There are two main types of guaranteed income products, a guaranteed income annuity and a reverse mortgage. A guaranteed income annuity is essentially a product where, for an initial investment, an individual receives a guaranteed income stream for the remainder of his or her life. With a reverse mortgage, homeowners can receive monthly payments from the reverse-mortgage lender for the remainder of their lives. At the time of their death, the money they have received must be repaid to the lender by the estate, or possession of the house is granted to the lender. Is a guaranteed income product right for you?

PROS
Can essentially function like a personal pension plan by providing consistent monthly income payments to retirees in order to help individuals plan their cash flow needs.
May also make budgeting simpler because monthly cash flow is known in advance and is not dependent on financial market conditions.

CONS
Individuals are generally locked into a relatively low rate of return. This means that in exchange for a guarantee of safety and lifetime income an individual sacrifices the possibility of higher returns.

Guaranteed-income products often suffer from a lack of liquidity and may not keep pace with the rate of inflation.

If you are considering guaranteed income products, comparison-shopping is absolutely vital. Also, consider general health and life expectancy, if a spouse will be included in the contract, and if you want to leave an inheritance, as all of these factors can impact whether or not guaranteed income products are a good choice for your financial future.

Annuities are long-term investments designed for retirement purposes. Distributions are subject to income tax and, if taken prior to age 59½, a 10% federal tax penalty may apply. The annuity may be subject to lengthy surrender periods and early withdrawals subject to surrender charges. Guarantees are backed by the claims-paying ability of the issuer.

The decision to take out a reverse mortgage can be a difficult one to make. The AARP, an American organization dedicated to protecting the elderly and retired, has extensive free resources designed to educate senior citizens about potentially unjust lending practices. Anyone considering a reverse mortgage should gather as much information as possible before carefully deciding whether a reverse mortgage is appropriate.