The math of retirement has never been more unforgiving. Longer lifespans, compounding healthcare costs, and persistent market volatility are colliding with a generation of investors who, in many cases, simply have not saved enough. The gap between what clients have and what they need is not a planning footnote. It is the central problem of retirement income today.
Michelin Sharp, Managing Director and Head of Insurance and Retirement at Janus Henderson Investors, frames the stakes directly1: "Losses early in retirement can wipe out years of savings, which highlights how important risk management is as investors plan for and get closer to retirement." Sequence-of-returns risk is not theoretical. It is the mechanism by which a poorly timed bear market can permanently impair a retirement portfolio before the client has even had a chance to adapt.
The instinct to reach for more risk to close the savings gap is understandable. It is also potentially catastrophic. That is the central tension this report addresses.
The Annuity Spectrum
Annuities are not a monolith, and the distinction matters enormously for advisors constructing client portfolios. Variable annuities offer full market participation but carry full downside exposure. Fixed annuities provide stability with minimal growth. In the middle sit indexed annuities: fixed indexed annuities (FIAs) and registered index-linked annuities (RILAs), both linking returns to an index while incorporating varying degrees of downside protection.
The market has noticed. Ben Rizzuto, Director and Wealth Strategist at Janus Henderson, notes that "U.S. annuity sales hit $461.3 billion in 2025, the fourth record year in a row," with indexed products now representing 45% of total sales, up from just 24% a decade ago. That shift reflects genuine demand, not product fashion.
The structural difference between FIAs and RILAs is worth understanding precisely. A FIA uses a floor, typically zero, so the investor cannot lose principal, but upside is capped. A RILA introduces a buffer, absorbing a defined percentage of losses, but in exchange the investor accepts partial downside exposure. As Rizzuto explains, "a RILA offers more growth potential than a FIA but less volatility than stocks," positioning it between the two in terms of both risk and return.
The practical illustration is clear: if an index returns 12%, a FIA with a 6% cap credits 6%. A RILA with a 10% buffer and a 12% cap credits the full 12%. The tradeoff is that if the index falls 15%, the RILA investor loses 5% after the buffer absorbs the first 10%.
The Bucket Strategy: Structure as Risk Management
The vehicle matters less than the architecture around it. Sharp and Rizzuto advocate for a bucket strategy, segmenting retirement assets by time horizon across four tiers: cash for years 1 to 2, bonds for years 3 to 7, FIAs or RILAs for years 8 to 15, and equities for years 15 to 30.
The logic is elegant in its practicality. In year one, the investor spends from cash. If markets fall, bonds cover expenses while equities are given time to recover. If markets rise, gains refill the earlier buckets. The indexed annuity in Bucket 3 matches its surrender period to its time horizon, so by years 8 to 15, a Guaranteed Lifetime Withdrawal Benefit (GLWB) can be activated, converting the annuity into a guaranteed income stream.
The behavioral dimension is not incidental. Sharp notes that "peace of mind can help investors avoid making emotional, rash investment decisions at an inopportune time." Panic selling during a correction is among the most reliable destroyers of long-term wealth. A bucket structure removes the immediate pressure from the equity allocation by ensuring near-term income is already secured.
The Mosaic
No single product solves the retirement income challenge. Sharp and Rizzuto are explicit on this point: "while no single solution can address every challenge, incorporating a broader set of tools may help investors avoid the potential pitfalls that arise from relying solely on traditional allocations." Indexed annuities are one tile in a larger mosaic, not the whole picture.
The takeaway for advisors is structural: client conversations about annuities are most productive when framed around time horizons and income sequencing, not product features.
Five Key Takeaways for Advisors and Investors
- Sequence-of-returns risk demands active management. Early retirement losses can permanently impair a portfolio. Risk management must begin before retirement, not after.
- FIAs and RILAs serve distinct client profiles. Conservative clients benefit from FIA floors; moderate-risk clients seeking higher upside with partial protection may be better served by RILAs.
- The bucket strategy is a framework, not a formula. Time-horizon segmentation aligns each asset class with its appropriate role, reducing behavioral risk across the full retirement timeline.
- Annuity sales data signals broad adoption. Nearly half of all U.S. annuity sales are now indexed products, reflecting sustained advisor and investor demand for growth-with-protection structures.
- Lifetime income guarantees change the behavioral calculus. A GLWB rider, once activated, provides a guaranteed income floor that can reduce panic selling and support disciplined long-term investing.
Footnote:
1 Sharp, Michelin, and Ben Rizzuto. Avoiding Retirement Pitfalls. Janus Henderson Investors, June 2026, www.janushenderson.com. W-0626-2399202. Accessed 28 July 2026.
