The New Savage Number: How Much Money Do You Really Need to Retire?

Chapter 12. ANNUITIES FOR INCOME AND TAX-DEFERRED GROWTH

One of the most important aspects of retirement income planning is the need for certainty. That's part of the appeal of the Monte Carlo process, a computerized evaluation of the likelihood that you will reach your goal of not running out of money before you run out of time (see Chapter 4). But you also need the certainty of having enough regular income to cover your retirement lifestyle. That's where annuities can play a role.

When you're planning your retirement, the topic of annuities is bound to come up. Annuities do have a place in most retirement plans. Immediate annuities can provide a regular, fixed stream of monthly income. And while you're still working, tax-deferred annuities can be a place to build tax-deferred growth when other options such as 401(k) or 403(b) plans or individual retirement accounts (IRAs) have been maxed out.

As a result of the market crash, many people are more anxious about protecting their investment gains. Even before the big market decline, insurance companies had started to create a wide variety of annuity products designed to combine the benefits of tax-deferred growth with certain guarantees against loss so that future streams of retirement income can be promised. Widely called "Guaranteed Minimum Income Benefits," these products, or riders to existing products, are becoming increasingly popular.

But a few words of warning when it comes to purchasing any annuity product. First, these are ...