Get retirement income with immediate annuities

Currently, a $100,000 SPIA would pay $613 a month for a single 65-year old man in California, according to immediateannuities.com. A married couple, each 65, would get $535 a month. You can

get variations through special terms, called riders, but you’ll generally get lower monthly payments. For example, a SPIA that promises to give the remainder of the premium to your heirs

after you both die would pay $517 a month for a couple. But those payments are usually fixed for life, and over time, inflation could reduce the purchasing power of your benefits.  How are

they able to offer such high payouts? To some extent, insurers invest in higher long-term returns from stocks, bonds and other investments. Although no one knows what the financial markets

will do in the future, stocks and bonds have typically returned more than short-term Treasury securities over the long term. According to Standard and Poor’s, the S&P 500 has gained an

average 7.45 percent the past 25 years, a period that has included four bear markets. Bonds have returned an average 4.95 percent, according to Morningstar, the Chicago-based investment

tracker. Inflation has averaged 2.47 percent. Another reason: death. When you die and you have money invested in a plain-vanilla SPIA, the money that hasn’t been paid to you goes back into

the pool that pays other people. According to IRS mortality tables, the average 65-year-old lives a little bit longer than 85 years. WHY BUY A SPIA? PEOPLE ARE LIVING LONGER. In 1960, the

average life span for men was 66.6, while women lived to 73. As of 2015, men lived an average of 77 years, while women lived an average of 82 years, according to the U.S. Census Bureau.

“Remember that half the people live longer than average and some people live to a very old age,” says David Haas, a CFP in Franklin Lakes, New Jersey. “Annuities are a great tool to minimize

the risk of outliving your money.” HIGHER PAYOUTS. Lower interest rates in the first part of the century made annuity returns unattractive. That’s changed. “Interest rates are higher —

[SPIAs] are much more attractive since the income will be on par with pension plans,” Bunio says. But higher interest rates also mean higher inflation. SIMPLICITY. Totaling up your

investment assets, figuring out how much to withdraw, choosing which funds to withdraw them from and adjusting that for inflation every year is a bit of a chore. A simple monthly payment

might better suit your time and temperament.