One disadvantage of an annuity is that a person may die sooner than their predicted life expectancy in which case if they also choose the largest payout this means they aren’t leaving anything to beneficiaries. In that case the rest of their assets in the annuity would go to the insurance company instead of being passed on as a bequest to their heirs. Real earning power is only lost in a fixed annuity in which the income stream is fixed and thus would not keep pace with inflation. The Arlts purchased a variable annuity which should keep pace with inflation assuming the investment returns are at least as high as the rate of inflation. A deferred annuity is not necessarily less tax efficient than a 401k or 403b account because in all these accounts income and capital gains are tax deferred so they are equivalent from that tax standpoint. One tax difference between the 401k / 403b accounts and annuities is the 401k / 403b accounts are funded with pretax dollars which lowers the investor’s taxable income by the amount contributed. In contrast the annuity is funded with after tax dollars thus the investor’s taxable income is not lowered at the time of the contribution as occurs with the 401k / 403b contribution but they owe less income taxes when they withdraw the money during retirement. The goal of the Arlts was to mitigate longevity risk which can only be done with an annuity which offers lifetime payments which is not an option with a 401k / 403b. Although taxes should always be considered they are not specifically mentioned as an issue in this case | 
