Last updated: March 2026 | Reviewed by: AnnuityJournal Editorial Team
Most retirement planning articles treat geopolitical risk like a footnote. A brief paragraph about “uncertainty,” a reminder to “stay the course,” and a pivot back to asset allocation percentages. That’s not good enough right now. Ongoing conflicts in Eastern Europe and the Middle East are running simultaneously — and the compounding effects on oil prices, inflation, interest rates, and equity markets have real, measurable consequences for people who are within 10 years of retirement or already in it. This is what those consequences actually look like.
How Wars Drive Inflation — and Why This One Is Different
War and inflation have moved together throughout modern economic history. The mechanism is straightforward: conflict disrupts supply chains, elevates energy costs, redirects government spending, and creates demand shocks that take years to unwind.
What makes the current environment unusual is the overlap. The Russia-Ukraine war disrupted global wheat, fertilizer, and natural gas markets beginning in 2022. Middle East tensions have periodically threatened Strait of Hormuz passage — the chokepoint through which roughly 20% of the world’s traded oil flows, according to the U.S. Energy Information Administration. These aren’t separate risks. They’re compounding pressures on the same underlying inflation problem the Fed has been fighting since 2021.
The result: inflation that was supposed to be “transitory” became structural. And structural inflation does something specific to retirement plans — it erodes purchasing power in a way that’s invisible month to month and devastating over a decade.
Oil Prices and the Retirement Tax Nobody Talks About
When oil prices rise, they function as a tax on every person who drives a car, heats a home, or buys food that was transported in a truck. For retirees on fixed incomes, this tax is particularly punishing because their income doesn’t automatically adjust upward when energy costs spike.
Social Security includes a Cost of Living Adjustment (COLA), but it’s calculated on a broad basket of goods — not the specific spending patterns of older Americans who often spend a higher-than-average share of income on healthcare and energy. In years of energy-driven inflation, the COLA frequently lags actual retiree cost increases.
Fixed annuity payments have the same problem — they’re fixed. A $2,000/month SPIA payment buys meaningfully less at 4% annual inflation over 10 years than it did on day one. This isn’t an argument against annuities. It’s an argument for structuring them correctly — keeping a portion of assets in growth investments to offset purchasing power erosion, and considering inflation-adjusted income options where available.
The Fed, Higher-for-Longer, and What It Means for Your Retirement Window
The Federal Reserve’s response to geopolitically-driven inflation has been to keep rates elevated. As of early 2026, the Fed funds rate remains well above pre-pandemic levels — a direct consequence of inflation that proved more persistent than the Fed’s initial models predicted.
For retirement savers, higher rates are genuinely a mixed blessing:
- Good: MYGA rates hit multi-decade highs. A 5-year MYGA at 5–5.5% in 2026 would have been unthinkable in 2020 when rates sat near zero. Guaranteed fixed returns are the most attractive they’ve been in 15 years.
- Bad: Bond portfolios that retirees were told were “safe” got crushed in 2022–2023 as rates rose. A 60/40 portfolio lost roughly 16% in 2022 — one of the worst years for that strategy in modern history.
- Uncertain: If geopolitical escalation drives another inflation surge, the Fed may be forced to hold rates higher longer — or raise them again. That scenario is bad for equities, bad for bond prices, and directly relevant to anyone planning to retire in the next 3–5 years.
Sequence of Returns Risk: The Retirement Killer Nobody Explains Well
Sequence of returns risk is the most important concept in retirement planning that most people have never heard of — and geopolitical volatility makes it urgent right now.
Here’s the core idea. Two retirees, identical portfolios, identical average returns over 20 years. One retires into a bull market. One retires into a bear market. The second one runs out of money. Same average return. Completely different outcome.
Why? Because withdrawals during a down market force you to sell assets at depressed prices. Those shares are gone — they can’t recover. The math is irreversible.
Consider a retiree who stepped away from work in January 2022 with $800,000. By October 2022, a standard 60/40 portfolio was down roughly 16% — leaving them with approximately $672,000. If they were withdrawing $40,000/year to live on, their portfolio had already absorbed a $128,000 market loss plus $32,000 in withdrawals. The remaining assets now had to grow harder just to get back to even — while distributions continued.
This isn’t a hypothetical. This happened to real people. And the conditions that caused it — geopolitically-driven inflation, rapid rate increases, compressed equity multiples — remain partially in place today.
The solution isn’t to avoid equity markets entirely. It’s to isolate your essential income from market risk. That’s precisely what a guaranteed income annuity does — it removes a defined portion of your retirement income from sequence-of-returns exposure. See our retirement income planning guide for how to structure this.
The Cost of Waiting: A Number Most Advisors Won’t Show You
One of the most common responses to geopolitical uncertainty is paralysis. “I’ll wait until things settle down.” It feels prudent. It usually isn’t.
