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It’s tax and IRA season, time to evaluate your retirement accounts. Stock markets may be rising in anticipation of the end of American socialism, but Washington has taken an interesting turn. The Obama Administration’s Middle Class Task Force has reported that the annuity offers a better chance for a more secure retirement.

An annuity is a contract of Insurance purchased with a lump sum in exchange for a monthly check. A big fear in retirement is running out of money. The Annuity can ensure that won’t happen and can fill in the gaps left by retirement accounts. President Obama didn’t talk about annuities per se, but the task force’s mere mention of it was enough to get insurance executives excited. “I never thought I would have the president as a wholesaler for us,” said Christopher O. Blunt, executive vice president of New York Life Insurance in a recent interview with The NY Times. The White House announcement demonstrates the administration’s desire to promote “annuities and other forms of income guaranteed for life.” Nothing is simpler than an immediate fixed basic annuity (also known as a single premium immediate annuity) that delivers a regular paycheck for life.

The presidential attention contrasts with previous negative news about the complexities and high costs of Variable Income. The Securities and Exchange Commission has extensive warning documents on its website for investors considering the variable variety. However, the low costs associated with fixed and indexed annuities may be another factor in their recent success. First time deposit can earn 3-15% bonus. 7-8% income growth and guaranteed lifetime income payments are available. A recent House bill called for a 50% tax exemption on the first $10,000 in annuity payments each year. These tax benefits and incentives may also explain the recent popularity.

Never put all your eggs in one basket, but the annuity could be used to cover living expenses or pay for long-term care insurance, defraying huge nursing home costs. Could you, without the help of a broker or financial planner, do any better? Maybe, but a guaranteed monthly income is a comforting factor, especially when investments fluctuate. All of this makes basic annuities the ultimate test of risk aversion. If you get an annuity, you and your heirs may have less money than if you had kept your retirement savings in investments. On the other hand, if you guarantee enough of your retirement income, you, and those same heirs, won’t have to worry about how you’re going to meet your basic needs.

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