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  • Should I Consider an Annuity to Guarantee Retirement Income?

    Should I Consider an Annuity to Guarantee Retirement Income?

    Annuities can provide lifetime income but come with costs and tradeoffs. Learn the pros, cons, and alternatives from a flat-fee fiduciary advisor.

    Why So Many Retirees Ask About Annuities

    One of the most common questions I hear from people approaching retirement is “Should I buy an annuity to guarantee income?” And honestly, it’s a good question. Annuities are advertised everywhere, usually with phrases like “pension-like income” or “peace of mind for life.” On the surface, it sounds like the perfect solution, right? A steady paycheck for as long as you live. But like most things in financial planning, the reality is more complicated.

    Here’s the thing, annuities can actually do two things really well, though there’s always a cost. First, they can guarantee you lifetime income, which means you don’t have to worry about outliving your money no matter how long you live. Second, depending on the type of annuity, they can protect your principal, sometimes all of it, sometimes a portion of it, if the stock market takes a dive. So for someone who wants certainty, an annuity can feel like a safety net.

    The Hidden Costs and Trade-Offs

    But the catch is what you give up in exchange for that safety. Fees can run high, often 2% to 4% annually, and those costs quietly eat away at your wealth over time. Flexibility is limited too. Once you hand your money to the insurance company, it’s locked up, and getting it back isn’t easy.

    I’ve seen the dangers firsthand when annuities are mis-recommended. I once worked with a client who had 90% of her wealth tied up in a growth-oriented variable annuity. The problem was that it was in a non-retirement account. On paper, it looked good because the annuity doubled in value, but here’s the painful part. Every time she makes a withdrawal, she’s paying 100% ordinary income tax. That’s pushing her into a higher tax bracket, which means more of her money is going to the IRS than necessary. If instead she had simply invested in a regular taxable brokerage account, her growth could have been more cost-efficient, and withdrawals would likely have been taxed at long-term capital gains rates, which are much lower. That’s the kind of long-term tax trap that happens when an annuity is sold as a one-size-fits-all solution rather than planned in the context of someone’s entire financial picture. For a deeper dive into how to reduce these tax burdens in retirement, read my article Retirement Planning Without Taxes: Why It Costs So Much (and How to Fix It). It explains how poor withdrawal sequencing and lack of tax planning can quietly cost retirees six figures over time and how to fix it.

    When Annuities Might Make Sense

    So when do annuities make sense? If you want a guaranteed income floor beyond Social Security, they can provide it. If you’re extremely risk-averse and the thought of market volatility keeps you up at night, putting part of your nest egg into an annuity might give you peace of mind. And if you have more than enough assets, carving out a portion for guaranteed income probably won’t hurt your long-term growth.

    But they’re far from ideal in every case. If your Social Security and pension already cover your essential expenses, adding another annuity just ties up money you could use more flexibly. If you want liquidity, control, or the ability to pass money down efficiently, locking it away inside an annuity could create bigger problems down the road. And if someone is pitching it to you as an investment rather than what it actually is, an insurance product, be cautious.

    Alternatives to Buying an Annuity

    The good news is there are alternatives. You can build predictable retirement income without locking everything into an annuity. A bucket strategy can divide your money into short, mid, and long-term pools so you always know what’s safe to spend and what’s still growing. A bond ladder can stagger maturities to generate reliable cash flow year after year. Guardrail withdrawal strategies let you adjust spending based on how markets perform, which stretches your portfolio further. And careful, tax-smart withdrawals like sequencing money between taxable accounts, Roth IRAs, and traditional IRAs can help you keep more of your income after taxes. And if you’re wondering how much you can safely withdraw each year without running out of money, check out my related article Finding Your Safe Withdrawal Rate in Retirement. It explores how portfolio size, taxes, and market conditions all interact to determine a sustainable income plan and why the old “4% rule” doesn’t always fit today’s environment.

    The real problem isn’t annuities themselves. It’s how they’re sold. Too often they’re pushed because of commissions, not because they’re the right solution. That’s not fiduciary advice. As a flat-fee fiduciary, I don’t sell annuities and I don’t earn commissions if you buy one. My role is to evaluate them objectively, side by side with other income strategies, and ask whether they really solve your problem or if there’s a smarter, more tax-efficient way. Sometimes the answer is yes, they fit. But far more often, I find that lower-cost, more flexible approaches do the job better.

