The U.S. Treasury Department has just given a tax break and its blessings to retirement savers who want to buy long-term deferred annuities in their 401(k) and individual retirement accounts.

The new rule focuses on a particular kind of annuity. These so-called deferred "longevity" plans kick in with guaranteed income when the buyer turns, say, 80 or 85 years old. For example, a 60-year-old man who spent $50,000 on a longevity annuity from New York Life could lock in $17,614 in annual benefits when he turned 80, the company said.

Like most insurance policies and traditional pension plans, these "longevity" plans take advantage of the pooling of many lives. Not everyone will live beyond 80 or 85, so those who do so can collect more income than they would have been able to produce on their own.

That takes off the table the worry of outliving your money. It also lets you take bigger retirement withdrawals in the years between 60 and 80.

These longevity plans convey a tax break, too: IRA and 401(k) money spent on these policies -- up to 25 percent of the account's value or $125,000, whichever is less -- is exempt from the required minimum distribution rules that force savers over age 701/2 to make withdrawals that count as taxable income.

Should you buy such a plan? Here are some considerations.

advertisement | advertise on newsday

Don't be in a rush to buy. These policies are relatively new, and the Treasury's rule will open the floodgates. Expect heightened competition to improve the policies. Furthermore, annuity payouts are always calculated on the basis of current interest rates, which remain near historic lows.

A policy bought in a few years, in a (presumably) higher interest-rate environment, probably would provide higher levels of income.

Age 70 might be a good time to jump in for those with lots of assets. Those required taxable distributions start the year you turn 701/2, so if you're worried about the tax hit of taking big mandatory distributions, you could pull some money out of the taxable equation by buying one of these policies with it. Your benefits would be taxable as income in the year you receive them.

Social Security is the best annuity. Before you spend money to buy an annuity, use money you have to defer starting your Social Security benefits as long as possible. Your monthly benefit check will go up by roughly 8 percent a year for every year after 62 that you defer starting your benefits. Social Security benefits are inflation protected, unlike these annuities.

Think of your heirs. Money spent to buy an annuity is gone, baby, gone, so you can't leave it to your kids.