I entered the profession during the rise of the modern planner — when CFP® credentialing was taking off, fee-only models were the practice of the future, and annuities were considered relics of a bygone era of sales-based advice. With custodians making investment management faster, cheaper and more scalable, annuities just didn’t seem to fit the operational or compliance-friendly mold we were being trained to embrace.
But then there was my dad, Greg.
He had been a financial advisor since the 1990s. After a painful lesson from the dot-com bubble, he began incorporating annuities as a core component of retirement income planning.
As I met the clients my dad had served for decades, it became clear: These annuity tools were doing exactly what they were supposed to do. They were helping people live in retirement — with confidence, consistency, and less anxiety about markets or withdrawals.
But for many advisors, especially those newer to the profession or trained under a purely asset-based model, annuities still raise big questions: How do they fit? When are they worth considering? And how do you introduce them in a way that’s transparent, fiduciary-minded, and actually builds trust rather than skepticism?
Let’s start with a simple but overlooked truth: Retirement is not just about having money; it’s about being able to use that money without fear. And that’s where the real behavioral challenge lies.
After decades of saving, many retirees struggle with the transition to spending those savings. Like watching a bank account slowly deplete, they hesitate to take the trip, fund the renovation, or support their grandkids because the money doesn’t feel reliable. It feels fragile.
That’s where annuities — particularly those structured with lifetime income riders — can make a meaningful difference.
When set up correctly, these products can function like a personal pension. They take a portion of the client’s nest egg and convert it into something stable, predictable and psychologically spendable. It’s the same thing they love about Social Security.
When Do They Fit?
If compliance weren’t a thing, I’d be tempted to say annuities always belong in the conversation. But let’s stay grounded.
What I can say — with full conviction and plenty of client stories to back it up — is that for the mass-affluent retiree, annuities deserve serious consideration.
Who am I talking about? The clients who’ve done well, saved diligently, and now find themselves looking to recreate most or all of their retirement lifestyle from accumulated assets. These aren’t ultra-high-net-worth families who couldn’t spend all their wealth even if they wanted to. They’re everyday millionaires who are trying to make that money last 25-plus years, through market cycles, tax law changes and rising healthcare costs.
In that context, why wouldn’t we consider building them their own pension?
Yet, today’s retirees are often wary — and understandably so. They’ve heard the horror stories: bad sales practices, hidden fees, irrevocable decisions, and products that locked up their money without delivering on the promise.
That’s why the fit isn’t just financial — it’s emotional.
Even if the math supports it, a client’s willingness to use an annuity depends on how the idea is introduced, how clearly the mechanics are explained, and how aligned it feels with their broader goals. In other words: You must approach annuities with care, like a true fiduciary.
Opening the Conversation
This is exactly where we were in our practice not too long ago.
We were using the right tools. We had the evidence, the real-life retiree outcomes. But we were still stuck. Annuities were helping clients — but they still felt like we were pushing rather than guiding. And that told us something: Our approach needed to change.
And this is key for you, too.
You might be excited about bringing annuities into your practice. You can already picture your client’s relief when that steady income starts hitting their account each month. You can even feel your own peace of mind, knowing your client’s lifestyle isn’t riding on portfolio performance alone.
But if that next step — the actual planning process— doesn’t go well, this whole idea stays as just that: an idea. It never becomes a plan.
That’s when Dad and I began working to distill what we were doing into something more collaborative and client centered. A way to make annuities feel like common sense — not something to be feared or sold.
The Four Buckets
So, we started with the framework. Turning our advice into a tangible philosophy. Here’s how it works:
Bucket 1: Cash Reserves
This is the retiree’s checking and savings buffer — usually 6 to 12 months of everyday spending needs. It’s the money that provides flexibility, peace of mind, and a sense of control.
Bucket 2: Earned Income
This includes Social Security, pensions and similar assets that provide lifetime income security. These sources form the foundation of the retiree’s monthly income — but often, they’re not enough to fully fund a lifestyle.
Bucket 3: Secure Income
Here’s where annuities structured with lifetime income riders come in. This bucket fills the gap between fixed sources (like Social Security) and the actual cost of living. In other words, this is where the lifestyle gets completed.
Bucket 4: Growth & Legacy
This bucket is for long-term investments and legacy goals. It’s the money that doesn’t need to be touched anytime soon — growth-oriented, tax-efficient, and able to ride out market cycles without jeopardizing lifestyle needs.
As you can see, it’s super straightforward. Cash for everyday needs. Lifetime income from Buckets 2 and 3 to fund lifestyle. Long-term investments in Bucket 4 to grow, adapt and support the future. Easy.
Except … you’re not done.
Because how you go through this process — the way you frame it, pace it, and collaborate with your client — matters even more than the planning itself.
The Process
A simple framework like the Four Buckets that translates the confusing into the understandable is great. But the real power — the thing that turns insight into action — is how you walk your clients through it. Here’s how the process typically unfolds across three foundational meetings:
Meeting 1: Introduction & Discovery
This first meeting isn’t about solutions — it’s about connection.
We introduce the Four Buckets at a high level, using simple visuals to give clients a sense of where their money might live in retirement and how it might support them. We ask open-ended, emotionally rich questions like:
“What are you most excited about in retirement?”
“What’s keeping you up at night when you think about this transition?”
Then we gather just enough financial data to set up the next step. We don’t dive deep yet — the goal here is trust and curious exploration together.
By now, the client has been introduced to the Four Buckets — and their thinking is starting to shift. Retirement is beginning to feel more real. This is where the real discovery begins as we ask deeper questions.
We start to model what their dream retirement might actually cost — not just “covering the basics,” but funding the travel, hobbies, generosity, and legacy they’ve imagined. And as we paint that picture together, clients begin to understand that having more reliable income isn’t just nice — it’s essential.
Meeting 3: Designing the Plan — Together
Now the financial data is in, the emotional vision is clarified, and the stage is set to design a plan with your client, not for them.
We walk through each bucket in sequence — starting with the most familiar (cash) and gradually moving to the more abstract (long-term investments and lifetime income tools). This order matters. It builds confidence with each step, and helps clients connect emotionally with the role each “bucket” plays in their life.
Once we’ve mapped out the income plan, we pause and reflect on it together.
Then — and only then — do we begin talking about implementation. Yes, this is when you start discussing annuities. But by now, it doesn’t feel foreign or salesy. You’ve reached this point together.
Conclusion
The landscape of annuities is vast — and frankly, overwhelming if you don’t enter with a clear sense of purpose. That’s why knowing what you’re solving for matters so much.
For us, the value proposition is simple: Annuities make spending easier in retirement. They remove the hesitation, the guilt, and the fragility that often come with drawing down a portfolio. When used appropriately, they give retirees permission to enjoy what they’ve worked so hard to build.
But here’s the truth: Knowing your tool inside and out still isn’t enough.
You need a planning process that takes the client from start to finish — not just intellectually, but emotionally. One that respects their fears, aligns with their goals, and builds clarity along the way.
That’s what The Four Buckets does. It’s the marriage of a simple framework and a client-focused process. It’s how we’ve turned annuity conversations into collaborative income planning — and how we’ve helped retirees feel better about spending their money.
Ethan Lohr, CFP® is a co-founder of The Four Buckets and a partner with Lohr & Company, a financial planning firm based in Charlottesville, Va.
