What do you do with retiree clients who can't stick to a spending budget?  For a growing number of advisors, the answer is to put them in a variable annuity (VA) with an income rider. But is that a good idea?

"It appears to be a rising trend," concedes John Riley, chief strategist at Dallas-based Cornerstone Investment Services.  "Some retirees can't get that they are on a fixed income and have to live within a budget.  Investors often tell us they need X dollars per month from their investments, but then frequently request much more, month after month."

Using VAs for budgeting discipline has obvious appeal.  "VAs can provide guarantees of income for specified or lifetime periods.  When you purchase the guarantee, you should have a clear picture of exactly how much money you will have to spend," says Andrew Barnett, relationship director at Global Financial in Sarasota, Fla.  "If all you have is this guaranteed income, you won’t be able to spend more no matter what."

But there are critics. "Annuities are best suited to clients who want safety and value steady, predictable cash flow. This can certainly benefit individuals who tend to be heavy on their wallets, because the monthly income check provides a set amount of spending money," acknowledges Benjamin Sadtler, an advisor at Gore Capital Management in Williamsburg, Va.  "However, it is our responsibility as good financial advisors to help clients understand the importance of following a budget, regardless of the investment vehicles they own."

It's important not to oversimplify. "A one-size-fits-all approach would certainly not make sense," says William Van Sant, senior vice president and managing director at Univest Investments in Souderton, Pa.  "Advisors must do their due diligence."

John Graves, owner of Ventura, Calif-based Renaissance Group, goes farther.  "Social engineering by an outsider, whether me or the government, never makes sense," he says.  "If you cannot control your spending, I do not want you as a client.  It will only work out badly for each of us."

For others, the strategy is downright awful.  "This is clearly not in the client's best interest," asserts Drew Horter, president, founder, and chief investment strategist at Horter Investment Management, in Cincinnati, Ohio.  "A responsible advisor would instead design a reasonable income plan that will help the client budget for long-term security."

After all, there are alternatives. "Guaranteed income for life can come from VA riders, Social Security or pension income," notes Michael Rosenberg, a managing partner at Diversified Investment Strategies, in Livingston, N.J.  "I usually recommend between 40 percent and 50 percent of income assets guaranteed."