UpTrajectory Review

Roger Wohlner's piece in TheStreet tackles a structural shift that most small-business owners feel in their bones but rarely name: the collapse of the traditional retirement safety net. For decades, defined-benefit pensions provided a guaranteed income floor, insulating retirees from market timing and longevity risk. That system is largely gone. Social Security remains, but for business owners—who often report income strategically to minimize taxes and thus receive lower Social Security benefits—it rarely covers essential expenses. Wohlner correctly identifies that the burden has shifted entirely to individuals, and for entrepreneurs who have spent years reinvesting profits into their companies rather than maxing out 401(k)s, the gap between assets and reliable income is often wider than they realize.

What makes this relevant to operators specifically is the sequence-of-returns risk Wohlner highlights. If you retire during a bear market and continue withdrawing from a portfolio of stocks and bonds, you lock in losses that compound over decades. Business owners are particularly exposed here because their exit timing is often tied to market cycles or personal burnout, not optimal financial conditions. Selling a business in a downturn, then immediately drawing from a depleted portfolio, is a double hit. Annuities, despite their controversial reputation, offer a mechanism to convert a lump sum into a guaranteed lifetime income stream—effectively creating a private pension that hedges against outliving your assets.

Wohlner is appropriately cautious. Annuities carry high fees, surrender periods that can lock up capital for years, and complex structures that confuse even sophisticated buyers. He emphasizes that only a specific subset—those designed for guaranteed lifetime income—serves this purpose well. We agree with his skepticism of annuities as broad investment vehicles but recognize their utility as a risk-transfer tool. The key is evaluating whether the income guarantee justifies the cost, and that calculation depends heavily on your health, other income sources, and tolerance for illiquidity. For business owners with concentrated wealth in their companies, annuities can diversify retirement risk in ways traditional portfolios cannot.

The second-order effects are worth noting. Business owners often assume their company sale or succession plan will fund retirement, but that assumes a liquidity event at the right price and time. Annuities force a different mindset: converting illiquid or volatile assets into predictable cash flow. This can be psychologically difficult for entrepreneurs accustomed to control and growth, but it addresses a real vulnerability. Additionally, the tax treatment of annuities—tax-deferred growth but ordinary income on withdrawals—interacts with strategies like Roth conversions in ways that require careful planning. Wohlner's mention of related tax rules underscores that annuities are not a standalone solution but one piece of a coordinated retirement strategy.

What to watch next: interest rate environments significantly affect annuity pricing, so the current rate landscape may make guaranteed income products more attractive than they were a decade ago. Readers should also monitor regulatory changes around fiduciary standards for annuity sales, as the industry has faced scrutiny over suitability and disclosure practices. For business owners within five to ten years of exit or retirement, now is the time to model scenarios with and without annuities, stress-testing against early-retirement downturns. Wohlner's piece is a starting point, not a prescription—the real work is in the details of your own balance sheet and risk tolerance.

“While annuities often carry a controversial reputation in the financial advisory world due to high fees, surrender periods, and complex structures, a specific subset of annuities can serve a powerful purpose: guaranteed lifetime income.” — TheStreet

Takeaway: Business owners nearing retirement should evaluate whether converting part of their nest egg into a guaranteed lifetime income annuity hedges against outliving their assets, despite the fees and complexity.