Retirees need to earn more on investments
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Annuities
If you're saving $1,000 a month in a tin can, that's an accumulation vehicle. If your tin can pays some interest, that helps. And if your tin can invests your money in stocks like a mutual fund, that helps, too. The insurance industry is trying to disguise the variable annuity as mutual funds when it's a mutual fund with an expensive wrapper that's sucking away about 1.5 percent a year of your money. People don't really get anything for that expense. I would agree that an annuity can be a useful tool if it's paying out money, but I don't see it as a good accumulating vehicle.

I would use an annuity as an immediate annuity. It's different from an accumulating annuity in that you put a sum of money in it and it instantly turns into a payment stream. The problem is most people are just buying annuities when they think they're buying investments.

Assess your situation
The first thing people should do is take stock of where they are financially. How much are they spending per month? It can be very hard to do your own accounting; we have a tendency to overstate income and understate expenses. Sometimes it's best to go to a third party and have them do it, if you can't be objective. If you retire and only have a fourth of the income coming in that you have now, you're not going to be happy.

Have someone measure your resources to tell you objectively how much money you can expect from your resources in retirement -- Social Security, pension, 401(k), IRA and any other assets you may use as funding sources for your retirement. Have the planner do various scenarios against different backdrops -- low interest-rate environment, high interest-rate environment, high inflation, low inflation, stock market crash, etc. Anybody can make you look richer by just raising your rate of return. But raising your rate of return may not be realistic because you may be taking far more risk than you can afford to take. A lot of people say they need to make more on their money to make up for lost time. Don't do that; you'll crash and burn.

Estate planning
Examine your will, trust, power of attorney, insurance coverage -- life insurance, health, long-term care, disability, property and casualty. You don't want to get in a car wreck and not have enough liability insurance; you could lose your retirement because not all states protect retirement money. You also want someone in power to handle your affairs if you can't. That's why you need a legal document like power of attorney, which has to speak to handling retirement plans, life insurance products, annuities, filing tax returns and health care decisions.