Experts estimate that Social Security replaces about 40 percent of people's income during retirement. Meanwhile, people need about 70 percent of pre-retirement earnings to live comfortably.
Even without a potential boost from Congress, people had begun to reconsider annuities as part of their retirement planning.
According to information gathered by Illinois-based Beacon Research Publications, sales of immediate fixed annuities -- those offering a lifetime income stream unaffected by the stock market -- hit $2.4 billion in 2008, a 30 percent increase over 2007.
Annuities can be structured in various ways. For example, a 65-year-old could invest $100,000 in an immediate fixed annuity to receive about $8,390 a year for life. If the same man wanted to guarantee that his beneficiaries would receive payments even if he died within 10 years of purchasing the annuity, he would receive about $7,980 a year.
Some experts recommend puchasing an annuity while also investing in stocks, which carry higher risks but the possibility of higher returns.
Annuities, which are offered by life insurance companies, have drawn criticism over the years for high fees and complex rules. Jeff Sharp, a wealth strategist at SilverStone Group in Omaha, said people seeking this kind of investment should shop carefully.
Investors generally should be within 10 years of retirement, he said, and they should expect to pay more for an annuity's guarantees because of the stock market decline.
The financial stability of the insurance company also is a consideration, Sharp said. Some insurance companies suffered losses because of the poor performance of their own stock market investments and have sought government bailout funds. Hartford Financial Services Group said this month that it would accept as much as $3.4 billion in aid.
People can check the financial health of insurance companies through ratings agencies A.M. Best, Fitch, Moody's and Standard & Poor's.
However, some of those agencies have been faulted for not seeing the dangers of financial instruments like credit default swaps that led to the financial meltdown, Sharp said.
"We have learned they do not necessarily have a good early opinion," Sharp said.
Waldie at Americans for Secure Retirement offered reassurance: Insurance companies are regulated by the states, which require that money be available to back policies, and the companies contribute to state guaranty funds that help pay policy owners if a company fails.
Sean Lynch, senior wealth management director at Wells Fargo Private Bank, said people have to weigh having their money tied up in an annuity and the fees involved against more security.
"It does offer some downside protection," Lynch said.
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