As traditional pension plans diminish, many individuals are seeking alternative strategies to secure their retirement income. While commercial annuities offer a solution, their often-complex structures, high fees, and limited flexibility can be deterrents. This article proposes an innovative approach: building a do-it-yourself (DIY) annuity. By strategically combining various income-generating investments such as high-quality bonds, U.S. Treasuries, and dividend-paying stocks, individuals can emulate the benefits of a traditional annuity while maintaining greater control over their assets and potentially achieving superior returns. This self-directed path aims to empower retirees to maximize their financial well-being by circumventing the hidden costs and rigidities of conventional annuity products.

Unlocking Higher Returns: The DIY Annuity Revolution

In the evolving landscape of retirement planning, where high interest rates are fueling a surge in demand for guaranteed income, a groundbreaking trend is emerging. In 2024, as the sale of annuities reached an astounding $432.4 billion, reflecting a growing need for financial security, savvy investors are discovering a more lucrative and flexible alternative: the DIY annuity. This innovative approach allows individuals to construct their own income-generating portfolios, potentially outperforming traditional annuity products by mitigating their inherent high fees and restrictive terms. Devin Carroll, a prominent financial advisor and owner of the Carroll Advisory Group, advocates for this self-managed strategy, emphasizing the control and cost-efficiency it offers to retirees.

The journey to building a personalized annuity begins with understanding the diverse spectrum of income-generating investments available. Instead of relying on the typical 4% to 8% annual returns of commercial annuities, which are often eroded by surrender charges, commission fees, and annual administrative costs, individuals can curate a diversified portfolio tailored to their specific risk tolerance and income needs. For those seeking stability akin to a fixed annuity, a combination of high-quality bonds and U.S. Treasuries, which typically pay distributions semiannually, provides a predictable income stream. As of June 2025, instruments like 10-year U.S. Treasuries offer a 4.25% yield, while investment-grade bonds provide 3.55%.

For investors comfortable with a calculated degree of risk in exchange for potentially higher returns, U.S. corporate bonds, with an effective interest rate of approximately 5.3%, present an attractive option. In contrast, 12-month Certificates of Deposit (CDs), while offering the lowest risk, yield less than 2%, with interest typically paid at maturity. Furthermore, dividend-paying funds, such as the iShares Select Dividend ETF, boast yields around 3.69% and can be integrated into a DIY annuity, provided investors choose funds with minimal management fees to maximize their net returns.

The allure of a DIY annuity lies in its transparency and autonomy. Unlike the opaque structures of indexed annuities, which often involve complex participation rates, cap rates, and underlying index compositions, a self-built portfolio ensures full oversight of assets and expenses. This direct control minimizes the "big bites" taken out of returns by various charges, a common concern highlighted by financial experts regarding commercial products.

However, this empowered approach demands a commitment to time, diligent planning, and a fundamental understanding of investment principles. While a DIY annuity eliminates the guaranteed income floor offered by traditional annuities, it compensates with unparalleled flexibility in asset allocation and the potential for significantly higher net returns. The ability to save thousands of dollars in fees, coupled with the satisfaction of self-managing one's financial future, makes the DIY annuity an increasingly compelling choice for the discerning retiree.

From a journalist's perspective, the rise of the DIY annuity signals a significant shift in retirement planning, reflecting a growing desire among individuals to take charge of their financial destiny. This movement is not merely about optimizing returns; it's about reclaiming agency in a financial world often dominated by complex products and hidden costs. The emphasis on education and informed decision-making embedded in the DIY annuity concept resonates deeply, fostering a more financially literate and empowered populace. It underscores the importance of understanding one's investments thoroughly, rather than blindly entrusting them to third parties. As interest rates continue to fluctuate, and traditional pensions become a relic of the past, the DIY annuity stands as a testament to individual ingenuity and financial resilience, offering a beacon of hope for a secure and prosperous retirement.