Assuming you are talking about an immediate fixed income annuity, the biggest disadvantage are the low record interest rates and hence they aren't paying out much of anything. The way to go is a longevity annuity aka deferred income annuity. However what I leaned there is you can't buy any of these in a retirement account past a certain age generally around 68 to 68 and 1/2. There is a new product, a Qualified Longevity Annuity Contract, that you can purchase in an IRA in older age. This product has some advantages such as being exempt from your annual RMD. Personally, I would only buy an annuity from New York Life because of the company's history of financial stability.

This sums the risks up pretty nicely:money.usnews.com/money/blogs/on-retirement/2010/12/16/3-risks-of-purchasing-a-fixed-annuity
The only thing I would add is there can also be a liquidity risk as you are locking your money up in the annuity and won't necessarily have access to it in case of emergency.

@rmt & @bee:
In the "growthy" world stock space, you may want to consider the LC/MC THOIX ($100K min Wellstrade retirement, $500 min Fidelity retirement + TF) and the MC/SC DGSCX (no minimum TDA retirement + TF, $500 min Fidelity retirement + TF).
Kevin

Dex said, "That is why I advise people to buy lottery tickets for their retirement - they have a 50/50 chance - either they win or they lose."
First, I'd never try to characterize anything Bob C says - because no one else can say it so well.
But Dex, You can't be serious! 50/50 chance of winning the lottery?

I was taking the piss out of Bob C's comments.
But the younger the person, the less likely they will be able to afford to retire.

Dex said, "That is why I advise people to buy lottery tickets for their retirement - they have a 50/50 chance - either they win or they lose."
First, I'd never try to characterize anything Bob C says - because no one else can say it so well.
But Dex, You can't be serious! 50/50 chance of winning the lottery?
http://www.nytimes.com/2013/08/10/your-money/win-a-lottery-jackpot-not-much-chance-of-that.html?_r=0
"The odds of winning (the lottery) remain infinitesimal: Powerball players, for instance, have a 1 in 175 million chance of winning. You have roughly the same chance of getting hit by lightning on your birthday."

Does it really matter? I look at it this way: every year the odds are 50-50 the markets will go up and 50-50 they will go down.

Very true. That is why I advise people to buy lottery tickets for their retirement - they have a 50/50 chance - either they win or they lose.

QLAC Primer:
understanding-and-implementing-qlacs-in-a-retirement
@Junkster...The author suggests:
You could divide the $125,000 limit into three policies, enabling withdrawals at ages 75, 80 and 85, respectively. It wouldn't provide as large a distribution as if it all came at age 85, but this staggered approach provides flexibility and hedges against life's "what ifs."
and,
Similarly, you could craft a staggered, multi-QLAC arrangement, each with different benefits and payout timing. One could have a COLA, another a cash refund and a third could forgo the cash refund. This would provide varying income streams at different stages of retirement.

Hi BobC,
I completely agree with your retirement planning that includes not going to a fully cash portfolio and keeping a 3 to 5 year cash equivalent reserve.
However, without more definitive projections, I start each year assuming the odds of a positive/negative equity return is 70/30 and not 50/50. That assumption is simplistically based on the historical statistical data set. Simple is superior to complex in many, but not all, instances.
Please note the distinction between a probability and a statistical prediction. Both are attempts at estimating the likelihood of a future event, but the approaches differ. A probability projection is based on some mathematical model that is guided by weighting various input parameters. A statistical projection is based entirely on past performance records.
In the investment universe, models are in constant flux since the input parameters are uncertain and include both appropriate components and those that introduce errors. Therefore, I prefer the simple statistical approach.
Guys, the Societe Generale’s Bear market odds projection is only at the 25% level. That is far from a Bear market certainty.
First, it is premature to pronoun the prediction wrong. More test time is required. Second, even if it is proven that a Bear market is not happening, Societe Generale could reasonably claim a successful prediction since they are simultaneously forecasting a 75% likelihood that the Bull market will continue its run.
When making a prediction and incorporating specific odds percentages, forecasters are wisely protecting themselves. In a sense, it is a win-win situation for them.
When making any decision, especially an investment commitment, it is always a good policy to know the odds and the likely payoff boundaries. Statistics and models provide guidelines.
But Mark Twain gave us a cautionary warning: “Facts are stubborn, but statistics are more pliable.” Statistics indeed are pliable, but history demonstrates that market models are both pliable and unreliable.
Best Wishes.

