• Question
  • How can I maximize my retirement income. I'm considering a variable deferred annuity with guaranteed

    Asked by a 69 year old man from South Hadley, MA on 12/13/2012

    How can I maximize my retirement income. I'm considering a variable deferred annuity with guaranteed life income?

  • Categories: Retirement Planning, Guaranteeing Income, How to Choose, Annuities


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  • My answer would be...it depends. Depending on your income, risk, time horizon, assets and tax rates there are a variety of ways to maximize your retirement income.

    Variable annuities are also insurance contracts yet their rate of return is uncertain and not guaranteed. With a fixed annuity you know that rate of return that will continue so long as the financial viability of the insurance provider remains. The flip side of these contracts is the potential for increased gains versus their fixed counterparts. With an appropriate investment allocation a variable annuity can (and should) perform at least in line with the investments made outside of the contract.

    Variable annuities in and of themselves are like empty boxes wrapped in a protective packaging of tax-deferral and insurance. The value of the boxes contents are however subject to the choices made initially and throughout the contracts duration. Again, a variable annuity is an account type that offers tax-deferral and insurance, however, all of the tax-deferral and insurance in the world is not going to make an investment perform without some careful attention and thoughtful guidance.

    The same attention that is paid to an IRA or Individual account needs to be paid to a variable annuity contract. Far too many of our members are able to rattle off all of the holdings within their taxable accounts yet know surprisingly little about the allocation of their annuities. Many people consider annuities to be their safety net, their future income stream and something that the insurance company is looking after.

  • Login to rate this answer:   Answered on 12/17/2012
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  • Preparing yourself now for retirement is one of the smartest financial decisions you can make and one way to achieve your financial goals is to consider an annuity with a Guaranteed Lifetime Withdrawal Benefit rider. Here is how it works. In most cases you submit a one-time premium to an insurance carrier, in exchange you most likely will receive an immediate bonus on top of that premium which establishes your new base. Each year thereafter your base should increase up until you start taking your first withdrawal. So in other words, the longer you wait until you begin your first withdrawal the maximum you receive on a yearly basis will increase.

    A variable deferred annuity (VDA) differs from a fixed indexed annuity (FIA). The VDA has a greater chance to grow in an up market but in a down market the annuity may take a loss. A FIA on the otherhand may not credit you with as much interest in an up market but it guarantees that you will never take any loss in a down market. In addition, hidden fees in the VDA are far greater than a FIA.
    It is best to check out both types of annuities before you make your decision.

  • Login to rate this answer:   Answered on 12/14/2012
**All above answers are provided as general information only. No warranty is made regarding the fitness or accuracy of the information provided in this answer. You should seek advice from a licensed CPA, attorney or CERTIFIED FINANCIAL PLANNER™ as to your unique financial situation.