Some annuities get negative press coverage while others are highly recommended. What explains this seeming contradiction? The way annuities are sliced and diced.
* Deferred annuities allow you to invest now and pull out money later. Such products may be sold aggressively and costs to investors might be steep.
* Immediate annuities (also called income annuities or payout annuities) don’t require any waiting. You pay a sum of money to an insurance company and receive a stream of cash flow that begins right away and possibly lasts for as long as you live.
Immediate annuities may prove to be valuable as life expectancies increase. A healthy 65-year-old male has a 50 percent chance of living beyond age 85, and a 25 percent chance of living beyond 92. For a healthy 65-year-old female, there’s a 50 percent chance of living beyond 88, and a 25 percent chance of passing 94.
The longer you live, the greater the strain on your retirement savings. If you use some of your savings to buy an immediate annuity, you could have guaranteed income, no matter how long you live.
