Social Security is complicated, y’all. That’s because a giant bureaucracy called the federal government got together with a complicated financial product called an annuity, and they had a baby named Social Security.

Despite what the financial advice industry may have you believe, annuities are neither the devil nor the answer to your prayers. So let’s dig into what annuities are, how they work, and how they might fit into your strategy for providing retirement income.

In the last post I discussed how to know if your retirement is funded or not. If you’ve determined that you have sufficient guaranteed income, or enough investments to fund your retirement without taking any market risk, then you’re in a really good spot. This is the situation many retirees used to be in back in the day.

Now that you’ve figured out your retirement personality, and I’ve totally depressed you with all the risks you may face, let’s figure out if you actually need to worry about how you’ll fund retirement.

If you feel like you’ve got a handle on lifespan, and you’re comfortable with investment risk - surprise! there’s another kind of risk you need to worry about. Our best-laid plans for budget and spending go awry when life happens. In retirement, this is even more impactful because surprises cannot be compensated for by working longer or earning more.

I think most people know they need to be concerned about investment returns during retirement. But do you know exactly what you should be worried about?

Similar to “average” life expectancy, “average” market return expectations mask the fact that returns are rarely average from year to year. Unlike life expectancy, you get another chance next year to be above average (sorry…a little financial planner humor there).