Income to Count On

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The biggest knock on income annuities is that once you've forked over a pile of cash, it's gone forever. So don't spend all your savings on one; 25% is a good target. In some cases, you can recover all or part of what you paid for an annuity. J.G. Wentworth, based in Bryn Mawr, Pa., offers a lump sum to take over your income stream. If you bought an annuity for $100,000 and changed your mind the next day, you could get back about $95,000. "Our typical customer has unexpected medical bills or some other sudden need for money," says Michael Vaughan, managing director at Wentworth.

One helpful rule: "The older I get, the more I'm willing to buy an annuity," says Michael Schulman, an accountant with Excelsior Senior Advisers in New York. With fewer years to live, you have higher monthly payments. An income annuity bought at age 75 or 80 might generate more monthly cash than you could get anywhere else. Your heirs might squirm. But you will sleep better knowing you have plenty of income and it will never run out.