Almost every retired person has an annuity: We call it Social Security. Social Security is a federally guaranteed program, of course, but it’s an annuity all the same: It pays a fixed amount to the recipient every month for as long as he or she lives.

Annuities aren’t glamorous, but effective, and perhaps that’s why they’re drawing more attention these days. As baby boomers age, more of them are buying annuities. For the first three quarters of 2001 the immediate annuity industry grew to $2.95 billion, an increase of 14 percent over the same period in 2000, according to LIMRA International.

You don’t need a financial planner to buy an annuity, but do some research to figure out the most appropriate options. They aren’t for everyone; for instance, those who are many years from retirement and those with health problems should either wait to buy one or avoid annuities altogether. John Ameriks, research economist at TIAA-CREF Institute, offers this simple get-started checklist: Fees, credit quality, and flexibility. Looking for low fees and flexible terms may be obvious, but don’t forget to check the insurance company’s credit quality — because if the company goes under, so does your annuity.
Ameriks says economists can’t figure out why annuities aren’t more popular. After all, everyone buys life insurance at, say, 35, when the risk of dying is small. Why not annuitize some of your portfolio at 65 to guarantee an income stream when the risk of outliving your life expectancy — and income — is more likely?

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