The Role of Annuities in Retirement

Abstract

Deciding how to generate reliable, lifetime retirement income is a critical retirement planning task. Retirees and their advisors can make the best decisions by informing themselves as to the merits of annuities compared with other methods of generating retirement income. An important part of this analysis is comparing the amounts of retirement income generated by the various approaches. The various approaches generate significantly different amounts of income throughout retirement, and they react differently to unfavorable and favorable economic scenarios. This article provides the reader with methods to make these comparisons, and attempts to dispel some of the misinformation and misperceptions surrounding annuities. It also explains that annuities can be used strategically as an important part of an individual’s retirement income portfolio.