Let’s Talk Deferred Variable Annuities
July 6, 2020 by Wade Pfau
Deferred variable annuities with income guarantee riders have gained popularity as a retirement income tool providing behavioral solutions for the annuity puzzle. Retirees are not always comfortable seeing the premiums disappear from their portfolio balances when buying income annuities that convert a lump-sum premium into a protected lifetime income. Many features of a variable annuity could be replicated by combining an income annuity with an aggressive investment portfolio, but both of those choices can be tough for retirees to accept.
A deferred variable annuity can provide a palatable alternative. Its appeal to retirees is based on its combination of downside protection with a lifetime income stream, upside growth potential through its underlying investments, and maintaining liquidity for the underlying assets, while also offering the potential for tax-deferral when compared with taxable investments.
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