When you're hedging against bonds
A single premium, immediate annuity can sometimes offer "a higher rate of return than you're getting on bonds," says Andy Byron, CFP, a principal of HC Financial Advisors in Lafayette, California.
So replacing part of a bond ladder with this type of annuity can help those who are trying to guarantee a set income in retirement while diminishing risk and offsetting low rates on bonds, Byron says.
"What you're guarding against is a low-interest rate environment that bonds are currently getting," he says.
One thing you should watch out for is that sometimes the gain can be offset by the annuity's expenses, Byron says. So do the math and shop carefully.
Also, if you're half of a couple, look at annuities with joint life survivor benefits, when you can leave the annuity payout to a beneficiary, usually a spouse. While the monthly payouts are often lower, the benefits will continue for your partner if you die first, Byron says.