What Is a Retirement Annuity?

It provides guaranteed retirement income, but there are downsides to know about.

By Lyle Daly – Updated May 13, 2025 at 2:53 PM | Fact-checked by Frank Bass

Key Points

Retirement annuities provide a guaranteed income, which is useful if you're unsure about the longevity of your savings.
Annuities come with fees such as administration and investment costs, affecting long-term returns.
Alternatives like Social Security or dividend stocks offer income with varying degrees of reliability.

A retirement annuity provides guaranteed income in your senior years. That may sound like a solution you need -- particularly if you don't know how long your savings will last. But, like any financial strategy, annuities have their drawbacks. To avoid unpleasant surprises later, it's smart to evaluate the pros and cons before you lock up your cash in an annuity.

Loading paragraph...

An infographic outlining five common types of retirement annuities. — Image source: The Motley Fool.

Loading image...

Loading paragraph...

Pros

Cons

Loading content_cards...

Loading paragraph...

Retirement Planning: How to Map Out Your Financial Success

Learn how, why, and how much to save for your golden years.

8 Best Strategies for Retirement Income

You've worked hard to build a retirement nest egg. Here's how to make the most of it.

How to Save for Retirement Without a 401(k)

The 401(k) is a traditional nest egg for Americans who want to retire, but there are other options.

Loading hub_pages...

Loading paragraph...

About the Author

Lyle Daly is a contributing Motley Fool stock market analyst covering information technology and cryptocurrency. Lyle has been a contributor at the financial services company since 2018. His work has been featured on USA Today, Yahoo Finance, MSN, Fox Business, and Nasdaq. Before joining The Motley Fool, he wrote for financial brands including Intuit.

TMFLyleDaly

@LyleDaly

The Motley Fool has a disclosure policy.