Half of Americans who aren't yet collecting Social Security are worried about outliving their savings, according to a recent study from SimplyWise. If you share that worry, you might be thrilled to hear that more employers are showing interest in providing annuity-based lifetime income options within their 401(k)s. This would allow you to convert your 401(k) savings into a stream of retirement income that will last as long as you do.

A nonstop source of income might sound like the answer to all of your retirement woes. But don't start celebrating just yet. Annuities, like anything else, have their advantages and disadvantages. Here's a look at the pros and cons and how they could add to -- or subtract from -- your retirement savings efforts.

Woman holding out a piggy bank.

Image source: Getty Images.

Pro: Your money won't run out

The most appealing aspect of a lifetime annuity is that your money won't run out. Like Social Security, the annuity continues to pay out the agreed-upon amount for the rest of your life. You won't have to worry about outliving your savings or having a long-term distribution strategy. The money just keeps coming until you don't need it anymore.

Pro or con: You'll be held to a fixed budget

An annuity is a contract between you and an insurance company. The process of converting your 401(k) funds into lifetime income is a sales transaction. You pay a certain amount either at once or in payments, and you receive the retirement income in return. Once you enter into that agreement, you generally don't have the option to change the income payments or periodically take a higher distribution. That can be a good thing, since you wouldn't be able to splurge on unnecessary purchases.

The fixed nature of an annuity can also be a bad thing, however. For example, you wouldn't have access to extra funds in an emergency. You'd have to cover unexpected medical or home repair bills in some other way, maybe with cash savings or a credit card. That's a strong argument for having ample cash on hand outside of your 401(k) annuity. As well, your annuity income has to allow for continued emergency fund deposits. If you spend your cash stores on something, you need the income capacity to replenish those funds.

There's also the issue of inflation to consider. If you're living on $50,000 a year today, for example, a 2% inflation rate would increase your living expenses to $90,000 in 30 years. You can address this by selecting an annuity that adjusts your income according to the inflation rate. There is a cost associated with that feature, which translates to lower initial income payments for you.

Pro or con: Your life span affects total value

Your annuity provider has to make some assumptions about your life span to calculate your monthly income payments. Those assumptions are based on life span averages for other people with similar backgrounds. Outliving those averages works in your favor because it increases the total value you receive from your annuity. But a shorter-than-average life span works against you. It's possible that you'd convert your $500,000 in savings into an annuity, for example, and only receive $50,000 back in income before you die.

Had you kept the money as savings without converting it to income, the unused $450,000 should go to the beneficiary named on your account. But with an annuity, that might not happen. Depending on the rules of your annuity contract, the payments might end with you, or they could continue to be distributed to your spouse.

Con: You lose some of your investment to fees

Annuities have a reputation for being expensive. A lifetime annuity normally has administrative fees, plus a premium to cover the risk that you might live well longer than expected. Generally, these fees will be higher than what you'd absorb if you owned mutual funds.

The result is that an annuity typically won't produce the same level of returns as your invested funds. You'd have to consider that a trade-off you make in return for the security of lifetime income.

You still have to save

An annuity offers peace of mind that you'll have money coming in for the rest of your life. But that peace of mind comes with its own risks. You could die early and get shortchanged. You could realize later that your annuity income isn't enough to pay your bills. Or you could dilute the power of your savings with excessive fees.

It's also worth noting that a lifetime income option doesn't relieve you of the responsibility of saving. Quite the opposite; the annuity income available to you will be based on what you've saved. If you don't save much, you'll have access to a guaranteed stream of income that isn't enough to pay your bills -- which doesn't sound like a good retirement solution at all.

Keep your options open by staying focused on contributing as much as you can to your 401(k). That's the surest way to solve your retirement woes, whether or not an annuity becomes part of your strategy.