From financial freedom to legacy planning, annuities can help retirees without children achieve their retirement dreams
- Childfree doesn’t mean carefree
- Retirement Security – A universal concern
- A childfree home – Meet the Millers
- Next steps
Childfree Doesn’t Mean Carefree
Whether referred to as DINKs (Dual Income, No Kids) or THINKERs (Two Healthy Incomes, No Kids, Early Retirement), more Americans are living childfree lives. The number of U.S. adults under age 50 without children who say it is unlikely to have kids jumped by 10% between 2018 and 2023, from 37% to 47%.1 Their reasons are varied and often deeply personal.
From a financial perspective, people without children have unique planning needs that are sometimes overlooked in the traditional planning process. For example, people who live childfree lives often have the flexibility to live where they want to live, move to new places, focus on work, take time away from work, and/or pursue passion projects.
However, childfree doesn’t mean carefree. DINKs and THINKERs face similar challenges as their counterparts with children as they age. These can range from caring for older parents, to planning for retirement and long-term healthcare either or both spouses may eventually need.
Retirement Security – A Universal Concern
One of the greatest concerns of retirees, whether they have children or not, is having enough money to last the rest of their lives after they stop working. According to a Pew Research Center study, 72% of childfree adults ages 50 and older are worried to some degree about not having enough money as they age.2 By comparison, a similar Pew study showed 80% of parents within the same age ranges have worried about funding their futures.3
It isn’t hard to infer from this data that having a predictable guaranteed income stream in retirement — and the peace of mind that comes with it — would be comforting to American households regardless of whether or not they have children.
Annuities provide two highly sought after qualities for retirement planning: versatility and predictability. Many retirees use annuities to create a secure stream of income they can use to meet their essential monthly expenses in retirement, like a mortgage, food, healthcare and other “must-haves.” Annuities can act like a personal pension to ensure essential retirement expenses are covered no matter how long retirement lasts.
Also, an annuity can be designed to keep pace with inflation. This measure of security provides peace of mind and can make it easier to allocate available assets from the rest of the portfolio to meet other goals.
A Real Life Scenario — Meet the Millers
Richard and Rachel Miller live in the Midwest. Richard is an internal medicine specialist who closed his medical practice after 30 years in 2023. Rachel, a career professional in the nonprofit sector, retired about seven years before her husband. The Millers are THINKERs who enjoy traveling, supporting causes that are important to them, and spending time with their extended family.
“I was worried about how to pay day-to-day expenses when I was no longer drawing a paycheck.”
Like many of their peers, the Millers had concerns as their retirement neared. “Even though we worked with our financial planner to prepare for this next phase of our lives, I was still worried about how to pay our day-to-day expenses when I was no longer drawing a paycheck,” said Rachel.
With their advisor, the Millers developed a retirement plan, which included purchasing an annuity to cover essential living expenses. This gave them the flexibility to dedicate the remainder of their portfolio to funding discretionary spending, which includes paying for the education of their great nieces and nephews, as well as establishing a donor advisor fund for legacy planning.
Beyond Income, How Annuities Can Help Fuel the Dreams of Childfree Retirees
Annuities offer compelling solutions beyond income. While annuities are best known for providing guaranteed income for life, they can do a lot more than that. For example, an annuity can help:
Catch FIRE. Anyone who is interested in the Financial Independence, Retire Early (FIRE) movement (or one of its many iterations) wants to accumulate enough wealth to leave traditional work behind, either temporarily or permanently. A deferred annuity, like a fixed index annuity, can help by providing tax-deferred growth while protecting savings from loss.
Grow Wealth with Tax-Deferral. Childfree adults are not eligible for certain tax benefits that adults with children do. When incorporated into a retirement plan, annuities offer significant tax benefits primarily through tax-deferred growth, allowing retirement savings to compound more efficiently over time.
Protect Assets from Market Downturns. Most childfree adults believe not having kids has impacted certain aspects of their own lives, such as saving for the future. However, a market downturn just before or soon after retirement can deplete a portfolio to the point it is unable to support income withdrawals throughout retirement — whether or not you have children.
The riskiest time for a retirement portfolio is five years before and five years after retirement. Known as the “fragile decade,” this is when an ill-timed market correction can have a detrimental impact on one's retirement dreams. However, modern annuities offer features like downside protection against market losses, which can be beneficial when approaching retirement.
License to Spend. Sometimes people without any immediate family want to spend everything they have while they can. Research has found that people who receive guaranteed income from annuities spend twice as much as people who don’t have guaranteed annuity income. Essentially, annuities give retirees a psychological license to spend their savings during retirement. Again, think of an annuity as a personal pension that the owner cannot outlive, and could be designed to keep up with inflation.
Next Steps
If you’re living a childfree life, finding solutions that help you pursue financial goals and overcome financial challenges is essential. Annuities offer compelling solutions that can help. While annuities are best known for providing guaranteed income for life, they do so much more.
Financial planning is all about deciding how you want to live life and what you want your money to do for you. Depending on your specific goals and needs, an annuity may be a valuable addition to your portfolio. If you would like to learn more about how annuities fit into financial plans, download DPL’s Retirement Income Planning Guide, or contact a DPL Consultant. We can help.
1, 2 Pew Research Center. “Experiences of U.S. adults who don’t have children.” July, 25, 2024.