Annuities

An Annuity lowers portfolio volatility thereby improving the risk/return profile of the Efficient Frontier. The Efficient Frontier (EF) is the envelop of optimal portfolios that provide the best risk-reward tradeoffs. A more detailed view is presented in our blog “Efficient Frontier and Diversification.” Adding an Annuity to a portfolio moves the EF to the left […]

An annuity is a tax-deferred instrument in which distribution taken during Accumulation and Income phases is taxed differently. Funding source and age also affects taxes. Annuities allow for two ways to take money out of the policy: withdrawals and income. A withdrawal is ad-hoc removal of funds as a lumpsum from the Cash Value (CV)

The key factors in selecting a deferred FIA as part of a tax optimized retirement plan. We will here review the key considerations in putting together a deferred FIA (Fixed Index Annuity) targeted at providing tax-free inflation-adjusted lifetime retirement income. A variety of high-performing index strategies exist: S&P 500 is probably oversubscribed and hence carries

A more in-depth look at how FIA’s Cash/Income Value accounts function during the Accumulation and Income phases. In this article, we take a closer look at how Fixed Index Annuity (FIA) accounts operate. Most products have two account types: Cash Value (CV) and Income Value (IV). The CV is the account balance available to the

An Annuity works best when bought within a Roth account where it can provide a lifetime of inflation-adjusted tax-free income. Fixed Index Annuity (FIA) benefits can be divided into four categories: Asset Growth, Asset Safety and Access, Tax Benefits, and Insurance Protection. Asset Growth: With an Annuity, you can beat the longevity risk (explained further

A deferred Fixed Index Annuity (FIA) tracks a market index during the Accumulation Phase, and pays out an annual income during the Income Phase. FIAs can provide a risk-free inflation-adjusted income stream like Social Security benefits. Let us go through the investment phases which a FIA involves. The initial investment marks the Premium phase. Next

In the following, we distinguish between several annuity types: Immediate vs. Deferred, Fixed vs. Variable vs. Buffer, and Income vs. Accumulation products. An annuity is a reverse bet from Life Insurance. It is an investment you make to self-sponsor your own pension plan. Money grows tax-deferred. The income derived will also be tax-free if bought

Planning for a shorter life expectancy risks outliving one’s savings. Planning for a longer life expectancy may mean spending less during retirement and leaving behind a larger than intended legacy. An Annuity can help mitigate both types of risk. The longevity risk is the risk of outliving one’s life savings. Life expectancy in the U.S.