Annually isn't a bad update plan.
You could setup Linux to use 2 seperate partitions, one for / (root) and
one for /home.
If you do it at least this way, of course you want a swap partition, you
can just install the new version fresh and not lose your settings and
files that should be saved in your home partition. This of course as
long as you don't reformat the /home partition.

The way I have my system setup I have a 300GB harddrive, roughly 512mb
for swap (which I really don't need cause I have 2GB of ram), 100GB for
/, 100GB for /home and the rest for storage.
When I update I use a fresh install setting up the partitioning manually
when it asks and only formatting the / partition and telling gparted
where my /home and swap are mounted.