Immediate fixed annuities convert a lump-sum payment into guaranteed monthly income for life, something that should make them attractive to retirees worried they'll outlive their money. But they're not as popular as you might think, since many retirees also worry about the reverse: that they'll die before they collect much of the money, effectively making the insurance company, not their children, the heir.
That's why insurers are coming up with features to make them more palatable. One allows your heirs to receive years of income if you don't live to collect it. Another boosts payments to keep up with inflation. If you need cash, some companies allow you to withdraw part of the value of your account at certain times. New York Life, for example, lets you take back as much as 30% of future payments at five-year intervals or in case of losses because of a fire, flood, or other natural disaster. You can lock in lifetime payments that start at a future date -- say, when you're 85 -- for a fraction of the cost of an annuity that starts paying immediately.