Annuities have gotten a bad rap. Here's why Jean Chatzky likes them.

Retirees often struggle with figuring out how to pay themselves and then spending the money they've saved. Personal finance expert Jean Chatzky suggests using an annuity to provide a steady paycheck. Annuities convert a lump sum in a retirement account into a contract that pays a fixed monthly amount for a set period or for the rest of the person's life. However, annuities have a negative reputation due to their complexity and fees, making them difficult to understand.

Chatzky, founder of HerMoney and a columnist for AARP, has changed her perspective on annuities in recent years. She believes they are just another financial tool like investments. The appeal lies in their ability to function as a regular paycheck, providing a sense of security. Research shows that people who use annuities to receive a paycheck tend to spend twice as much compared to those relying solely on their own calculations.

Annuities are contracts between an individual and an insurance company, where a lump sum is given, and a monthly check is received for a certain period or until death. The amount paid each month depends on factors such as the amount invested, the individual's age, gender, and the current interest rate. There are two main types of annuities: fixed and variable.

Fixed annuities provide a straightforward monthly payment, while variable annuities invest the lump sum and the monthly check can fluctuate based on market performance, but with built-in protections.