@bee and @msf
I did note previous in this thread about being able to itemize deductions for federal (which may also positively affect state taxes, too); and that this ability may have value with deducting mortgage interest and/or that mortgage interest may be the trigger for enough money to get into the itemized deduction section.
It has since been noted too about being able to deduct property tax, and other smaller items that would not otherwise be able to be used.
Another itemized dedcution that has become "more" important in the last year is for the medical expenses area. I will guess that this was not the case previously, except with special medical circumstances within a family's expenses.
NOW, with some families finding more extreme montetary expenses from compliance with ACA, I will again guess that more families now also have this area available for itemizing.
From experience with some friends and families, the following may now exist:
---much higher out of pocket costs for medical and dental plans
-including policy premiums
-co-pays (medical/dental)
-co-pays (meds)
I played devils advocate with several folks beginning the start period for new ACA rules to help determine previously unused/couldn't use itemized deductions for this area, due to percentage cut off points. Most of these people would not have considered these deductions in prior years.
Some were now able to include medical/dental expenses due to higher policy premiums, more out-of-pocket expenses for items related to medical and dental. There are many items available to include within this itemized area.
Obviously, everything will vary depending upon one's personal monetary circumstance.
However, this is another point of consideration for maintaining a mortgage to allow for this interest deduction that may allow for many other itemized deductions.
Lastly, as a method of testing whether all of this may be of value versus using the standard tax deduction; is to use tax software and create another "user" tax report as if it was going to be the "real thing". From my recall, the two most popular tax software programs let one create up to 6 tax returns. So, one may fill in the blanks to test if medical/dental deductions of all flavors would meet the cut-off percentage to be of value in reducing taxable income.
Sadly, as we know; tax things should not have to be so complex for regular folks, but this is how things are, eh?
Note: many years ago, we did move to a 15 year mortgage at something around 6.75%.
As has been noted here, we pretty much doubled up on the monthly payment. The only variable was that we funded retirement investments to the maximum first. The most important factor, as we here know; is that we did not live beyond our means and were and still are very good with money flows revolving around the wants and needs of human nature.
I think I rambled about what was in my mind an hour ago. :)
Take care,
Catch

http://money.usnews.com/money/personal-finance/articles/2013/09/05/are-you-afraid-to-spend-money
Junkster and I have been posting similar threads - money and retirement.
I'm wondering how many people here, in retirement, under-spend out of fear or some other issue - must see net worth grow, net worth must grow for ego issues?????????
I grew up poor but I always enjoyed life. I have a strange issue, I don' t like to spend money on thing that take up space. I don't care about cars, as long as they work. But, I'm OK with spending money on things like travel and food.
To be truthful, I have a spreadsheet projecting out my net worth out to 100 and even when adjusting for inflation I a great final net worth - something many would envy. That is with conservative spending and growth.
We all may remember people who lived through the Great Depression. In later years they might have a great deal of money but, they could not spend it. They were OK with giving it to other but they just could not spend it on themselves.
I'm in great health and plan to spend more. BUT, IT IS STILL A PURPOSEFUL EFFORT, TO SPEND.
I try to remember, will I be on my death bed wishing I spent less??
So, what is your story on spending?

http://finance.yahoo.com/news/retirement-account-balance-compares-peers-143234713.html
Is it any wonder so few are prepared for retirement?

FYI: NorthCoast Asset Management made slight adjustments to its retirement ETF portfolios in June. While the Greece debt crisis grabbed much of the headlines, NorthCoast focused on more favorable trends in the region. The firm upped its allocation to European equities and high-yield bonds while standing pat on most of its other major holdings.
Regards,
Ted
http://license.icopyright.net/user/viewFreeUse.act?fuid=MTk4MDQ5Njg=
Enlarged Graphic;
http://news.investors.com/photopopup.aspx?path=WEB_NClist070115.gif&docId=759708&xmpSource=&width=1000&height=2845&caption=&id=759795

I'm am not 85 but some of my friends are in their 90's. still active and have plenty of money, none were millionaires at retirement (not working) in their 60's........
How did they do it? wanta guess

FYI: The $14 trillion retirement gap in America “is so scary we’ve stopped talking about it,” Sallie Krawcheck said during a keynote presentation at the Morningstar Investment conference. “And the retirement crisis is a woman’s crisis.” They retire with less money than men and live longer.
Regards,
Ted
http://wealthmanagement.com/print/2015-morningstar-investment-conference/morningstar-gender-diversity-key-success-says-krawcheck

Craig Israelsen made a convincing case for cash as a beneficial asset class in a diversified portfolio in this 2007 Article.
In our household, we have an emergency cash fund which earns very little but is very liquid. In our taxable and retirement investment accounts, I try my best to keep a low cash balance, at most 5-10% at any given time, as I am about 20 years from retirement and I want to maximize our wealth creation despite increased volatility. If I have extra cash with no specific target, I dump the funds in my PRWCX position.
As for the question of how many funds to own, we own a total of 9 funds/stocks, but I see no problem with folks who own more funds, as long as they are excellent, relatively low cost and outperform their respective indices. Live and let live. As I will likely die before my fetching wife (not "partner"), I am focused on wealth creation, and I continually remind my wife that there is only one thing worse than being old, and that is being old and poor.
Kevin

Here is an interesting article on people 100 years and older. There are five times as many women as men in this group:
http://money.usnews.com/money/retirement/articles/2013/01/07/what-people-who-live-to-100-have-in-common

I hadn't paid much attention to cash until this year as I get close to official retirement. So far my Schwab Investor Checking is the bulk of it. It get a small amount of interest but the big thing is that all ATM fees are refunded back.
As far as active cash goes, I have none. If new investments catch my eye I sell some from those that are lagging. Lately my AAPL has gained enough for me to fund two other investments.