    At the end of the day, annuities can play a role in retirement income planning, but they are not a one-size-fits-all solution. The decision should always be made in the bigger context of taxes, estate planning, healthcare, and market risk.

    So should you consider an annuity? Maybe. But the more important question is whether an annuity solves your specific income challenge or whether it’s going to create a new problem later, like higher taxes or less flexibility. That clarity doesn’t come from a brochure or a sales pitch. It comes from a plan tailored to your life. And that’s exactly why I offer a Retirement Income Clarity Call so you can see whether an annuity really belongs in your plan or if there’s a smarter path forward.

    Schedule your free Retirement Tax Strategy Call today.

    Raman Singh, CFP®

    Your Personalized CFO

     

    Important Disclosures

    The information provided herein was obtained from sources believed to be reliable and is believed to be accurate as of the time presented, but it is provided “as is” without any express or implied warranties of any kind. This material is intended for informational and educational purposes only and should not be construed as individualized investment, tax, or legal advice. You should consult with your own qualified investment, tax, or legal advisor before making any decisions based on this material. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. Withdrawal strategies and tax outcomes will vary depending on individual circumstances, account types, tax brackets, and market conditions. No strategy can guarantee success or prevent losses. Investment advisory services are offered through Singh PWM, LLC, a registered investment adviser offering advisory services in the State of Arizona and other jurisdictions where registered or exempted. Singh PWM, LLC is a registered investment advisor offering advisory services in the State(s) of Arizona and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute.

  • Retirement Planning Without Taxes: Why It Costs So Much (and How to Fix It)

    Retirement Planning Without Taxes: Why It Costs So Much (and How to Fix It)

    Why Most Retirement Plans Miss the Mark

    Retirement planning is one of the biggest financial steps you’ll ever take. But here’s what I see far too often when I review new clients’ plans: the investments are there, but the tax strategy is missing. And that gap can be costly, sometimes in the high six figures over the course of a retirement.

    The truth is, retirees overpay in both fees and taxes, not because they picked the wrong investments, but because their advisor never built taxes into the plan. That’s like building a house without considering plumbing. It might look fine at first, but sooner or later, you’ll be dealing with a very expensive problem.

    Understanding the Different Types of Advisors

    Now, let’s clear up one thing that causes a lot of confusion. The financial industry loves titles like financial advisor, wealth manager, or retirement consultant. What really matters is how that person gets paid.

    Commission-based advisors make money selling products like annuities or insurance. Variable annuities, for example, often carry stacked ongoing fees that can easily amount to 2%–3% per year (M&E charges alone often around 1.25%) plus potential surrender charges, costs that directly reduce returns.

    If you’re considering an annuity or wondering whether it makes sense to guarantee part of your retirement income, I’ve broken down the pros, cons, and fiduciary perspective in my related article: Should I Consider an Annuity to Guarantee Retirement Income?. It explains when annuities can provide genuine peace of mind — and when the hidden costs can outweigh the benefits.

    Then you have percentage-based advisors who charge around 1% of assets under management, still the dominant model in the industry according to MarketWatch and Barron’s. On a $2 million portfolio, that’s $20,000 every year, regardless of market performance. Over twenty years, that adds up to more than half a million dollars, money that could have been compounding for you instead of covering someone else’s business model.

    Oh, you also have the Fee-Based advisors who are not only charging you % of assets under management but also selling you commissioned based products.

    But here’s the thing, Flat-fee fiduciary advisors work differently. They charge one transparent fee, with no commissions, no sliding percentages, and no hidden incentives. Their advice is tied to your best interests, not to sales contests or the size of your portfolio.

    At Singh PWM, my approach is simple: one flat annual fee that includes everything like investment management, tax planning, withdrawal strategies, and estate coordination. That alignment ensures every decision serves you, not your advisor’s compensation model.

    Why Tax Planning Matters More Than Ever

    So why does tax planning matter so much? Because taxes are often your single biggest controllable expense in retirement. And unfortunately, most plans don’t integrate them properly, and that’s where tons of money is left on the table.

    You see, smart tax planning isn’t just about filing returns or doing Roth conversions. It’s about structuring your income, withdrawals, and investments in a way that maximizes what you keep. And If you’re wondering how much you can safely withdraw each year without running out of money, check out my related article: Finding Your Safe Withdrawal Rate in Retirement. It explains how portfolio size, taxes, and market conditions interact to determine a sustainable income strategy—and why the old “4% rule” may no longer apply.

