Fixed income annuities, however, can be pricey, often requiring an investment of six figures or more to secure benefit payments large enough to supplement your savings.
Keep in mind, too, that because the return is fixed, your purchasing power drops if inflation starts to climbs.
As such, the inflation adjustment rider offered by some insurance companies is well worth the higher prices, says Christine Benz, director of personal finance for mutual fund tracker Morningstar.
Variable annuities are different.
Such products allow retirees to chase returns by investing their annuity balance in a selection of sub-accounts that consist mainly of mutual funds.
Payments can begin either immediately or at a future date, but the value of your payment is not guaranteed.
Like other securities, the rate of return is determined by how well the investments you select perform.
Such products do provide a death benefit, however.
If you die before payments begin, your beneficiary is guaranteed to receive a specified amount, usually at least the amount of your purchase payments.
Blue-chip stocks that pay a consistent dividend can also create predictable cash flow.
Historically, such assets have been less volatile that the broader equity market, but they also offer a smaller return.Page 4 of 6 | Prev Page | Next Page