Annuities vs. Other Retirement Income: Social Security and Bonds

An annuity is one way to create retirement income, but it is rarely the only option, and often it isn't the first one to look at. Before deciding whether an annuity belongs in your plan, it helps to see how it compares with the income tools most retirees already have or can easily reach: Social Security, bonds and Treasury securities, and withdrawals from savings.

Each option handles the big retirement risks differently. Some protect against living a long time, some against inflation, some against market swings, and each gives up something in return. Seeing those trade-offs side by side makes it easier to judge where, if anywhere, an annuity adds something you don't already have.

This guide compares them at a general level. It is general information, not financial, tax or legal advice, and the right mix depends on your circumstances.

Social Security: the income stream you already own

For most workers, Social Security is the foundation. The CFPB's guide to claiming age points out that it provides guaranteed income for life and is generally adjusted each year for increases in the cost of living. Those are two features many people look for in an annuity, and anyone eligible for Social Security already has them in some amount.

When you claim matters. According to the Social Security Administration's Benefits Planner, as viewed in October 2026, you can start retirement benefits as early as age 62, reach full benefits at your full retirement age, and earn increases by waiting up to age 70.

• For people born in 1960 or later, SSA's Benefits Planner (as viewed in October 2026) lists a full retirement age of 67 and shows that claiming at 62 reduces the retirement benefit by 30.00 percent.
• For people born in 1943 or later, SSA's Benefits Planner (as viewed in October 2026) lists a delayed retirement credit of 8 percent per year for waiting past full retirement age.
• The CFPB's claiming-age guide, checked in October 2026, summarizes the range for people reaching full retirement age at 67 as running from 30 percent less than the full benefit to 24 percent more.

The CFPB calls claiming age an important retirement decision because it affects your lifetime income. It notes that if you work less or stop working in your 60s, you could use retirement savings, such as 401(k) or IRA money, to supplement your income until your full claiming age, since your monthly benefit is higher the longer you wait, up to age 70. In effect, waiting can be another way to secure more lifetime income that rises with the cost of living, without buying a separate product. The CFPB also notes that claiming age can affect what a surviving spouse receives.

To see your own numbers, the CFPB suggests creating a my Social Security account to review your expected benefits based on your actual earnings record.

Fixed annuity income: lifetime payments from an insurer

An annuity can add a second guaranteed income stream. FINRA explains that annuitizing shifts the risk of outliving your money from you to the insurer, which is the main thing an income annuity offers.

The comparison with Social Security is useful, though. FINRA notes that fixed annuity payments typically don't have cost-of-living adjustments, so their purchasing power may decline over time, and that annuities with inflation protection cost significantly more. Annuity guarantees also depend on the insurer's ability to pay, and FINRA notes that annuities aren't guaranteed by the FDIC or any other federal agency. Our guide in this section on immediate versus deferred annuities explains the payout choices.

Bonds and Treasury securities: income with your principal back

Bonds work differently. Investor.gov explains that bonds pay interest and, if held to maturity, return the entire principal, which makes them a way to preserve capital while earning a predictable return. Unlike a lifetime annuity, a bond ends on a set date, and you keep control of the principal.

Investor.gov lists the risks: the issuer may default (credit risk), the bond's value can fall if rates rise and you sell before maturity (interest rate risk), inflation can erode a fixed payment, and some bonds can be hard to sell or may be called early. U.S. Treasuries, Investor.gov notes, carry the full faith and credit of the U.S. government.

Two Treasury products are built for inflation:

• Treasury Inflation-Protected Securities (TIPS). TreasuryDirect explains that the principal of a TIPS goes up with inflation and down with deflation, interest is paid every six months on the adjusted principal, and at maturity you receive the greater of the adjusted principal or the original amount. As of October 2026, TreasuryDirect says it sells TIPS with terms of 5, 10 or 30 years. TreasuryDirect notes federal tax is due each year on interest earned.
• Series I savings bonds. TreasuryDirect explains that the rate combines a fixed rate and an inflation rate that resets every six months. As of October 2026, TreasuryDirect says you can cash in an I bond after 12 months, but if you do so in less than five years you lose the last three months of interest.

For example, imagine a hypothetical retiree who holds Treasuries maturing in different years and plans to spend each one as it comes due. That approach can cover a known stretch of years with predictable cash, but unlike lifetime income, it doesn't protect against living longer than planned.

Withdrawals from savings: control without a guarantee

The simplest option is to draw down your own investments. FINRA describes the trade-off directly: with systematic withdrawals, you maintain control of your money, but you forfeit any insurer guarantee that you won't outlive it. Your investments remain exposed to market swings, and you decide how much to take each year.

Comparing the options side by side

• Lasts for life: Social Security and annuitized income are designed to; bonds and savings withdrawals last only as long as the money does.
• Keeps pace with inflation: Social Security generally adjusts each year; TIPS and I bonds are built to; fixed annuity payments typically don't unless you pay extra for an increase.
• Access to principal: bonds and savings keep it available, though selling a bond early can mean a loss; annuitizing generally gives it up.
• Left for heirs: savings and bonds remain yours; lifetime annuity payments may stop at death unless you buy a death benefit or period certain.
• Who stands behind it: Social Security is a federal program; Treasuries are backed by the U.S. government; an annuity depends on the insurer's claims-paying ability.

Putting the pieces together

Many retirement plans combine several of these tools. The CFPB's claiming-age guide, checked in October 2026, says that on average Social Security replaces 40 percent of a worker's income, so savings, a pension or other sources need to fill the gap. It also notes that, on average, a woman reaching 65 today lives to 87 and a man to 84, and suggests planning for the possibility of 20 or more years in retirement.

One general way to think about it is to compare your basic, must-pay expenses with your guaranteed income from Social Security and any pension. If guaranteed income already covers those basics, an annuity may add less. If there's a gap and outliving your savings is a real worry, an income annuity is one way to fill it, alongside options such as delaying Social Security or holding Treasuries.

For personal guidance, contact the Social Security Administration about your benefits, your state insurance department about annuities, or a licensed financial or tax professional. Be wary of anyone who presents an annuity as your only option.

Key takeaways

• Social Security already provides lifetime income that is generally adjusted for the cost of living, and claiming later increases it.
• Income annuities transfer the risk of outliving your money to an insurer, but fixed payments usually lose ground to inflation.
• Bonds and Treasuries return principal at maturity; TIPS and I bonds are designed to keep pace with inflation.
• Withdrawals from savings keep you in control but come with no lifetime guarantee.
• Compare guaranteed income with essential expenses before deciding whether an annuity fills a real gap.

Sources - Social Security Administration, Retirement Age and Benefit Reduction — https://www.ssa.gov/benefits/retirement/planner/agereduction.html - Social Security Administration, Delayed Retirement Credits — https://www.ssa.gov/benefits/retirement/planner/delayret.html - Consumer Financial Protection Bureau, Planning your Social Security claiming age — https://www.consumerfinance.gov/consumer-tools/retirement/before-you-claim/ - FINRA, Annuities — https://www.finra.org/investors/investing/investment-products/annuities - U.S. Securities and Exchange Commission (Investor.gov), Bonds — https://www.investor.gov/introduction-investing/investing-basics/investment-products/bonds-or-fixed-income-products/bonds - TreasuryDirect (U.S. Department of the Treasury), TIPS — https://www.treasurydirect.gov/marketable-securities/tips/ - TreasuryDirect (U.S. Department of the Treasury), I bonds — https://www.treasurydirect.gov/savings-bonds/i-bonds/