Deferred income annuities have become more popular over the past few years. Alone, they are a great way to prepare for retirement and ensure that you don’t run out of money. You purchase the annuity with a lump sum and start receiving lifetime income payments at a predetermined point in the future. Some people defer their DIA’s until age 85. A new annuity product takes the guarantees of the DIA and combines them with a variable annuity to take advantage of potential market gains. In Life Health Pro’s “Transition into retirement seamlessly with combo DIA-variable annuity,” William H. Byrnes Esq. and Robert Bloink Esq., L.L.M., discuss this combination DIA and variable annuity. Insurance companies have introduced this new combination annuity to offer the benefits of two different annuities in one contract. These are issued as variable annuities with a deferred income annuity rider attached. This allows consumers to receive the benefits of market gains as well as guaranteed lifetime income.
These combination products were innovated to provide consumers with more flexibility in their annuity products. When clients purchase a new variable annuity, they have the option to add a deferred income annuity rider. This is the only time they can do so. After two years, they can transfer part of the accumulation from the variable annuity product into the deferred income portion. Once they start transferring funds to the deferred portion, they have to choose a start date for receiving their deferred income payments. Deferral time frames range from two years to as many as forty years. It’s also up to the clients to decide how much money they will transfer to the deferred portion of the annuity at a time. You can transfer anywhere from $1,000 to $100,000 depending on your needs for the future.
The main benefit to this combined variable annuity/deferred income annuity product is that clients can simplify their annuity portfolio. Within a single annuity, they can receive the benefits of both types of annuity products. This is especially important for the future because it can be complex to create an income stream at retirement from an investment-focused product like a variable annuity. A combination product simply saves time in the transition process. It’s certainly possible to use a 1035 annuity exchange to transfer a variable annuity to a deferred income annuity at retirement. But having the products already attached makes for less retirement planning stress when you reach your retirement. You can simply transfer funds from the variable portion to the deferred income portion in one lump sum or in increments over the life of the annuity product. This variable annuity with a deferred income annuity rider is new, but is being offered by an increasing number of insurance companies. This combination annuity helps to meet consumer needs while they are still working and throughout their retirement.
Written by Rachel Summit