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Couples need smart retirement strategies

Posted: November 24, 2008 7:58 p.m.
Updated: November 25, 2008 4:30 a.m.

The odds are overwhelming that a wife will live longer than her husband. She is also two and a half times more likely than the husband to live alone. Needless to say, she has to be self-sufficient and the money has to last longer.

As professed in previous articles, annuities are about the only investment vehicle you can own that can guarantee a stream of income for life.

And when a variable annuity is combined with certain optional living benefits (available for an additional fee), that lifetime stream of income can be guaranteed while the contract owner maintains control of the underlying investments.

These guarantees are only offered by variable annuity income riders. This means that for a specified period or for the rest of your life, you can receive an income distribution that is guaranteed to be no less than a minimum predetermined amount, which is based on a percentage of the protected withdrawal value in your annuity.

It is important to note that electing such an optional living benefit is different from annuitizing an annuity contract. When you annuitize, you pass control to the insurance company in exchange for a guaranteed income stream.

With certain optional living benefits, (only offered with variable annuities), you can retain control, which means you can select the investments to fund your guaranteed income stream and you can start, stop or change the amount of that stream at any time.

If your investment choices perform well, you even have the option to reset your income stream to a higher level.

Keep in mind that guarantees are based on the claims-paying ability of the insurance company. This is why only a few of the best companies have the ability to offer the guarantees as only certain companies have the reserves to protect the guarantees.

Considering the current market conditions and its volatility for the foreseeable future, these riders are proving even more valuable to have a place in almost everyone's retirement portfolio.

Should you wish to consider a variable annuity and income rider for your portfolio, consult with your financial adviser or a financial professional familiar with variable annuities and these riders.

Variable annuities and living benefit riders are similar for the few companies that offer them, but vary greatly in benefits, time, step-ups and fee charges. (Future articles will address other smart strategies for couples).

Jim Lentini is president of Lentini Insurance & Investments, Inc., located in Santa Clarita. His column reflects his own view, not necessarily that of The Signal.


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