Boca Raton Office
1001 W. Yamato Rd
Having enough income to last until age 90 and beyond is a future problem for baby boomer clients, but it can be solved with some innovative thinking.
Now a growing number of purveyors of deferred variable annuities offer guarantees to shield you against market risk. Called “living benefits”, these guarantees offer investors peace of mind about their retirement savings by ensuring that they will receive a minimum income should market conditions deteriorate while they remain invested among stocks, bonds and other assets.
In the past, the only means of providing a guaranteed income for life with personal funds was to purchase a single premium immediate annuity. This meant losing control of one’s underlying investment to an insurance company in exchange for such lifelong payments. The advent of these new lifetime guarantee riders within deferred variable annuities couldn’t have come at a better time. Longer life spans and a declining role for traditional pension plans have raised concerns that more people could outlive their retirement savings, especially if they invest too conservatively. Yet the recent volatility of the stock market due to the tightening of the credit markets has made it even more challenging for many baby boomers to confidently invest in stocks. This new product feature will afford baby boomers the opportunity to hold some growth investments and take comfort in knowing that they can withdraw a minimum income for life without losing control of their savings.
In many instances, retirees can choose to be more aggressive with their other investments knowing that they can exercise the living benefit rider. There is a cost associated with these living benefits that can add between .15% and 1.10% in annual fees to a variable annuity’s typical costs, which range from .70% to 2% of the assets in the annuity. In order to give investors a better chance to overcome these fees, they should diversify their investment allocation, and consider including a percentage of stock funds.
Please call us at 561-276-8710 (or toll free at 888-276-8710) if you have any questions about how these new living benefits work. We would be happy to assist you.