Hi Guys,
I believe Hank is spot on-target when he recommends that a broadly defined two category portfolio would be more precisely classified equities/fixed income over the equities/bonds designation.
After my initial postings here, I recognized that the “Bonds” descriptor should be expanded to the more comprehensive “Fixed Income” descriptor. To avoid subsequent exchange confusion, I elected not to make that adjustment. That was a mistake; sorry about that.
Portfolio asset allocation is a very nuanced, personal decision. Not only is it personal, it changes over time. One size definitely does not fit all. And, in the investment universe, getting it right is an elusive goal. It is hard to find experts who consistently get it right more often than a fair coin toss.
The CXO Advisory Group tested the accuracy of 68 experts over an extended timeframe. Results were less than impressive. Here is the Link to CXO’s final Guru Grades report:
http://www.cxoadvisory.com/gurus/
The cumulative expert accuracy hovered around the uninspired 47% level for most of the study. Very few of the experts were able to score correct predictions two-thirds of the forecasts. In general, experts are overrated.
Experts continue to disappoint in terms of their financial insights. I recently read a book titled “Wrong” by David H. Freedman. You guys might find it useful. The subtitle of the book is “Why experts keep failing us-And how to know not to trust them”. You might want to give it a try.
H. L. Menchen said: “There is always a well known solution to every human problem-neat, plausible, and wrong”. Far too often, the Gurus tout this wrong pathway.
These days, I prefer investment solutions that feature simple mutual fund portfolios that are Index product heavy. Leonardo da Vinci said it best: “Simplicity is the ultimate sophistication”.
MFOer Hank observed that John Bogle has recently recommended adding Social Security benefits to the fixed income segment of a portfolio’s asset allocation. I agree. I’ve been doing that for many years. I also consider both my and my wife’s corporate retirement benefits as an integral part of our fixed income asset allocation. Given that philosophy, these are substantial additions to our Fixed Income holdings.
Well, the Merriman article triggered some stimulating exchanges from the MFO Board. It was fun and illuminating. Thank you all for participating. I’ve said all I want to say on this matter.
Best Regards.

Sorry, I can't even relate to this question - as posed by Merreman. ... Problem is this: The past 35 years have been decidedly atypical for interest rates (and by association bonds) which, except for only brief respites, have trended continually downward since around 1980 when Fed Chair Paul Volker burst the inflation bubble by ratcheting-up the overnight lending rate to 20%. Making investment allocation decisions at/near market highs is risky. That's true not only for bonds, but for stocks, gold, oil, emerging markets and real estate. So, a healthy dose of skepticism regarding bonds is warranted.
I'd be much more comfortable if Merriman had asked what percentage of one's retirement savings should be in "fixed-income". That's a broader compendium of the (albeit bond) market and would allow, perhaps, greater consideration of short-term bonds, ultra-shorts, cash, foreign currencies, high yield and the like. Certainly, retirees should be in some of these fixed-income assets. For the most part, I'll defer to the fixed-income/allocation people at T. Rowe Price. I suspect their mathematicians and analysists are at least as capable as the good people here at MFO. Unless you have humongous quantities of money to invest, let folks like that make the decision for you under the umbrella of one or more of their allocation funds. They're very good at it. I like TRRIX and RPSIX. On the more aggressive end there's PRWCX which continues to elicit favorable reactions from MFO board participants.
As an aside, I like John Bogle's rule of thumb - but only as a starting point for one's own analysis. He has long advocated having a percentage equivalent to one's age invested in bonds (I'd expand that to the broader "fixed-income" category). And, if my read is correct, Bogle has modified the advice somewhat in recent years, faced with the harsh realities of historically low interest rates. One acquiescence of reality has been his advocating of moving to shorter and shorter bond maturities as rates declined; and the other is his more recent advice to include one's anticipated Social Security income as part of one's bond holdings (effectively reducing one's actual allocation to bonds). The fellow may at times appear rigid and stubborn - but he's not dumb.
---
Footnote: While I don't consider my own allocation decisions necessarily pertinent to the discussion or instructive to others, in the interest of full disclosure here's my latest M* X-Ray (age 70).
Cash 17%
Bonds 28%
U.S. Stocks 31%
Foreign Stocks 12%
Not Classified 13%

I have given annuities a lot of thought recently in my retirement planning. The only that ones that make half way sense are deferred annuities. And there especially the ones where the recent Treasury rule allows you to exempt up to $125,000 in your IRAs from the RMD rule. Still, I just can't see the financial allure of annuities of any stripe or color. Piece of mind and psychological allure I can understand and peace of mind in old age is a powerful motivator. The bottom line with annuities are they seem more of a return of principal gimmick for x amount of years and then after that you better hope you live a long life (real long) to reap some real benefits. But I am always open to differing opinions.
Edit: If anything, maybe suited for a small, very small portion of your retirement nest egg.