Jim Miller of Human Events was asked in “Immediate Annuities: A Safe Way to Boost Your Retirement Income” what kind of annuity would provide a retiree in their 70’s with a safe income stream for life. His answer was a fixed immediate annuity because it is a means to retirement that while being virtually free of risk gives you a guarantee of income for life. After purchasing the annuity from an insurance company, the retiree will receive monthly checks either for the rest of their life (single-life annuity), the rest of a spouse’s life (joint-life annuity), or a specified time frame (fixed-period annuity).
Miller points out that after purchasing an annuity the money stays in the annuity, so he recommends using no more than 50% of a portfolio or 401k annuity for the purchase or the amount that will cover your living expenses. Age, gender, original investment amount, interest rates, and any riders you add to your policy will determine the amount of your monthly payout. There are many riders that can be added to an annuity which bring additional benefits at a small cost. Protecting against inflation can be done either with an inflation-adjusted rider or laddering the purchase of annuities, basically purchasing a new annuity every few years to take advantage of being older and possible increases in the interest rate. Although most state guaranty organizations protect annuities to an extent if an insurance company goes out of business, it is best to research the ratings and choose the best insurance company for your retirement plans.