JoeTaxpayer

Regular readers of mine know that I am anti-Variable Annuity, one of my first articles on my main site JoeTaxpayer.com was titled “Variable Annuities are sold, not bought“. More recently, I quoted Suze Orman, who “hate[s] them with a passion”. That blog post received much response from readers challenging me to be more open minded. So I invited those readers to offer me a VA that they felt was worth a fresh look. In my August feature article titled “Another Look at Variable Annuities“, I analyzed the Fidelity Growth & Guaranteed Income Annuity. It’s a piece worth reading and as always, I invite any comment. In it, I conclude that the product doesn’t achieve what the typical buyer is seeking, inflation protected growth. I was challenged to suggest an alternate solution and in this month’s feature article, “Creating an Inflation-Adjusted Immediate Annuity“, I offer a strategy to create an inflation-adjusted stream of income from the purchase of a series of standard (non-adjusted) annuities. This is a strategy I am proud to present as I’ve not seen such a strategy presented elsewhere, and it offers both a high starting withdrawal rate (5%) along with conservative assumptions (4% inflation factor, yet just 3% return on savings). Please read it and share your thoughts.

Joe

written by JOE \\ tags: fidelity, immediate annuity, income, inflation, saving, suze, Suze Orman, variable annuities

Regular readers know how I feel about variable annuities, but have little issue with the immediate annuity. Now, one issue that would hit us if you wished to put an immediate annuity inside an IRA is the calculation of RMDs and taking RMDs that may exceed the cash available within the IRA.

IRS Regulation section 1.401 (a) (9)-6 offers a solution.

If an immediate annuity is qualified and based on a payout scheme that is not intended to exceed your life expectancy the annual payout satisfies the RMD requirement even if it is less than would otherwise
be required. Perhaps a bit of an obscure issue, but one you may run into at retirement.

Joe

written by JOE \\ tags: annuity, immediate annuity, IRA, irs, irs regulation, Retirement, RMD, variable annuities

Well, it’s been a month since my “Suze on Variable Annuities” post which sparked some heated debate. So much so, that I decided to take a look at a newer product, the Fidelity Growth & Guaranteed Income Annuity and analyze it in a feature article titled “Another Look at Variable Annuities” on my main web page.

I must say, I find the process interesting. I’ve been a ’spreadsheet guy’ for some time and enjoy playing with the numbers. Please read the article and comment here, if you wish. The Fidelity link above should download a PDF of a brochure for the product I analyzed. If it doesn’t, please advise of the broken link.

Joe

written by JOE \\ tags: annuity, fidelity, income, interest, spreadsheet, suze, variable annuities

Regular readers know where I stand on Variable Annuities, and I though thought I’d share this quote from a Suze Orman interview on CNN Money which caught my eye;

“I hate them with a passion - a passion! - especially in a retirement account like an IRA. Variable annuities have all these extra fees and tax issues and penalties, but - oh, that’s okay! - because they give you a tax deferral. But a retirement account is already tax-deferred without all those fees. It’s absolutely ridiculous. I think variable annuities exist for one reason only: to make money for the financial advisers who sell them.”

I’ve had some disagreements with some of her advice, but lately I’m finding more of her quotes that are right on target.

Joe

written by JOE \\ tags: CNN, cnn money, IRA, money, Retirement, retirement account, Suze Orman, tax deferral, variable annuities