Lifetime Payout Annuity

See: Annuity.

Annuities provide guaranteed regular payments in retirement. You pay a large sum now to make sure you have some income when you get to your golden years.

A life annuity guarantees this income for as long as you live. There are some potential wrinkles, though, giving you a couple choices you can make.

You can choose a fixed payment plan, meaning all the annuity payments are the same for the entire time. You get $2,000 a month from now until you die, no matter what. This system works great in the beginning. But a few decades down the road, when a hotdog costs $342, that $2,000 a month annuity payment might not seem so fab.

Or you can have payments with a cost-of-living adjustment. They start at $2,000, but increase over time, tied to some inflation metric. If the CPI rises 2% in a year, your monthly payment will climb to $2,040. That keeps going, so that when the economy gets to the point where hot dogs cost $300, you are drawing $100,000 a month in your inflation-adjusted annuity.

Or you can have a fluctuating payment. These payments would be tied to the performance of some underlying investment metric. Basically, how much you collect is determined by some measure of how the stock market or the underlying economy is doing. It may start at $2,000, but if the S&P 500 rises 5%, you might get an additional 5% boost.

The structure keeps you from kicking yourself for buying the annuity instead of investing in the market.