If you're worried about outliving your retirement savings, you're not alone. Research shows it's a top concern for many Americans.
In a recent survey, financial advisors noted that health-care costs, market fluctuations and potential lifestyle expenses caused clients the most stress about running out of money. To alleviate those fears, many financial advisors suggest annuities as a way to ensure that clients have a stable stream of income during retirement.
As fewer and fewer companies now offer pension plans, the federal government is making it easier for retirement plans to include annuities as an option within 401(k)s and IRAs. Last October, the Treasury Department and the IRS approved guidance making it clear that employers can offer deferred-income annuities in target-date funds that are used as default investments in the retirement plans they sponsor.
The target-date fund can include annuities that begin payments at retirement or at a later time, offering a way to generate guaranteed retirement income and protect your income stream later in life.
When considering an annuity, it's important to read the fine print as many carry high fees. There's also the risk of not living long enough to receive deferred payments if you select an annuity that pays out later in life, or seeing inflation erode their real value.
Still, many experts argue that annuities at least provide some insurance against outliving your assets.