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Some Guaranteed Income Insurance and Annuity Strategies

Last update on: Mar 15 2020
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Many people are looking for steady, guaranteed income in their retirement years. There are several different vehicles providing guaranteed income. There are many differences between them. Don’t make the mistake most people make. Don’t consider only one vehicle because that’s what your advisor offers. If you’re interested in guaranteed income, consider the several options out there and compare the results under different scenarios. You should look at immediate annuities, variable annuities with guaranteed lifetime withdrawal benefits, fixed index annuities, and longevity insurance coupled with systematic withdrawals or another annuity during the pre-age 85 years.

Here’s an article that does a good job showing how to analyze a choice. It shows how fees and all the restrictions matter. It also shows that despite all the promises and magic some of these products have, you might be better off with something much simpler and less expensive.

A variable annuity lets your client invest in mutual funds and/or exchange traded funds tax-deferred. Not only are the types of investments limited, but your client also is limited as to how much can be invested in stocks.

The guaranteed lifetime withdrawal benefit is a rider the policyholder gets upon buying this tax-deferred annuity. However, average annual expenses for these types of annuities run greater than three percent—more than your client can earn on a bank CD today. Depending on your client’s age, he or she can get as much as five percent or so annual income from the investment for life–no matter how the underlying investment performs. For example, a $100,000 investment might pay your client $5,000 a year from systematic withdrawals. Once the value of the investment hits zero, the insurance kicks in to continue those payments.

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