Bob Stowe thinks every retiree should have an annuity.

To make his case, Stowe, a fee-only financial planner out of Plano, Texas, with a mass-affluent client base, points out that social security is a type of annuity. So were the corporate pensions of yesteryear. His point is that most retirees should invest a portion of their assets in an annuity, as long as the rate of return exceeds the rate at which the client is drawing down his or her savings.

Most of Stowe’s clients are middle or upper-level corporate managers, and many of them are given the choice of a lump sum payout or an annuity when they retire. “Especially in the early 2000’s, when the market was steadily rising, the conventional wisdom was to take the lump sum over the annuity and make a better return by investing it yourself,” he says. But, today, now that the market is more stagnant, “that isn’t always the case.”

If the client plans on withdrawing 4 percent a year from his or her nest egg, and the annuity offers 6 or 7 percent, then by taking the annuity the client will come out ahead and will take some of the pressure off of the rest of his portfolio.

But when purchasing an annuity, Stowe says there are two factors to consider: interest rates and longevity. The higher the rate and the longer the client expects to live, the more value the client will receive from the annuity. Right now interest rates are so low that the payouts are extremely low, and Stowe is advising clients to wait for rates to rise before making their purchase. The delay has another advantage, because by holding off the retiree won’t collect the payout for as long and should receive a higher rate of return for the same price, when he finally moves ahead with the investment.

If the case for annuities is so compelling, why should clients only use a portion of their portfolio to purchase one? “Because except for cost-of-living annuities, which are extremely expensive, annuities offer a flat payout that doesn’t increase with inflation,” Stowe says. So clients need to devote the remaining portion of their portfolios to investments with the prospect of growing—to compensate for a rising cost of living.