Retirement plan - building your own pension - savings, social security - aarp...

Under the rules, people must begin withdrawing a specified amount from their accounts (called a required minimum distribution, or RMD) after they turn 70 1/2. The proposed changes exempt the

annuity purchase from RMDs, which should make an annuity more attractive for people who want to minimize their withdrawals. AN EXPANDING INDUSTRY Interest in income annuities is growing:

Sales rose 6.6 percent in 2011, to a record $8.1 billion, according to insurance-industry research group LIMRA. A New York Life deferred annuity aimed at pre-retirees (ages 55 through 65) is

off to the fastest start of any annuity in company history. A variety of online tools ease annuity shopping: Both Vanguard and Fidelity Investments, for example, offer Web resources for

comparing policies; ImmediateAnnuities.com can give you an instant quote. Selecting an annuity provider means choosing a partner for life, so check insurance ratings at A. M. Best Company,

Standard & Poor's, Fitch Ratings or Moody's Investor Services. You also mitigate risk by spreading annuity purchases among more than one carrier. Income annuities aren't

for everyone. Once you've bought one, the principal's gone. There's no take-back option for buyers who need emergency funds or have second thoughts. But some policies offer a

"cash refund" feature that pays whatever remains of the premium to a beneficiary if the buyer dies prematurely. Critics also warn of inflation risk. Standard fixed annuities offer

payments that don't rise with inflation, so future checks could be worth less. You can buy cost-of-living add-ons that automatically increase with inflation, but at significant

additional cost. "Having one fixed stream of cash flow that can't change is a dangerous approach," argues Charlie Farrell, a principal at Northstar Investment Advisors.

DIMINISHED PAY-OUTS Also, because of low interest rates, both immediate and deferred annuities have less attractive terms than they've had in the past or may have in the future. For

instance, a 65-year-old man who bought a $100,000 SPIA in June 2012 would receive $549 per month for life, according to Vanguard. That's an initial annual payout of 6.59 percent,

compared with a payout of 8.7 percent as recently as 2000, Morningstar data show.