Jean Chatzky
As the economy takes a dive, the editors at Smart Money magazine are reporting on two interesting turns of events. The first is a dip in the pricing of luxury vacations, and the second is a surge in baby boomers investing in annuities. Jean talks with Jonathan Dahl, editor-in-chief of Smart Money, about these two topics, from the magazine's July 2008 issue.

Jonathan says some luxury trips like adventure safaris in South Africa and spa weekend retreats now cost 30 to 40 percent less than a year ago. When the economy was solid, Jonathan says the luxury vacation market was booming; now, it's hurting. "These aren't the cheapest trips in the world, but the point is we've all wanted to take that real special trip, and these opportunities don't come when the market is great—they come now," he says.

While some may want to use their extra cash to take a dream vacation, others—especially baby boomers—are putting it into variable annuities. An annuity contract is issued by a life insurance company, and Jonathan says in the case of a variable annuity, you "basically give the company a chunk of your savings." The company then invests it, and when you retire, it will give you a "paycheck" for 20 years or perhaps the rest of your life—no matter how successfully your money was invested, he says.

Despite the comfort of knowing there will be a paycheck down the road, Jonathan says there is always the possibility of a disaster, much like the case with the subprime industry. "Even people in the industry can't say for sure that there will be enough money to pay all those 78 million boomers if the market doesn't cooperate and if we live longer than they think," Jonathan says.