When you retire, you no longer obtain income in return for your work. In the United States you can receive retirement income from government in the form of social security benefit as early as age 62 or as late as age 70. The maximum benefit for a worker retiring at full retirement age was $2,788 per month in 2018. In 2019, it increases to $2,861 per month.

Is it enough for someone like me to maintain my lifestyle with that income alone, you may ask? Probably not. That’s why people save up in their IRA, 401(k), 403(b), etc. to a certain amount which hopefully can last for their lifetime. However, money in IRA or 401(k)/403(b)* are mostly invested in risky investment, such as stocks, mutual funds or bond. The older you get, the less you can tolerate any investment risk. Besides, IRA, 401(k)/403(b)* can drain out eventually if you continue withdrawing money from it. What if there’s another way of receiving guaranteed income for your lifetime just like social security benefit, would that be nice?

An annuity is a contract between you and an insurance company in which you make a lump sum payment or series of payments and in return obtain regular disbursements beginning either immediately or at some point in the future. The beauty of annuity is that you can be rest assured that the payment check will be delivered to you month by month for as long as you live, and it’s guaranteed. Especially an Index Annuity with lifetime income rider can be a very attractive option.

401(k)/403(b)* : Normally employees take advantage of tax deferral benefit and put a chunk of their hard-earned money into employer-sponsored 401(k) or 403(b). That’s all fine, except that you have very limited investment choices that are stipulated by the plan. It should be a good idea to roll over your 401(k) or 403(b) funds to an IRA when you change job or retire. Then you will have all the options in the world how you will invest money in your account.