How to Safely Build Your Retirement Income

The Washington Post has a good piece giving folks tools to help them begin to build their retirement income; fewer folks are retiring with pensions and Social Security just doesn't cut the majority of a person's living expenses. The piece goes into depth about annuities -- how they differ and which may (or may not) be the right fit for you. Here's a snippet:
An immediate annuity is based on a simple concept: You give an insurance company a lump sum and it promises to send you a monthly check for the rest of your life -- no matter how long. For example, a 65-year-old man who invests $100,000 in an immediate annuity today could collect $8,112 a year. That's about twice as much as he could safely withdraw from his savings each year if he followed a widely accepted recommendation: Limit initial withdrawals to 4 percent of your portfolio to avoid outliving your savings.
Part of the reason for the bigger annuity payout is that each distribution consists of interest as well as a return of principal. But the real secret behind the beefed-up annuity checks is that you pool your risk with other policyholders. Those who die at earlier ages end up subsidizing the payments of people who live longer. You get the biggest bang for your buck if you buy a "straight life" annuity, which pays out only for your lifetime, with no survivor benefits. Most married couples, however, prefer to buy annuities that pay out as long as either spouse lives, even though it means smaller benefits. For example, a 65-year-old couple who invests $100,000 in an immediate annuity and chooses dual coverage would receive an annual payout of $6,634.
Read the rest here.