For years, conventional wisdom in retirement planning followed a familiar script:
Fund the 401(k). Max out the IRA. If there’s money left over, maybe consider an annuity.

That hierarchy made sense in a world where retirement planning was almost entirely about accumulation — where market growth, tax deferral, and account flexibility were the primary goals. But retirement itself has changed. Longevity has increased. Pensions have declined. Market volatility has intensified. And clients are no longer asking only “How much can I grow?” — they’re asking, “How do I make this last?”

So, the real question today isn’t whether annuities still “belong” in a portfolio.
It’s where they belong — and what role they are meant to play.

The old rule: Accumulate first, insure later

The traditional funding order — 401(k), IRA, then annuity — was built on three assumptions:

1. Markets would do the heavy lifting
Growth oriented assets were expected to carry most of the retirement burden.

2. Income could be created later
Systematic withdrawals, rules of thumb like the 4% rule, and bond ladders were commonly used to convert assets into income.

3. Insurance was a last resort
Annuities were viewed as expensive, illiquid, and best used only when other options were exhausted.

In an accumulation‑only mindset, that logic holds. But retirement isn’t just accumulation — it’s decumulation under uncertainty.

What’s changed: Retirement is now a risk‑management problem

Modern retirement planning must address risks that traditional portfolios may not be designed to manage on their own:

• Longevity risk (living longer than expected)
• Sequence‑of‑returns risk (poor market performance early in retirement)
• Behavioral risk (clients underspending or reacting emotionally during volatility)
• Income timing risk (needing cash when markets are down)

Annuities can be used to help address some of these risks — not to compete with 401(k)s or IRAs, but to complement them.

Importantly, recent regulatory changes and product innovation have also shifted the conversation. Annuities can now be held within qualified plans, and newer designs often emphasize flexibility, transparency, and clearly defined objectives rather than accumulation alone.

A better question: What job is each dollar doing?

Instead of asking, “Should we fund an annuity after everything else?”
A more useful framework is: What role does each portion of the portfolio need to play?

Growth capital

Focused on long‑term appreciation. Accepts volatility. Typically aligned with equities and market‑based assets.

Liquidity capital

Covers near‑term spending needs. Requires accessibility and stability. Often held in cash or short‑duration instruments.

Income capital

Meant to produce reliable, durable income. Prioritizes predictability over upside.
This is a role annuities may be well positioned to serve.

Seen through this lens, annuities are not “leftover money vehicles.”
They are income‑focused tools.

So … How much of a portfolio belongs in an annuity?

There is no universal percentage — and that’s the point.

Rather than anchoring on a number, consider these guiding principles:

Cover essential expenses with sources of guaranteed income.

Social Security, pensions, and annuity income can be layered together to create a personal paycheck that is designed to provide a more stable source of income.

Use annuities as a fixed‑income complement – not a stock replacement.

For many clients, annuities may replace a portion of fixed income — not growth assets — particularly in a low real‑return bond environment.

Think in phases, not all at once.

Annuities can be deferred, laddered, or introduced gradually to support later retirement needs while preserving early‑retirement flexibility.

Does the old funding order still hold water?

Partially — but it’s incomplete.

Tax‑advantaged accounts like 401(k)s and IRAs remain powerful accumulation tools. But treating annuities as something you only fund after everything else assumes retirement risk can be managed solely through markets.

For many clients, that assumption no longer holds.

A modern approach doesn’t ask, “Have we maxed out every other account yet?”
It asks, “Have we built a portfolio designed to support income with confidence over time and manage market risk?”

When viewed that way, annuities stop being an afterthought — and start becoming part of the architecture.

The bottom line

Annuities are not about beating the market. They are about changing the conversation from assets to outcomes.

The appropriate amount of annuities in a portfolio is driven not by tradition or leftover dollars, but by how much income a client needs to feel comfortable entering retirement.

And in today’s retirement landscape, certainty has become one of the most valuable assets of all.

The Internal Revenue Service (IRS) updates the eligibility guidelines and contribution limits for certain employer-sponsored plans and individual retirement accounts (IRAs). Higher “catch up” contribution limits are also set for those ages 50 and over who are closer to retirement.

An individual or couple’s eligibility to contribute to an IRA (like a Roth IRA), or deduct the contributions made, can be impacted by their filing status and income. These guidelines are outlined on the IRS website.

These restrictions can make it harder for those earning a higher income to save enough for retirement. Thankfully, products like annuities and permanent life insurance can often serve as a helpful IRA alternative to help these individuals build tax-advantaged financial resources for retirement.

As people age, many believe they have less of a need for the death benefit of life insurance. However, there are very important ways life insurance can make your retirement more comfortable and secure. Here are a few benefits to owning life insurance in retirement:

Ensure money for your family with a death benefit

One of the best things about adding life insurance to a retirement plan is the freedom it can provide.

With a permanent life insurance policy as part of a retirement plan, life insurance can help maintain your spouse’s lifestyle at your death as well as provide the legacy you hope to leave to the next generation.

