Citi explains 6 annuity types to support retirement income
Among pre-retirees aged 50 to 75 who are within five years of retirement and currently enrolled in an employer's defined contribution (DC) plan, 58% worry about exhausting their DC plan during retirement, MetLife's 2026 Paycheck or Pot of Gold Study found.
That anxiety reflects a broader shift in retirement planning, in which rising health care costs, longer life expectancies, and unpredictable financial markets are pressuring savings that once seemed sufficient.
Citi Personal Wealth Management published guidance on how different annuity structures can serve as tools within a broader retirement income strategy.
What an annuity is and who it serves
An annuity is a contract between an individual and an insurance company in which the insurer commits to making periodic payments at a future date.
Contract holders can fund an annuity through a single lump-sum payment or a series of contributions over time, Citi Personal Wealth Management explained.
These products are designed for retirement or other long-term financial goals, and they offer the ability to grow assets on a tax-deferred basis.
That tax-deferred feature allows earnings to compound without an immediate tax obligation, accelerating growth during the savings phase, the firm noted.
Annuities serve three primary audiences: retirees seeking a stable income stream, pre-retirees looking to grow principal, and individuals focused on building a legacy for beneficiaries.
Each group has different priorities that shape which annuity type fits their situation, Citi outlined.
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How annuitization creates lifetime income for retirees
One defining feature of an annuity is the option to convert accumulated value into payments that last for the contract holder's entire life.
This process, known as annuitization, provides a safeguard for retirees concerned about outliving their financial resources, Citi's analysis indicated.
Annuitization can be structured to cover one life or two lives, meaning payments can continue through the lifetimes of both the contract holder and a designated spouse.
This flexibility allows couples to build a reliable income floor that persists, regardless of how long either partner lives, the firm detailed.
Without reliable income streams to anchor their finances, retirees face an elevated risk of outliving their savings.
The guarantee behind lifetime income payments depends on the financial strength of the issuing insurance company, Citi reported.
Income payments from variable annuities also fluctuate with investment subaccount performance, adding another layer of risk for retirees to weigh.
A quick comparison of fixed and variable annuities
Fixed annuities are the more straightforward product, offering a guaranteed interest rate during the accumulation phase of the contract.
When the contract holder begins receiving income, payouts can last for one lifetime, two lifetimes, or a predetermined number of years.
Variable annuities allocate investments to subaccounts that function similarly to mutual funds in their structure and overall risk profile. The contract's value rises and falls with investment performance, and income payments reflect that fluctuation.
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The core distinction Citi draws is between predictability and growth potential, which shapes how each product fits within a retirement income plan.
Fixed annuities prioritize stability and principal protection, a profile Citi associates with conservative investors focused on wealth preservation.
Variable annuities target long-term growth and provide direct market exposure, which Citi positions for individuals with longer time horizons and higher risk tolerance.
Both types carry a 10% federal tax penalty on taxable withdrawals before age 59-and-a-half.
Both types carry a 10% federal tax penalty on taxable withdrawals before age 59-and-a-half. For qualified annuities purchased with pre-tax retirement funds, distributions are taxed as ordinary income; for non-qualified annuities, only the earnings portion is taxed at ordinary-income rates, the firm noted.
Shared features and key exceptions across six annuity types
Citi's analysis maps out the advantages and drawbacks of six annuity types: single-premium immediate, deferred income, fixed, indexed, buffer, and variable.
Each type offers a different combination of features, and the tradeoffs vary based on a retiree's priorities, the firm reported.
Death benefit options that allow assets to bypass probate are available across all six categories, providing a planning advantage for legacy-focused individuals.
Tax-deferred growth potential is available across all categories except single-premium immediate annuities, which begin paying income right away, Citi indicated.
Surrender charges may also apply within the contract's holding period across all six categories. Both variable and buffer annuities carry the additional risk that investment performance can reduce the contract's overall value, Citi noted.
Where annuity types fall on the investment risk spectrum
Citi's guidance organizes annuity products along a risk spectrum from conservative to aggressive, helping savers identify where each product fits within a broader portfolio.
- At the conservative end, single premium immediate annuities and deferred income annuities provide guaranteed income streams with no fluctuating account value, the firm reported.
- Fixed annuities also sit in the conservative range, offering a guaranteed rate of return for a set number of years alongside full principal protection.
- Indexed annuities occupy the moderate tier by linking returns to a market index while guaranteeing that the annual return cannot fall below 0%, Citi explained.
- Buffer annuities also sit in the moderate tier, providing limited downside protection while allowing greater upside than fixed or indexed annuities through index-linked crediting strategies, Citi reported.
- Variable annuities sit at the aggressive end with full market participation, the firm outlined.
The spectrum framework provides advisors with a tool to align annuity selection with individual risk tolerance and existing portfolio allocations.
How Citi structures custom annuity proposals
Citi Personal Wealth Management offers customized annuity proposals through dedicated wealth advisors who collaborate with annuity business development specialists and tax advisors.
The process can incorporate one or more fixed and variable annuities, or more specialized products tailored to individual income timelines, the firm stated.
One specialized option is the Qualified Longevity Annuity Contract (QLAC), which uses funds from a qualified retirement account to purchase a deferred income annuity.
The SECURE 2.0 Act raised the maximum QLAC contribution to $200,000 and indexed the cap to inflation, eliminating a prior rule that limited contributions to the lesser of $125,000 (adjusted to $145,000 by 2022) or 25% of the retirement-account balance.
The limit rose to $210,000 effective Jan. 1, 2025, and will remain at $210,000 for 2026, according to Fidelity.
A QLAC allows contract holders to shield up to $210,000 in 2026 from required minimum distributions, with income payments exempt from RMD rules until age 85.
Because payouts are deferred until later in life, the contract typically delivers higher guaranteed income at the start date than an immediate annuity with the same premium would, a structure that can help offset escalating long-term care costs or other late-retirement income needs, the firm indicated.
The range of available annuity structures reflects how varied retirement income challenges have become across different risk tolerances and income timelines.
Related: The Retirement Coverage Gap: Beyond the Hype
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This story was originally published June 2, 2026 at 7:07 AM.