7 secrets to a richer retirement #5 Make friends with an annuity

Many retirees should consider an immediate annuity, which begins a stream of regular fixed income for life. The advantage is not just financial: Studies show that retirees who have guaranteed income to cover some of their costs are happier than those who do not.

So why is that few people buy annuities? In part because of legitimate concerns about insurers that sell them - the rescue of AIG, certainly did not inspire confidence. But also at work is the fear of losing control, in addition to a bias called the endowment effect: It is the value that is in your power more highly than something you have not, even if something is worth so much. Annuities trigger that prejudice, because they require you to "abandon" a big chunk of money upfront.

To learn how to combat this trend, Jeffrey Brown, a finance professor at the University of Illinois, and colleagues recently tested different ways of describing the annuities for a group of people 50 and older.

A description was of a monthly income of $ 650 for life, another, a return of $ 650 for life. The same thing - but three times as many people went to the first option. "Only by changing the perspective away from wealth accumulation to produce income can make a big difference," says Brown.

Now put these findings into action:

Remember: It's all or nothing
One way to overcome their reluctance to lose control, says Harold Evensky, a financial adviser in Coral Gables, Fla., is to remember that the standard advice is to put only a portion of their retirement savings into an annuity - and to focus on income monthly trust can provide.

See if you can come across an institutional rate
Knowing that I have a good business can help lower your anxiety. And about 1,200 employers now allow their 401 (k) participants to buy immediate annuities through a service called Income Solutions at low prices that only large institutions usually get. In addition, Vanguard has just announced it will do the same for your 401 (k) and retail investors. Check with your plan to see if you qualify.