When combining annuities and mutual funds makes sense, or not.

If there’s one financial concern that millions of Americans share, it’s anxiety about running out of money in retirement.

Annuities are designed to address this fear by providing a stable stream of cash flow that you can’t outlive. Mutual funds, especially those focused around stock investments, play a potential role by offering a path to greater returns than annuities might provide, with more flexibility. But neither of these options alone has solved the basic worry about outliving one’s income and assets.

Could they do a better job if combined?

That’s what some financial companies are trying with relatively new funds that incorporate annuities in various ways.

A new report from investment researcher Morningstar examines the trend of combining annuities with “target-date” funds, which hold investments that grow more conservative as your retirement gets closer. For example, a typical growth fund might hold stocks more or less permanently, but a target-date portfolio usually would start out investing entirely in stocks, then over the decades gradually move into bonds.

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What fund-annuity combinations look like

Over the past few years, roughly a dozen fund groups have incorporated annuities with target-date funds in an attempt to provide investors with more income in retirement. These target-date funds “are looking to succeed where others have fallen short by including insurance against running out of money in the form of annuities,” the Morningstar researchers wrote.

But the new products are complex, and they charge expenses on top of those for the underlying target funds — and these costs aren’t always transparent.

They tend to run lower for funds that use straightforward income annuities compared to more complex variable annuities, the latter of which might add 0.5% to 1% in additional yearly fees, Morningstar noted. Variable annuities can hold a range of investments, including stocks, and include other features.

With the more-straightforward income variety of annuity, investors can lock in an income stream based on how much they invest, current interest rates and other factors. For example, a $200,000 lump sum placed recently into an income annuity would qualify for a payment of about $1,200 a month for life, Morningstar said.

For people already considering annuities, the new target-date funds might be attractive, as they choose the annuity so that investors don’t need to “sort through myriad complicated options,” the report said.

But that’s where the simplicity ends. Morningstar views the complexity of these combined products, along with often-hefty fees, as drawbacks.

One financial firm, Empower, has dropped the annuity option owing to lackluster investor response that possibly reflects confusion, Morningstar added. Other companies and brands offering the new target funds include BlackRock, Nuveen, SSgA, AllianceBernstein and Lincoln PathBuilder.

Where do you stand on an annuity checklist?

The Morningstar report also highlights considerations to help determine whether you need annuity protection, whether combined with a target-date fund or as a stand-alone option. Here are eight of those factors:

Income-replacement needs: This considers the amount of your yearly income that’s already covered by a pension, other annuities, Social Security and so on. Perhaps you have plenty already. If not, an annuity can help fill the gap.

Wealth levels: People who have accumulated hundreds of thousands if not millions of dollars often can afford to tap into these assets as needed in retirement, making an annuity unnecessary. Conversely, people with little in the way of savings might not have enough money to purchase an annuity, Morningstar noted.

Spending “guardrails:” Some people live paycheck to paycheck because they spend all of their available cash. If that describes you, then you might benefit from the discipline that a monthly annuity payment provides.

Comfort with investment decisions: If you don’t like to figure out where to invest or how to allocate your assets among stocks, bonds and so on, a target-date fund with annuity exposure can help. Target-date funds by nature follow a allocation mix that gradually shifts from aggressive to conservative as retirement nears.

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Anticipated life expectancy: Running out of money might not be a problem for people who don’t live into their late 70s, 80s or beyond. That’s why it’s wise to assess your life expectancy given your health, family history and other factors. The longer you expect to live, the more an annuity can make sense.

Income-risk comfort: If you worry a lot about running out of money, then an annuity could be a good choice, “if only for peace of mind,” Morningstar said.

Flexibility needs: Conversely, if you don’t know how you might spend money in retirement, how much or when, it might be imprudent to tie up your assets in an annuity, Morningstar observed.

Other retirement goals: Running out of money isn’t the only consideration. Maybe you want to spend down your assets, leave a sizable bequest or inheritance, or have other considerations. Annuities can ensure that you have a regular cash flow to spend, but that could conflict with these other objectives.

Morningstar’s take on the new genre of target-date funds with annuity options is mixed. The report credits the investment industry for trying to solve the running-out-of-money dilemma. But the new funds are “complex and can be confusing,” with higher fees and less-personalized choices that you could make on your own.

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