Here’s what waiting actually costs on a fixed index annuity with an income rider. Assume a $300,000 deposit and a 7% simple annual roll-up on the income base:
| Age at Purchase | Income Base at 70 | Estimated Annual Income at 70 | Cost of Waiting |
|---|---|---|---|
| 60 | $510,000 | ~$26,500/year | — |
| 62 | $468,000 | ~$24,300/year | ~$2,200/year for life |
| 65 | $405,000 | ~$21,000/year | ~$5,500/year for life |
| 67 | ~$363,000 | ~$18,900/year | ~$7,600/year for life |
Waiting from 60 to 65 costs approximately $5,500 per year in guaranteed lifetime income — every year for the rest of your life. Over a 20-year retirement, that’s $110,000 in foregone guaranteed income. “Seeing how things play out” has a price. Most people just never see it itemized.
This doesn’t mean buying blindly in the face of uncertainty. It means understanding that uncertainty doesn’t go away — and that waiting for it to resolve is itself a financial decision with real consequences.
What Annuities Actually Do (and Don’t Do) in Volatile Times
Annuities don’t solve every problem geopolitical risk creates. They solve specific ones.
What they solve:
- Sequence of returns risk on essential income — your guaranteed payment doesn’t shrink because markets did
- Longevity risk — if you live to 92 in an inflationary environment, guaranteed income for life is more valuable, not less
- Behavioral risk — people with guaranteed income are far less likely to panic-sell during market crashes, which destroys more retirement wealth than almost any other single factor
What they don’t solve:
- Inflation erosion on fixed payments — a life-only SPIA bought today pays the same nominal amount in 2041. Budget for this.
- Healthcare cost spikes — keep liquid assets for this specifically
- The need for portfolio growth — annuities cover the floor, not the ceiling
LIMRA, the insurance industry research group, reported that annuity sales hit record levels in 2023 and again in 2024 — driven in part by retirees recognizing exactly this dynamic. When markets are volatile and rates are elevated, the value proposition of guaranteed income becomes harder to ignore.
What to Actually Do Right Now
If you’re within 10 years of retirement, the geopolitical environment argues for three specific actions — not paralysis, not panic, just deliberate positioning:
- Lock in current MYGA rates while they’re elevated. If the Fed eventually cuts rates in response to a slowdown, today’s 5%+ MYGA rates will look exceptional in hindsight. A 5-year MYGA purchased now locks in that rate regardless of what happens next. See current MYGA rates.
- Stress-test your income plan against a 2022-style scenario. Run your retirement projections assuming your portfolio drops 20% in year 1 of retirement. If you run out of money before 85, you need more guaranteed income on the floor.
- Don’t wait for “clarity” that isn’t coming. Geopolitical risk doesn’t resolve cleanly. The Middle East has been a source of oil market risk for 50 years. Europe hasn’t been this volatile since the Cold War. Waiting for stability to buy guaranteed income is waiting for something that may not arrive before your retirement window closes.
Use our annuity income calculator to model how a guaranteed income floor would have performed through 2022 in your specific situation. The numbers are clarifying.
Frequently Asked Questions
Should I buy an annuity now or wait for rates to improve?
Current MYGA and FIA cap rates are near multi-decade highs — a direct result of the elevated rate environment driven by post-pandemic and geopolitically-fueled inflation. Waiting for “better” rates assumes rates will go higher, which requires either more inflation or more Fed tightening. Both are possible but not guaranteed. The more relevant question is whether the guaranteed income you’d buy today covers your essential expense gap. If it does, rates are good enough. See our best current MYGA rates.
How does war affect stock market performance for retirees?
Historically, equity markets have shown resilience over long periods despite geopolitical events — but short-term volatility spikes are common during escalation. For a retiree with a 5–10 year horizon, that short-term volatility is the risk. A 20% drawdown in year 1 of retirement has permanent consequences on a withdrawal portfolio. A guaranteed income annuity covering essential expenses eliminates that specific risk for the income it covers.
Are fixed annuity rates going to go up or down from here?
Annuity rates broadly follow the 10-year Treasury yield, which reflects Fed policy expectations and inflation outlook. If geopolitical tensions drive another inflation surge, rates could stay elevated or rise. If conflicts de-escalate and the Fed cuts aggressively, rates will fall — and today’s MYGA rates will look like a missed opportunity. Nobody knows which happens first. That uncertainty is exactly the argument for locking in guaranteed rates now rather than speculating on the direction. See our annuity rate trends guide for more context.
What is the safest annuity to buy during uncertain times?
A MYGA from an A+ rated carrier — Allianz, Nationwide, North American — offers guaranteed returns, principal protection, and the financial strength to honor that guarantee through economic disruption. It’s the closest thing to a risk-free retirement savings instrument available outside of Treasury bonds, with better rates and tax deferral advantages. See our best fixed annuity companies for current carrier ratings and rates.
Should I be worried about insurance company failures during economic instability?
Major carriers with A and A+ AM Best ratings have weathered every economic crisis of the past century including the Great Depression, the 2008 financial crisis, and the 2020 pandemic. State guaranty associations provide an additional safety net up to your state’s coverage limit — typically $250,000 per carrier. For deposits above that threshold, spreading across two A-rated carriers is the prudent approach. See our state guaranty association guide for your state’s specific limits.
