Variable Annuities: Lifelong Income, High Cost

People worried about losing their retirement savings in the stock market are seeking safety in variable annuities that promise lifelong income. U.S. insurers' sales of variable annuities jumped 24 percent in the first quarter, led by policies that offer guaranteed minimum payments. Moshe Milevsky, finance professor at the Schulich School of Business at York University in Toronto says the products appeal to investors who "fear that the S&P at 1,300 is a mirage and it's going to go back to 700 for the rest of our lives."

Sales of variable annuities in the U.S. climbed to $39.8 billion in the first quarter, from $32.2 billion the year before, according to trade group Limra. Investors withdrew $50 billion from U.S. stock mutual funds in the 12 months through April, according to Morningstar (MORN).