Report: Annuities better than mutual funds for retirement. (Life/Health).

Investors who want lifetime retirement income would do well to consider using variable annuities, according to a report by PricewaterhouseCoopers LLP.

The report, "The Value of Lifetime Annuitization," finds that after-tax annual income from an annuitized deferred variable annuity or from an immediate variable annuity significantly exceeds amounts that can be safely withdrawn from a mutual fund. For the comparison, PricewaterhouseCoopers calculated the maximum withdrawals consistent with no more than a 5% chance of the owner outliving mutual fund assets.

Mark Mackey, president and chief executive officer of the National Association for Variable Annuities, said he hopes that brokers, agents and financial planners will read the report and better appreciate the real value that lifetime annuity payments can provide.

To price annuity payouts, PricewaterhouseCoopers used the National Association of Insurance Commissioners' 2000 Individual Annuity Mortality Table. It used the Social Security Administration's 2001 mortality assumptions to calculate the risk of outliving mutual fund assets. Those sources show that buyers of annuities tend to live longer than the general population of the United States.

The report assumed that owners funded their investments all at once and did not add to them.

Based on the report, Mackey said he would expect financial advisers to recommend deferred variable annuities to clients in their 40s or 50s, 50 they could enjoy the benefits of tax-deferred growth until they annuitize their contracts. Clients at around age 65 might want to put a portion of their 401(k) money or other savings into an immediate annuity, he said.