Immediate Annuities

Last Updated Apr 17, 2009 5:53 PM EDT

How do I make sure I don't outlive my money?

If you're looking for a source of retirement income you can't outlive, consider a type of insurance policy called an immediate fixed annuity. You purchase one with a lump-sum payment, and in return you get a promised amount of money at regular intervals, usually monthly, no matter what the financial markets do. (These plans differ from variable annuities, in which your payment depends on the performance of underlying investments.) In most cases, the payment for an immediate fixed annuity is guaranteed to continue as long as you live.

The key advantage of immediate fixed annuities is the protection they offer against outliving your money. That tends to bring considerable peace of mind. On the downside, the fixed payments offer no defense against inflation. For those reasons and more, you're usually best off putting only a portion of your retirement savings into annuities.

The links below outline the ins and outs of annuities, and offer tips on deciding whether an immediate annuity is right for you.

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