Guide for Retirement-Ready Professionals

How to Protect Your Retirement Income From Market Downturns

A Guide to Building Guaranteed, Predictable Income Into Your Retirement Plan. Markets go up. Markets go down. If a large part of your retirement income depends on how the stock market performs in any given year, a bad year at the wrong time can permanently change your retirement.

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  • Why a portfolio that relies only on stocks and bonds can leave a dangerous gap in retirement
  • How a market protection strategy can shield your savings from downturns without giving up growth potential
  • How guaranteed income works, and why it matters most in the years you can least afford to lose money
  • Why living a long life is actually a financial risk, and how to plan for it instead of hoping around it
01

The Retirement Risk Most People Never Plan For

Most retirement portfolios are built around two tools: stocks for growth, and bonds for stability. That combination worked reasonably well for a long time. But it has a gap.

When interest rates rise, bond values can actually fall, which means the "safe" part of a portfolio is not always as safe as it looks. And when stock markets decline in the first few years of retirement, retirees who are withdrawing income at the same time can suffer damage that is very difficult to recover from, even if the market eventually bounces back. This is sometimes called sequence of returns risk: the order in which gains and losses happen matters just as much as the average return over time.

The strategy in this guide is designed to reduce that gap.

02

A Strategy Built on Protecting What You Cannot Afford to Lose

The strategy centers on directing a portion of retirement savings into a vehicle where the account cannot lose value due to a market downturn, while still having the opportunity to earn interest linked to market performance in good years.

The vehicle that executes this strategy is called a Fixed Indexed Annuity, or FIA. A Fixed Indexed Annuity is a contract with an insurance company that credits interest based on the performance of a market index, such as the S&P 500, but includes a guaranteed floor, typically 0%. In years when the index goes down, the account does not lose value from that performance. In years when the index goes up, the account has the opportunity to earn interest, generally up to a cap or participation rate set by the contract.

This is different from investing directly in the stock market, where both the gains and the losses flow straight through to the account balance. It is also different from a bond, which can lose value when interest rates rise. A Fixed Indexed Annuity is not tied to interest rate movements in the way a bond is, which makes it behave differently than either stocks or bonds inside a portfolio.

Plain-language summary: Your account can grow when the market goes up. It does not shrink when the market goes down.

03

From a Lump Sum to a Paycheck You Cannot Outlive

Growth and protection solve part of the problem. Income solves the rest.

Many Fixed Indexed Annuity contracts include the option to convert the account value into a guaranteed stream of income for life. This means that no matter how long you live, or what the market does after you start taking income, the payments continue. This directly addresses what is known as longevity risk: the financial risk of living longer than your savings last.

Consider this: for a married couple who are both age 65 today, actuarial data shows that on average at least one spouse will survive to age 93.¹ A thirty-year retirement is common, not rare. A portion of retirement savings placed into a strategy with a guaranteed lifetime income option can function as a personal pension, providing income that continues regardless of market conditions or how long you live.

Is This Strategy Right for You?

This strategy is generally worth exploring if:

  • You are age 55 or older and actively planning for retirement
  • You want to reduce how much of your retirement income depends on stock market performance
  • A significant market downturn in the next five years would meaningfully change your retirement plans
  • You want a portion of your income to be guaranteed and predictable, regardless of what happens in the market
  • You are concerned about outliving your savings

This strategy is not designed to replace growth-oriented investments entirely. It is designed to work alongside them, protecting a portion of your plan while your other investments continue pursuing growth.

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  1. Why a stocks-and-bonds-only plan can leave a dangerous retirement gap
  2. How a Fixed Index Annuity protects against market downturns
  3. How to convert savings into guaranteed lifetime income
  4. Whether this strategy fits your specific retirement timeline

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Why King Legacy Group

Strategy first.
Products second.

King Legacy Group works with retirement-ready professionals who want to reduce how much of their retirement income depends on market performance. This guide reflects that approach. Strategy first, products selected only after the right framework is in place.

A Fixed Index Annuity is a tool. This guide shows how it fits into a complete, coordinated plan built on the LivingLEGACY™ framework, not as a standalone product, but as part of a system.

FAQ

Common questions, answered plainly.

What is a Fixed Indexed Annuity (FIA)?

A Fixed Indexed Annuity is a contract with an insurance company. It credits interest based on the performance of a market index, with a guaranteed floor so the account does not lose value due to a market downturn, and it can be converted into guaranteed income for life.

Can I lose money in an FIA if the market drops?

No. The account value does not decrease due to negative index performance in a given period, because of the guaranteed floor built into the contract. Fees or optional riders, where applicable, are handled separately and disclosed in the contract.

How is money in an annuity taxed?

An annuity is a tax-deferred vehicle. Earnings are taxed as ordinary income when they are withdrawn. If money is withdrawn before age 59 and a half, a 10 percent federal tax penalty may apply in addition to ordinary income tax. If the annuity funds an account that is already tax-advantaged, such as an IRA, the tax deferral feature does not add extra benefit on top of what the IRA already provides.

What if I need to access my money early?

Most annuity contracts allow a certain amount to be withdrawn each year without a penalty from the insurance company, called a free withdrawal amount. Withdrawals beyond that amount during the surrender period may be subject to a surrender charge. This is why an annuity is best used for money that is intended for long-term retirement income, not short-term needs.

Is this strategy only about annuities?

No. The strategy is about protecting a portion of your retirement income from market risk while maintaining growth potential and guaranteed income options. A Fixed Indexed Annuity is one vehicle that can execute this strategy. The right vehicle and the right amount depend on your full financial picture, which is why this guide is a starting point, not a final recommendation.

See How This Strategy Would Work in Your Plan

This guide explains the strategy. A complimentary strategy review with King Legacy Group is where we look at your specific numbers, your goals, and your timeline to see whether this approach fits, and if so, how to size it correctly within your broader plan.

Schedule your strategy review here.

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Important Disclosure

An annuity is intended to be a long-term, tax-deferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59 and a half, may be subject to a 10 percent federal tax penalty. If the annuity will fund an IRA or other tax-qualified plan, the tax deferral feature offers no additional value. Qualified distributions from a Roth IRA are generally excluded from gross income, but taxes and penalties may apply to non-qualified distributions. Withdrawals are subject to ordinary income tax and, if taken before age 59 and a half, a 10 percent federal penalty. Withdrawals that exceed any free withdrawal amount during the surrender period will be subject to a surrender charge. Consult a tax advisor for specific information. The source or sources used to prepare this material are believed to be true, accurate, and reliable, but are not guaranteed.

1. Statistic: for a couple at age 65, at least one person, on average, will survive to age 93. Source: Society of Actuaries RP-2014 Mortality Table, projected with Mortality Improvement Scale MP-2021 (2022 data), as cited by Fidelity Investments, Social Security Tips for Couples.