Plenty of people want steady, paycheck-like income in retirement, yet many dismiss the only product designed to guarantee payments for life: annuities.

The disconnect usually stems from misunderstandings, not math. Clearing up a few stubborn myths can help you decide—rationally—whether an annuity deserves a place alongside Social Security, pensions, and investments.

Too Complex?

It’s true some annuities come with dense riders and alphabet soup fees. But income-focused choices can be refreshingly straightforward. A single-premium immediate annuity (SPIA) converts a lump sum into checks that start right away and continue as long as you live. A deferred income annuity (often called a “longevity annuity”) works similarly but begins payments years later, trading time for a higher future payout per dollar invested.

How Payouts Work

Your monthly income depends on age, prevailing interest rates, and contract features. Older buyers and those deferring payments longer receive larger checks because fewer total payments are expected. You can also elect “joint life” coverage so payments last as long as either spouse is alive. Quote tools show projected income per $100,000 premium so you can compare options apples-to-apples.

Dying Early?

A common fear is “What if I pass away soon and the insurer keeps the money?” Think of lifetime income as insurance against the opposite risk—living so long your portfolio runs dry. Like homeowners insurance, the value is protection against a low-probability, high-impact outcome. If leaving something behind is essential, you can add period-certain or refund provisions so beneficiaries get payments for a minimum term or receive any unrecovered premium.

No Access?

With SPIAs and deferred income annuities, you typically give up liquidity on the premium in exchange for higher guaranteed income. That doesn’t make them non-starters; it just changes how to use them. A practical approach is funding only a slice of your savings—often enough to cover core expenses when combined with Social Security—while keeping the rest in a diversified, liquid portfolio for flexibility, growth, and emergencies.

DIY Beats It?

“I’ll build my own paycheck from stocks and bonds.” Sometimes that works, but it’s not an apples-to-apples comparison. Insurers can add “mortality credits”—dollars from contract holders who die earlier that subsidize payments to those who live longer. Individual investors don’t have access to that pooling effect.

Wade D. Pfau, retirement researcher, writes, “Income annuities are especially valuable because of their ability to provide longevity protection through the provision of mortality credits.” To match an annuity’s lifetime payout, a do-it-yourself plan typically must take more market and sequence risk, and it still can’t guarantee you won’t outlive your assets.

No Legacy?

Buying income doesn’t have to erase bequests. The solution is proportion and design. Allocate only what’s needed to secure essential spending; invest the remainder for heirs and optional goals. If you want contractual protection for beneficiaries, consider period-certain, installment refund, or cash-refund features. These reduce the monthly check somewhat but ensure value passes on if you die before receiving payments equal to your premium.

Right Amount

How much to annuitize? Start with a budget. Add up must-pay costs—housing, food, utilities, insurance, basic healthcare. Subtract reliable income sources. The shortfall is your “income gap.” Funding some or all of that gap with an annuity can stabilize the plan, while leaving discretionary spending, gifting, and legacy growth to your investment portfolio.

Smart Types

For guaranteed lifetime income, prioritize simplicity and transparency. SPIAs and plain-vanilla deferred income annuities are built for monthly checks. If you consider variable or indexed annuities for income, scrutinize rider costs, crediting methods, and withdrawal rules. Complex structures are not inherently bad, but you should be able to explain—in one paragraph—how you get paid and what it costs.

Key Trade-Offs

Every annuity is a trade: more certainty, less liquidity. The payoff is protection from longevity and market sequence risk. The cost is relinquishing some control over the premium and accepting a lower expected return than an aggressive all-equity portfolio in strong markets. For many retirees, that’s a fair swap for sleep-at-night income on essentials.

Buying Tips

Compare multiple quotes from highly rated insurers; pricing varies. Decide on single or joint life and whether period-certain or refund features matter. Mind the start date: immediate income works for current needs; deferring can lock in larger future payments for later-life costs. Also consider how payments may be taxed under your local rules, and choose account types that match your long-term income plan.

Who Might Skip

Not everyone needs an annuity. If guaranteed sources already cover your baseline spending, or your nest egg is large enough that withdrawal risk is minimal, optionality may trump guarantees. Likewise, disciplined investors who prefer managing sequence risk with guardrail withdrawals and bond ladders may choose to self-insure longevity risk.

Balanced Use

The most durable retirements often blend guaranteed income and market growth. That might look like: baseline benefits plus a right-sized SPIA for essentials; a diversified stock/bond portfolio for inflation protection and goals; and a cash buffer for near-term withdrawals. This mix reduces the odds that bad market timing derails your plan.

Conclusion

Annuities aren’t magic—and they’re not monsters. Used selectively, they can convert a portion of savings into reliable, lifetime cash flow that markets can’t promise. The practical goal is simple: secure the spending you cannot afford to miss, then keep the remainder flexible for growth, surprises, and long-term goals.