     

    Vanguard’s research on “Advisor’s Alpha” shows that the value of skilled financial advice, including tax-efficient withdrawal sequencing, can add roughly 3% in net returns over time. Even Morningstar and other research groups have echoed this finding, showing that a coordinated withdrawal plan across taxable, tax-deferred, and Roth accounts can meaningfully extend portfolio longevity and reduce lifetime taxes.

    Hidden Tax Traps in Retirement

    Take Social Security, for example. Many people don’t realize that up to 85% of Social Security benefits can become taxable depending on total income. Combine that with distributions from IRAs or capital gains, and suddenly your “safe” retirement income can trigger higher taxes and even push you into an unexpected Medicare bracket.

    Speaking of Medicare, those brackets, known as IRMAA or income-related monthly adjustment amounts, can be brutal if you’re not proactive. For 2025, the standard Part B premium is $185 per month, but higher-income retirees can face surcharges that add hundreds of dollars per month per person. I’ve seen cases where one poorly timed IRA withdrawal or Roth conversion triggered an IRMAA surcharge lasting an entire year.

    The SECURE 2.0 Act brought new opportunities and new traps. It raised the required minimum distribution (RMD) age to 73, giving some retirees extra time to perform Roth conversions in lower tax brackets before mandatory withdrawals begin. But it also reinforced the 10-year rule for inherited IRAs, which forces non-spouse beneficiaries to deplete their inherited retirement accounts within a decade. And without proper planning, that can create a steep, “bigly” tax bill on your family.

    And then there’s the 2026 tax cliff. A lot of the provisions of the 2017 Tax Cuts and Jobs Act are set to expire after December 31, 2025. That means higher marginal rates for many households and less room to maneuver on conversions and income strategies. Acting now can help lock in today’s lower brackets before they disappear.

    Real-Life Consequences of Delayed Tax Planning

    I’ve seen what happens when people wait too long to think about taxes. One couple had $3 million and waited until RMD age to consider Roth conversions and their window to convert in lower brackets got smaller and smaller. The result was paying hundreds of thousands more in taxes than they needed to pay over their lifetime. Another client drew from IRAs first instead of taxable accounts. That decision pushed their income just high enough to trigger a Medicare premium jump that cost them an extra $2,100 year. Mistakes like this don’t look dramatic at first, but over a decade or two, the costs compound. And once you’ve missed the opportunity, you can’t go back and undo it.

    This is why flat-fee fiduciary planning works so well. The model aligns retirement and tax strategy without conflicts of interest. At Singh PWMSingh PWM, my approach is simple: one flat annual fee, integrated planning that connects investments, taxes, estate, and cash flow. Every plan includes proactive tax strategies such as Roth conversions, withdrawal sequencing, RMD planning, and tax-loss harvesting, all built on a fiduciary standard that puts your interests first.

    The payoff is big. On a $2 million portfolio, the gap between a 1% AUM advisor and a flat-fee model can be roughly $440,000 over 20 years. Add in tax-smart moves like bracket management, avoiding IRMAA cliffs, and estate structuring, and you can easily save another six figures over your lifetime. Meanwhile, fund costs themselves have fallen dramatically. The asset-weighted average fund fee across U.S. mutual funds and ETFs is now about 0.34%, according to Morningstar, which means the biggest savings opportunities today often come from outside the portfolio through better fee and tax management.

    And timing really matters. If you’re in your 50s or 60s, every year you delay closing tax gaps, your window narrows. Once RMDs start, once you’ve filed for Social Security, or once your estate documents are finalized, your flexibility is gone. Acting now means you can convert at today’s tax rates before they sunset in 2026, manage Medicare surcharges proactively, and set up your legacy to pass down more efficiently under the SECURE Act rules.

    At the end of the day, retirement planning isn’t just about investments. It’s about after-tax income and the legacy you leave behind. Working with a flat-fee fiduciary who builds taxes into every step means you keep more of your money and reduce uncertainty about your future.

    Important Disclosures

    The information provided herein was obtained from sources believed to be reliable and is believed to be accurate as of the time presented, but it is provided “as is” without any express or implied warranties of any kind. This material is intended for informational and educational purposes only and should not be construed as individualized investment, tax, or legal advice. You should consult with your own qualified investment, tax, or legal advisor before making any decisions based on this material. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. Withdrawal strategies and tax outcomes will vary depending on individual circumstances, account types, tax brackets, and market conditions. No strategy can guarantee success or prevent losses. Investment advisory services are offered through Singh PWM, LLC, a registered investment adviser offering advisory services in the State of Arizona and other jurisdictions where registered or exempted. Singh PWM, LLC is a registered investment advisor offering advisory services in the State(s) of Arizona and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute.