In addition, the money from the death benefit may be available to pay for end of life medical costs, taxes on retirement assets, or simply as an additional benefit to be distributed as you choose.

If properly structured, life insurance death benefits pass income tax-free to your beneficiaries and can be removed from the taxable estate. Since death benefit proceeds can provide the funds needed to pay estate and income taxes as well as financial expenses, life insurance is often the most cost-effective means for protecting your estate.

Additional help in the event of a chronic or terminal illness

Some policies have the ability to add a rider that can accelerate the payment of the death benefit if the insured needs care for a chronic or terminal illness. This benefit can provide you with additional financial resources at a time when you may need them the most. Best of all, the payment of the benefit is not tied to a particular course of treatment, but can be used as you need to use it, for whatever purpose suits you best.

Acceleration of the death benefit during the insured’s lifetime will reduce the future benefit payable upon their death. As with any significant financial decision, you should consult with your financial advisor so that you can make the best decision for you and your family.

Reserve cash value for the unexpected

The cash value in permanent life insurance can also give you financial security when unexpected (or higher than expected) expenses arise during retirement. That might include needing a temporary boost to your retirement income, covering a large purchase or repair cost, or helping to cover the costs of health or long-term care.

Depending on your circumstances, it might make sense to either withdraw some of the cash value from the policy (known as a “partial surrender”), or take a loan against the policy. Unlike loans from a bank, there is no credit check or income verification required to access the available cash value of your life insurance policy. This ensures that you have access to the money when you need it most. Your financial professional can help you understand the differences between partial surrenders and loans, and decide what is best for your needs.

Have a non-traditional solution to tax uncertainties

Permanent life insurance, when purchased in conjunction with other retirement investments, may provide an ideal way to help tax-diversify your retirement savings. How?

• Withdrawals and loans from your policy values are generally income tax-free to you under the Internal Revenue Code.*
• Because withdrawals and loans can be taken on an income tax-free basis, they do not typically subject your Social Security income to taxation, unlike income from other sources.
• There is no 10% penalty tax on cash values distributed prior to age 59½ (as long as the policy is not classified as a modified endowment contract).
• You decide when, or if, to take distributions because there are no required minimum distribution rules.

Buffer market volatility with permanent life insurance

Qualified retirement savings accounts, such as 401(k) and IRAs can be helpful tools for building up assets for retirement. But, when it comes time to get money for retirement, it involves selling off shares of the investments.

When the market is doing well, that’s no problem. But if the market is down, you may be selling more shares of your investments than you want in order to get the same income you need. That also means you may be depleting your account too quickly, and jeopardizing your future retirement income security.

Most permanent life insurance policies have the ability to build up cash value. While there are different types of permanent life insurance, many have protections in place that shield the cash value from market volatility. That means you can potentially use this asset for retirement expenses during investment downturns and allow your investment accounts to rebound in value.

Next steps

Talk to your AuguStar financial professional today about using life insurance to supplement a retirement plan.

Everyone wants to know that all of our hard work will go on to make it just a little easier for the ones that we leave behind. We want to know that we not only made memories, but also helped bring peace, protection and stability to those we love or the businesses that we built.

There are many ways to pass on our wealth – through wills, trusts, gifts, etc. What many people don’t realize is that life insurance can be used to share resources with the ones we love.

Here are some ways to help your love live on.

It’s for your loved ones – however you define them

You don’t have to be married or have children to provide for the ones you love. As you think about life insurance, think about loved ones who depend on your income.

Or, consider those that you would like to leave a special gift. This may include parents, grandparents, siblings, nieces/nephews, relatives with special needs, live-in partners or special friends.

Knowing the right amount of life insurance you should have can be challenging. Here are some starting points to finding out how much life insurance you need. A financial professional can also help you determine the life insurance amount you may need.

As a gift for a child

A series of gifted premium payments to a permanent life insurance policy can provide grandchildren, nieces or nephews with additional education and financial opportunities.

The tax-deferred savings that accumulate within the policy can be accessed for various purposes, including a college education, business opportunity, or a down payment on a home.

In addition, the cash value can also help supplement retirement income later in the child’s life. It’s the gift that keeps on giving.

To support your favorite causes

The gift of life insurance is an economical and tax-advantaged way to benefit your favorite charities using either an existing life insurance policy or a new policy.

For donations to qualify for a tax deduction, they must be made to a qualified charitable organization, or specifically, a 501(c)(3) organization. Generally, qualified charitable organizations include religious, scientific, literary, educational, government and veterans’ organizations.

Ensure that your business continues smoothly

Planning for the continuation of a business is important, especially a business with more than one owner. It’s also about caring for business partners you’ve worked hard to build the business with, and ensuring your business will continue to be there for your employees and customers who have grown to rely on the goods or services you provide.

Life insurance can be an important part of your business continuation plan, allowing the partner(s) to buy out the other partner for a smooth transition.

It’s an important part of your financial plan that can bring peace to both your family and your business partner(s), knowing that both will continue on.

Next steps

The people and things in our life that we care about most are worth protecting. Work with your financial professional to see how you can let your love live on for the ones you love.