In this financial world there are a myriad of different strategies available to save for retirement. Individual stocks, bonds, mutual funds, real estate, CDs, and the list goes on and on.

At retirement, the desire should be not necessarily to have a big pile of money, but to guarantee an income for your entire life, and possibly the life of a loved one.

Many people who retired in 2007 might have had a big pile of money. But, in one scary swoop in 2008, that pile of money might have been reduced by thousands of dollars. This reduction could have dramatically changed their expected income in retirement. Or for those not yet retired, could have pushed your year of retirement way past your original goal.

An annuity is a vehicle that guarantees an income for life. It, by its very nature, is tax-deferred. (Therefore there is no interference from Uncle Sam until the distribution stage). However, any kind of qualified plan (e.g. IRA, SEP, TSA, etc.) is tax-deferred.

So why might an annuity be a consideration for part of your retirement income?

An annuity provides some predictability of your retirement income through a steady income stream that lasts for your entire life.

There are different kinds of annuities.

Fixed, index and variable are the most common. A fixed annuity simply credits an interest rate for a period of time (e.g. 3 percent for three, five or 10 years). An index annuity has its performance tied to one of the indexes used in stock market performance (e.g. S&P500).

Variable annuities normally are based on stock market performance. An assortment of mutual funds (they are called sub-accounts in a variable annuity) are offered to match each individual's risk tolerance.

Most annuities provide some sort of assurance that, should you die, your beneficiary will get at least what you have contributed.

As an example, if you contributed $100,000 and the market drop reduced your annuity value to $50,000, and you died without taking any distributions, your beneficiary would receive $100,000.

Some annuities allow for a percentage to be withdrawn per year. In our example of $100,000, it might allow 5 percent per year to be withdrawn for your entire life, even though the market value has dropped substantially lower than this.

Other annuities might have a step-up feature to lock in a higher value through the years, and even an inflation adjustment to keep up with rising costs in your retirement.

These guarantees, however, come with a price. Where a typical mutual fund or managed account might cost 1 percent annually, an annuity can cost 2 percent to 3 percent, depending on the features you include.

The question is: Does that 1 percent to 2 percent additional cost warrant the guarantees provided? Obviously, with a market that has seen 25 percent to 40 percent reductions in recent times, the 1 percent to 2 percent per year cost to provide these guarantees could seem miniscule.

As with any investment, it should not be an all-or-nothing decision, but simply a part of a diversified portfolio. It is an individual decision, best made with some research and the helping hand of a trusted adviser.

* Next month: Real estate as an investment.

Tim Schumacher represents Strategic Financial Partner in Hays. tschumacher@htk.com