  • Finding Your Safe Withdrawal Rate in Retirement

    Finding Your Safe Withdrawal Rate in Retirement

    Don’t risk running out of money. A flat-fee fiduciary explains how to set a safe withdrawal rate based on your portfolio, taxes, and retirement lifestyle.

    What Is an Appropriate Safe Withdrawal Rate for My Retirement?

    One of the biggest fears retirees face is running out of money. That’s why financial planners often talk about a “safe withdrawal rate.” This is the percentage of your portfolio you can withdraw each year in retirement without running out of funds too soon. But here’s the catch: there is no one-size-fits-all number. The right safe withdrawal rate depends on your portfolio size, lifespan, tax strategy, and spending needs. Let’s break it down.

    The Traditional 4% Rule

    You’ve probably heard of the 4% rule. This old guideline suggests you can withdraw 4% of your portfolio each year, adjusted for inflation, and your money should last 30 years. For example: A $2,000,000 portfolio, when applying a 4% rate, generates $80,000 per year. While this is a good starting point, it has limitations:

    • It assumes a fixed 30-year retirement, but what if you live longer?
    • It doesn’t factor in taxes or Medicare surcharges.
    • It assumes market returns that may not reflect today’s reality.

    Why Your Safe Withdrawal Rate Might Be Lower or Higher

    That number may sound straightforward, but the reality is much more nuanced. Several factors determine whether that $80,000 will truly sustain your lifestyle for decades:

    • Your lifespan and health – If longevity runs in your family, you may need to stretch your portfolio across 30 to 35+ years of retirement. That means your withdrawal rate has to account for the possibility of living longer than average.
    • Market conditions – Retiring at the start of a bear market can significantly stress-test your portfolio. Taking $80,000 during down years locks in losses, which can shorten the life of your nest egg unless your plan is flexible.
    • Tax efficiency – Not all $80,000 is created equal. If it comes primarily from pre-tax accounts, you could owe tens of thousands in taxes. Poor sequencing of withdrawals from taxable, tax-deferred, and Roth accounts can cost six figures over the course of retirement.
    • Flexibility in spending – Retirees who can adjust spending in response to market performance by cutting back in bad years and spending more in good years can often afford a higher overall withdrawal rate than someone with rigid expenses.
    • Guaranteed income sources – Pensions, annuities, and Social Security reduce the amount you actually need from your portfolio. For example, if those sources cover $40,000 of annual expenses, then only $40,000 would need to come from your investments, effectively lowering your withdrawal pressure.

    Why Tax Planning Changes the Math

    When most people talk about safe withdrawal rates, they tend to leave out one critical factor: taxes. That’s a costly oversight. Your gross withdrawal amount is not the same as the money that actually lands in your pocket after the IRS takes its share. Even more importantly, the order in which you draw from different account types – taxable, tax-deferred, and Roth can dramatically affect how long your money lasts.

    If you’d like a deeper look at how tax-efficient retirement planning strategies can help you keep more of your income, read my article: Retirement Planning Without Taxes: Why It Costs So Much (and How to Fix It). It explains how poor tax coordination can quietly drain six figures from your nest egg—and what proactive steps you can take to prevent that.

    Based on research, the way you structure withdrawals in retirement can significantly change the amount of after-tax income your portfolio produces.

    • Without tax planning: A $2 million portfolio might support withdrawals of about 3.5% per year ($70,000 gross). But after federal and state taxes, your net spendable income could be far lower.
    • With a tax-optimized strategy: Studies have shown that coordinating withdrawals across taxable, tax-deferred, and Roth accounts, along with strategies such as Roth conversions and tax-loss harvesting, can materially improve outcomes. In fact, the Journal of Financial Planning published research showing that tax-efficient distribution strategies can increase sustainable withdrawal rates by 0.5% to 1.0% or more, depending on account mix and tax brackets. On a $2 million portfolio, that translates to supporting closer to 4.5% withdrawals, or about $90,000 of income.

    That is potentially an extra $20,000 per year in available income achieved not by chasing higher investment returns but simply by using smarter, tax-efficient withdrawal sequencing.

