Pin Money Club

I’ve got some good news and I’ve got some bad news…

We’re all living longer (whoopee) but it’s going to get more expensive. At the rate we’re saving in this country, many of us are at risk of outliving our nest eggs (boo!). But there are some intriguing new financial products coming on to the market that promise to pay a steady stream of income in retirement. Just how good are they?

All these products are not created equal - not by a long shot. While they all have the same goal - providing you a steady stream of income in retirement - the amount and length of their payout, how much that payout costs you in fees and whether or not you can outlive the payout - differ widely. So read the fine print and know what you’re getting into. Here’s just a few questions to ask:

How long is the payout guaranteed and can I outlive the income? Some plans stop payouts at age 85, the actuarial life expectancy for today’s American woman. If you’re convinced that all those supplements you’re swallowing will take you to age 100 and beyond, then you’ll have to spend more to guarantee you won’t outlive the income.

What are the fees? Fees are usually charged on an annualized basis and taken directly from your account. These products can be expensive, so comparison shop.

How much can I expect the payout to be? This is partly a function of how much the fund charges as well as what the fund’s target rate of return is.

Will I ever dig into my principal? The answer is yes with some products. You may want to consider this strongly if you want to leave anything to your heirs.

Who guarantees the income stream? Is it an insurance company? What is that company’s financial rating? Remember, the guarantee is only as good as the company selling the product. These products aren’t going to be FDIC-insured nor are they likely to be SIPC-insured, the securities industry equivalent of the FDIC.

I don’t know about you, but my momma told me:”you’d better shop around”. I’ve looked all over and decided I like this version of that song best from American Idol’s David Archuleta…