"Guaranteed Lifetime Income," but Where's the A-Word?

Insurance company commercial on Boston radio this a.m. pushed "Guaranteed Income for a Lifetime." What product produces this guaranteed income? The commercial pointedly didn't say.

You can see the problem. In the public mind, the A-word, "annuity," has become firmly attached to investment packages known as deferred annuities.

Maybe we need a new term for immediate annuities?

For certain, immediate annuities are back in style. They fell from favor in the inflationary 1970's, when "fixed income" meant "rapidly shrinking income" in real terms.

Inflation is tamer now, and an endless array of derivitives allow insurance companies to offer a variety of inflation-indexed annuities to those who desire them.

Perhaps the real reason immediate annuities are making a comeback is that traditional pensions have become a vanishing species. By purchasing an immediate annuity, a retiree can gain some of the lifetime security corporate pensions used to provide.

How much should a retiree put into an annuity? As you can read in this Julie Jason column, the answer may be determined by applying a patented formula. Yes, patented.

The U.S. patent was issued to Peng Chen and Moshe Milevsky on their "theory and system for creating optimal asset and product allocations for individual investors looking to finance consumption or generate income during retirement."

Can an intricate formula really apply to situations where much depends on iffy variables such as changing state of health and future estate planning goals? Time will tell.