    Sources:

    • “Tax-Efficient Retirement Withdrawal Planning Using a Comprehensive Tax Model,” Journal of Financial Planning (2012), Financial Planning Association.
    • TIAA Institute, “Withdrawal Strategies: A Tax-Smart Perspective” (2017).
    • Schwab Center for Financial Research, “Why Withdrawal Order Matters” (2020).

    A Smarter Way to Think About Withdrawals

    The traditional “safe withdrawal rate” often gets oversimplified into a single, fixed percentage like 4%. But retirement isn’t static. Your income needs, tax situation, and lifestyle evolve over time. Instead of clinging to one “magic” number, a smarter approach is to view withdrawals as a dynamic strategy that adapts with each stage of life:

    • Early Retirement (60s): This is when most retirees are healthiest, most active, and likely to spend more on travel, hobbies, or family experiences. Withdrawals may be higher during this period. It’s also a prime window for Roth conversions, which can raise taxable income temporarily but lower future taxes.
    • Mid Retirement (70s): Once Required Minimum Distributions (RMDs) begin, taxable income often increases, sometimes significantly. Coordinating withdrawals across taxable, tax-deferred, and Roth accounts becomes essential to avoid pushing yourself into higher tax brackets.
    • Late Retirement (80s+): Spending often slows down as lifestyles simplify, though healthcare and long-term care costs may rise. Withdrawal needs may be smaller overall, but the focus shifts to protecting against longevity risk and funding medical expenses.

    By adjusting your withdrawal rate as life unfolds, you not only create flexibility but also reduce the risk of outliving your savings. For example, Imagine a couple retiring at age 65 with a $2.5 million portfolio:

    • Years 65–70: They spend 5% annually to enjoy their most active years, while also converting part of their IRA to a Roth, accepting higher taxes now to lower future tax burden.
    • Years 70–80: They scale back to 3.5% withdrawals, supplementing with Roth assets when needed to smooth out taxes and maintain flexibility.
    • Years 80+: Their spending naturally declines, so withdrawals drop to 3%. The reduced withdrawals, combined with earlier tax planning, help preserve the portfolio through their 90s and beyond.

    The end result? They end up maximizing enjoyment in early retirement, reduce taxes in mid-retirement, and extend the longevity of their nest egg without being locked into one rigid number.

    The Flat-Fee Fiduciary Advantage

    Most traditional advisors charge around 1% of assets under management (AUM). That fee structure often comes with a narrow focus: managing investments. What gets overlooked? Withdrawal strategy and tax efficiency! These two factors that can be just as important as your portfolio’s returns in determining whether your money lasts.

    As a flat-fee fiduciary, Singh PWM takes a different approach. Instead of charging more as your portfolio grows, I provide one transparent annual fee that covers the full scope of planning:

    • Strategic investment management
    • Retirement withdrawal planning
    • Tax-efficient income strategies

    When clients partner with Singh PWM, the result is a coordinated plan designed around your lifespan, lifestyle, and spending goals, not big firm incentives.

    With the right withdrawal sequencing and tax planning, you keep more of what you’ve worked hard to build, while enjoying the confidence that your retirement income strategy is aligned with your future.

    The Bottom Line

    There isn’t a single “safe withdrawal rate” that works for everyone. The right number depends on your portfolio size, tax strategy, health and longevity, and lifestyle goals. The old 4% rule may serve as a starting point, but the smartest retirees know it’s not a rule, it’s a guideline. The real advantage comes from adjusting withdrawals dynamically and weaving in tax optimization.

    When done right, this approach doesn’t just stretch your portfolio further and it can add years of financial security to your retirement and keep six figures or more from being unnecessarily lost to the IRS.

    If you are ready to see how a tax-optimized withdrawal strategy could work for you? Schedule your free Retirement Tax Strategy Call today.

    Raman Singh, CFP®

    Your Personalized CFO

     

    Important Disclosures

    The information provided herein was obtained from sources believed to be reliable and is believed to be accurate as of the time presented, but it is provided “as is” without any express or implied warranties of any kind. This material is intended for informational and educational purposes only and should not be construed as individualized investment, tax, or legal advice. You should consult with your own qualified investment, tax, or legal advisor before making any decisions based on this material. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. Withdrawal strategies and tax outcomes will vary depending on individual circumstances, account types, tax brackets, and market conditions. No strategy can guarantee success or prevent losses. Investment advisory services are offered through Singh PWM, LLC, a registered investment adviser offering advisory services in the State of Arizona and other jurisdictions where registered or exempted. Singh PWM, LLC is a registered investment advisor offering advisory services in the State(s) of Arizona and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute.