(ARA) - Do you depend on your CDs or IRAs for a portion of your retirement income and cannot settle for less? Are you concerned about increased living and medical expenses while interest rates continue to be volatile? These possibilities are prompting many retirees to consider an immediate annuity in order to assure a steady stream of income. Also known as a current income annuity (CIA), it is sold by several large insurance companies, and provides income that you cannot outlive.

Current income annuities can work in tandem with assets like CDs or IRAs. Regardless of the amount you have in your IRA, you may prefer a CIA for one of four reasons.

1. Payouts from an IRA CIA, in most cases, are substantially greater than required minimum IRA custodial distributions starting at age 70 1/2.

2. Variable bond or stock sub-account CIAs can be selected (giving you the opportunity to invest in stock or bond accounts). However, if a fixed payment CIA is used, payments will be predictable and stable. This is very important in today's volatile economy, particularly if payouts are necessary to cover living expenses and other obligations like life insurance or long- term care premiums.

3. Cost of living benefits can be added to a CIA to help keep up with inflation.

4. Whether an IRA or not, the CIA annuitant (person or persons receiving the periodic payments) cannot outlive the annuity payments.

On the other hand, individuals who prefer to maintain total control of their IRA, yet are interested in one of the above benefits of CIAs can consider placing part of their IRA custodial account into a Current Income Annuity.

Making a current income annuity part of their retirement planning makes sense for many people. Yet, a majority of financial counselors and clients know very little about CIAs. "Once my clients see the comparison of CIAs versus CDs or IRAs, they typically have one of three reactions," says financial planner Jim Pedigo.

"The first is 'this sounds great -- I need more guaranteed income that I cannot outlive.' Second, clients who have sufficient income say 'looks good, but I want to make sure there is something left for my heirs.' The third reaction is 'I don't want more income. I don't want to pay more taxes. I don't even need this IRA, but I'm forced to take out income,' explains Pedigo." A CIA can address all of these concerns.

While buying a CIA means turning over a hefty lump sum of your nest egg to an insurance company, it can be a good choice for those looking for a guaranteed income during their retirement years. "Very few people have pensions anymore," says Pedigo. "CIAs can fill this gap."

For those concerned with passing wealth along to their heirs, consider the following example: Based on a CIA with September 2002 rates from Fidelity & Guaranty Life Insurance Company in Baltimore, a 70-year-old male with a $100,000 IRA and a 50-year-old son could see total income of $250,000 or more paid over their joint lifetimes. It is important to note that payouts vary by age and interest rates in effect at the time of issuance of the annuity certificate.

Everyone is required by law to take minimum distributions from their IRAs at age 70 1/2. For Individuals in the third group, those who don't need that money to live on, but who are mandated by law to withdraw the money from their IRA, investing in a CIA can give them more control over how their IRA money is allocated.

The current income annuity is a retirement planning tool that allows you to maximize your retirement income or maximize what you pass on to your heirs or both. A knowledgeable financial planner can help you decide how to put this option to work for you.

Courtesy of ARA Content