It is a tough world out there these days when it comes to deciding what to do about money in retirement. Back in the day, employers would pay their employees a pension that lasted you the rest of your life (also known as a golden parachute). You would turn 65, retire on the spot, accept your life-long pension, and be on your way.

Not the case anymore. Today some people have 401(k) plans, but others have to make their own monetary decisions and decide how to manage their funds. Buying annuities is a great new option for those who aren’t quite sure how to manage their funds in retirement.

What are annuities? Annuities are insurance products that are bought with an annuity lump sum payment, which is then paid out over the course of the individual’s lifetime after they’ve turned 59 1/2. An annuity is tax-deferred as long as you don’t withdraw money before the payout period begins.

What will buying annuities do for me? Many financial planners and advisers recommend those nearing retirement to purchase an annuity because you will have a set amount of income for life. If you don’t want to buy an annuity but don’t have any other financial plan for retirement, you may end up spending too much.

Types of annuities:

• Immediate – These annuities pay you a set amount for as long as you live. Or you can opt to receive payments for a set amount of years, after which a beneficiary will receive payments.
• Deferred – This type accumulates your money until a future payment is made. There are three types: fixed annuities, equity-indexed annuities, and variable annuities. Variable annuities are generally not the best for meeting short-term goals because they have substantial taxes and high insurance company charges if you withdraw early.

Buying annuities that are right for you: An estimated eight out of 10 non-qualified annuity owners have an annual income below $100,000 because generally anything lower than that will not guarantee payments for life.

You may want an immediate annuity if you have retirement expenses that aren’t covered by a monthly pension or social security benefits. Immediate annuities can offer a regular monthly payment to cover these expenses. If you believe you’ll be around for a long time, an annuity is a great option. If you have serious health issues, you may want to opt for a lump sum.

If you are worried that you will run out of money before you die, you can purchase an annuity. But what happens if you die before your payments run out? No worries, you can name a beneficiary to receive the money after you have passed. Those who are older are also generally not taking many monetary risks and choose an annuity instead.

There are plenty of reasons and plenty of options to buying annuities. Talk to your financial adviser about what would be best for you.