Navigating Retirement: Annuities vs. IRA Withdrawals for Sonic Automotive Employees

Healthcare Provider Update: Healthcare Provider for Sonic Automotive Sonic Automotive primarily offers its employees health insurance through a plan established with Aetna, which provides comprehensive healthcare coverage and plans tailored for the company's workforce needs. Potential Healthcare Cost Increases in 2026 In 2026, Sonic Automotive and its employees are likely to face significant healthcare cost increases, driven predominantly by a convergence of factors. A projected rise of 8.5% in employer-sponsored insurance costs reflects ongoing inflation in medical expenses and the staggering demands placed on health providers. Additionally, the potential expiration of enhanced ACA premium subsidies may force many employees to bear higher out-of-pocket costs. As these shifts unfold, it may become critical for Sonic Automotive to evaluate its healthcare strategies and potentially adjust its offerings to mitigate the financial impact on its workforce. Click here to learn more

There are just a couple of things almost all Sonic Automotive retirees need when they hit retirement: predictable income and protection against a cluster of risks, which include longevity risk, performance risk and sequence-of-returns risk.

In the past we have seen retiring Sonic Automotive employees utilize the “4% rule,” where retirees take annual withdrawals start at 4% of the entire portfolio and increase with inflation. They then keep the remainder of the portfolio with at least 50% invested in equities. Based on historical data, this would give a Sonic Automotive retiree about 30 years of retirement income.

As the economy constantly changes, a number of factors may force prospective Sonic Automotive retirees to revisit the 4% rule. It may be worth considering annuities as an alternative.

As life expectancies increase, Sonic Automotive retirees need to prepare for expenses over a longer time frame. In the past we would plan for a 15 to 20 year retirement, but now we need to prepare for a 30 to 35 year retirement. What is available to assist meeting the 35-year time frame?  

The annuity strategy can assist with a few of the pitfalls we see in the 4% rule. For example:

If you need $50,000 per year in retirement and need that for 30 years, you may need $1.2 million in fixed income at a 3% interest rate. BUT if you look to fund $50,000 for 30 years, you can cover that expense with $800,000 by choosing the annuity option.

The other pitfall with the 4% rule is that it may not reflect a client’s risk tolerance. When you are accumulating assets, you can afford more volatility and can take on more risk than when in the retirement and withdrawal phase after leaving Sonic Automotive. 

Also, should we see a drop in the market, you would be able to reduce your income using the 4% rule, which you cannot do if you choose an annuity option.

 

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