You would think that after decades of saving money for retirement, the hard part of investing would be over. Think again. Devising a plan to turn a heap of cash into a stream of income that can last a lifetime is more art than science, and there is no one magic formula that suits every investor. "We'd all like to find one simple answer, but retirement is not simple," says Eric Sondergeld, vice-president of Limra, an insurance-industry trade group.

Consider one commonly accepted model: the 4% solution. The rule of thumb is to withdraw 4% from your portfolio to finance your first year in retirement, and increase that initial dollar amount in subsequent years to keep pace with inflation. This conservative withdrawal pace virtually assures that you won't run out of money -- one of the most frightening scenarios for retirees. But the meager income it generates -- initially $40,000 from a $1-million kitty -- may be insufficient for many retirees. Some opt to spend more early on and vow to cut back later.

Or you could buy an immediate annuity. You hand over cash to an insurance company, and in exchange it promises to send you monthly payments for life. This strategy may be good for someone who doesn't have a pension and wants a stream of guaranteed income to cover fixed expenses such as mortgage payments and utilities. One of the nice things about this approach is that you can invest the rest of your money more aggressively, knowing that your annuity payments, supplemented by Social Security benefits, will cover many living costs.

But interest rates, which affect immediate-annuity payouts, are near historic lows, and inflation erodes the buying power of fixed-rate investments. As a result, retirees who buy an immediate annuity now may have to curtail their spending in the future or buy additional annuities to maintain their standard of living. Nowadays, a 65-year-old man investing $100,000 would receive about $690 a month for the rest of his life. Because of longer life expectancy, a 65-year-old woman would receive less -- about $635 a month. To get an idea of how much income your lump sum will produce, check out ImmediateAnnuities.com.

You may want to consider a deferred variable annuity with income guarantees, also known as "living benefits." You invest a chunk of cash in mutual fund-like accounts and take annual withdrawals -- usually of 5% or 6% of your initial investment -- regardless of how your investments perform.

Unlike immediate annuities, these deferred annuities allow you to cash out your account balance without penalty once the surrender period expires (usually from two to seven years). Or you can continue withdrawing guaranteed annual payments for as long as you like. Although fees can run as high as 2% to 3% a year (that includes both insurance charges and the costs of the underlying funds), many retirees think the price is justifiable because they can benefit from holding stock funds while at the same time maintaining a guaranteed income even if the market tanks.

Just ask Bob De Angelis. He retired from his job as an estimator with a New Jersey plumbing company in 2001 in the midst of a horrific bear market. De Angelis, 67, and his wife, Dianne, 64, started withdrawing money from their investments, but they grew increasingly skittish -- with good reason -- as the stock market continued to sag. Withdrawing money from a shrinking balance can ravage a retirement nest egg.

De Angelis's financial adviser, Nick Spagnoletti, of Macro Consulting Group, in Parsippany, N.J., suggested that his client invest in a variable annuity with an income guarantee. So De Angelis bought an annuity for $100,000 in 2004 and a second one for $108,000 in 2005. Together, the contracts are now worth about $275,000 -- even after taking 6% withdrawals ($12,000) a year starting in 2006 -- because of appreciation in the subaccounts, which include funds that invest in foreign stocks and small-company stocks. "His most-aggressive investments are protected by the income guarantees," says Spagnoletti, who admits that he would never have recommended variable annuities before 2000. "The criticism of them was well deserved for years. They were expensive, and you didn't get a lot for your money. All that has changed with guaranteed living benefits."

De Angelis withdraws $12,000 a year to supplement his pension and the Social Security benefits that he and his wife receive. He says the annuities have bought him peace of mind and have helped provide a comfortable retirement. That includes a new home in tax-friendly Lewes, Del., and a three-month trip to Florida each winter.

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