The good news for the annuity industry: most Americans would consider the fixed-income products to finance some aspect of their retirement.

The not-so-good news: more than half of those surveyed don't really understand how annuities work.

According to a study by The Phoenix Companies, nearly three-quarters (71 percent) of Americans would consider using annuities to establish predictable income in retirement, as a vehicle to protect inheritances, or as way to protect money for health and chronic care expenses.

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But 53 percent said they are "not familiar with annuities," according to Phoenix Companies, and only 20 percent are actually planning to use an annuity to convert retirement savings into a set income stream.

The survey confirms what annuity-industry insiders have suspected anecdotally for years, says Mark Fitzgerald, national sales manager for Saybrus Partners, a subsidiary of Phoenix. People "don't necessarily understand the basic income protection traditionally offered on all annuities, and they also are not aware of the range of benefits available on newer products, such as accumulation and chronic care features."

When investors have annuities explained to them, particularly the variety of annuities designed to protect income for specific purposes in retirement, such as long-term health care costs, people show a strong interest, Fitzgerald said. "The annuities available today are not your grandfather's annuity."

About half of respondents said they would use annuities to establish an income stream. Forty-one percent said would use and annuity as an inheritance vehicle, and 36 percent said they'd use an annuity to establish reserves for health-care expenses.

One-quarter of respondents said they would not consider purchasing an annuity for any reason.

The Phoenix data suggests the annuity industry has some work to do in establishing a greater understanding of their products: 34 percent of participants said they were "not at all familiar" with annuities; 19 percent were "not very familiar." Only 13 percent said they were "very familiar."

Of the pre-retirees surveyed, 69 percent expressed confidence in their ability to establish predictable income streams with their retirement savings.

The challenge for the annuity industry is in bridging the gap between those who would consider using annuities to set up predictable income streams (49 percent), and those who are actually planning to do so (20 percent).

"While it is encouraging that people are willing to consider annuities, they clearly need some help translating intentions into concrete plans," says Fitzgerald. 

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.