Immediate annuities likely to sustain long retirements. (Life/Health: Marketplace).

Immediate annuities can help long-lived retirees mitigate the chance their nest eggs will dry up, according to a story published in the December issue of the Journal of Financial Planning, published monthly by the Denver-based Financial Planning Association.

A previous study had found that assets should last 90% of the time over 30 years when inflation-adjusted withdrawals are no more than 4.5% a year.

"Our analysis shows that the 4.5%-withdrawal factor can be sustained with more certainty, for longer time periods, by adding the risk-pooling characteristics of an immediate annuity to the overall retirement portfolio," said John Ameriks, a research economist at the TIAA-GREF Institute and a co-author of the recent study. Other authors were Robert Veres, a financial-planning journalist, and Mark J. Warshawsky, a visiting researcher at the National Bureau of Economic Research and former director of research at TIAA-CREF, the New York-based company that specializes in retirement programs for college and secondary-school educators.

By providing a stable source of income, a fixed life annuity can substitute for the cash or bond part of a retiree's portfolio, the authors found. Using Monte Carlo simulation, they determined that a conservative Portfolio would fail 25% of the time over a 25-year period and 97% over a 40-year period. The fail failure rate would drop to only 9% and to 82%, respectively, if half of the portfolio were annuitized.

Some 15% of aggressive portfolios would fail over 40 years, but only 7.4% would fail if half of the portfolio were annuitized, they found. Visit www.journalfp. net/jjfp1201-art6.cfm to view the entire study.