Financial & Estate Planning

Some variable annuities offer a guaranteed minimum withdrawal benefit. Image: RAGMA IMAGES/

If you are concerned about inadequate income over a long retirement, you could consider investing in a variable annuity.

* Variable annuities can deliver supplementary retirement income. Money you invest can be placed among many different stock funds, bond funds, etc. Any returns will be tax-deferred until you take money out.

* Variable annuities may be “annuitized,” which means converted into a stream of regular payments. This annuity can provide cash no matter how long you live. If you wish, a joint annuity can deliver lifetime income for you and your spouse.

* The ideal time to buy a variable annuity may be after age 50. At that point, you will not be far from 59-1/2, when a 10 percent early withdrawal penalty no longer applies.

Variable annuities can be expensive, so you should shop around for one with low annual costs and a short time before surrender charges disappear.

Increasingly, variable annuities offer “living benefits” to buyers. That is, they guarantee principal against loss. At the same time, your money can be invested among stock funds and bond funds so you have the potential for superior returns over a long term.

For example, some variable annuities offer a guaranteed minimum withdrawal benefit (GMWB). With this feature, consumers can take out the amount they have put in, even if their investment accounts have lost money. These withdrawals may have to be spread over a period of years.

It’s true that you will pay the insurance company for providing the guarantee. However, such a guarantee may give you the confidence to invest in stock funds, where returns historically have been higher than cash or bonds over periods of 10 years or longer.

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