-of-returns risk.
Steadiness for the Years That Matter Most
Someone with 20 or 30 years left before retirement has time on their side. Someone standing five to 10 years out doesn't have that same cushion, and the years right around retirement deserve a plan built specifically for that narrower window. A fixed indexed annuity offers a way to protect a portion of savings against that timing risk without giving up on lifetime income altogether.
At 1891 Financial Life, we specialize in providing tailored insurance solutions that cater to diverse needs. Our team is equipped to help you navigate these challenges with expertise and compassion. Contact us today for personalized assistance and to explore your options.
About the Author
Thomas Adamson, CLU, ChFC, FICF, AMTC, CFFM
Thomas Adamson launched his insurance career in 1968 with New York Life and developed skills in management, marketing, recruiting, training, and development of new and experienced agents.
Tom has been involved in fraternal Home Office Sales, Marketing, Product Development, and Training for the last 20 years. He truly appreciates the opportunity to blend his faith with his profession. He has been an advocate for the agent in the Home Office and brings a unique perspective to marketing and product development. Tom is also involved in philanthropic efforts and community-based activities; as a dedicated parent and grandparent, it has been his passion to volunteer on behalf of children.
Tom’s mission is to “provide an environment for agents to successfully design insurance plans that give our clients and members the financial peace of mind they deserve.”
About 1891 Financial Life
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