WORRIED ABOUT OULIVING YOUR MONEY?
If outliving your money has you worried, here's an immediate variable
annuity product that guarantees you an income and promises to pay until you
die---no matter what.
Most retirees know that retirement living isn't exactly living on the
cheap. Sure, many have paid off their homes, but there are still real
estate taxes and insurance premiums and month-to-month expenses.
Add the fact that most people are living much longer then the generation
before them, and it's easy to see why having enough money to live on
becomes a big concern for those in their golden years.
In an effort to provide investors with a monthly income that's guaranteed
to be there for as long as they live, T Rowe Price has recently introduced
an immediate variable annuity called The Income Account,
(800-469-5304).
"All the studies have shown that the No.1 concern people have in retirement
is outliving their assets and here's a product that's been designed to meet
that concern, " says Steven Norwitz, vice president at T.Rowe Price
Associates.
Norwitz explains that unlike regular tax-deferred variable annuities in
which contract owners have to annuitize to get an income stream, this
immediate variable annuity starts providing an income within a month of
opening the account. Thus, it can provide investors with an income that
supplements what they are receiving from other retirement sources such as
their pension or Social Security.
In a nutshell, here are some of the features of T. Rowe Price's immediate
variable annuity Income Account:
- Minimum investment. $25,000.
- Investment choices. You can invest into can into any one, or any
combination of, these T.Rowe Price funds: New America Growth, International
Stock, Mid-Cap Growth, Equity Income, Personal Strategy Balanced; or
Limited-Term Bond fund.
- Monthly income. Because this is an immediate variable annuity, each
month you'll get a fixed monthly payment. Payments are reset every 12
months based upon the performance of your investments.
- Guarantees. Monthly income is guaranteed for life, and, guaranteed at
80 percent of your initial monthly payment. That means, if you're 65 years
old today, ( maximum age for investing is 85), invest $50,000 into the most
aggressive stock fund available, (the New America Growth fund), live to be
110 and the stock market is in the tank for the majority of those years,
even though the value of your account hasn't grown, the insurance side of
this investment guarantees that you'll still get a monthly income check
that's no less than 80 percent of your original monthly pay out. (Provided,
of course, you didn't make any withdrawals from the account during the
first five years of ownership which would alter that guaranteed pay-out
amount.)
Then again, if that same 65-year lives to be 110, invests the same amount
of money into that same fund and it's performance soars throughout the
years, monthly income checks can increase.
Sweet as that may sound, there are always downsides to any investment
product. Here are a couple:
- Costs. Because this is a mutual fund and an insurance product, there are
annual fees and expenses on both sides. The average fees and expenses for
the fund expenses are estimated at 0.87 percent per year. Mortality and
expense charges, paid to Security Benefit Life Insurance Company
underwriters of the product, are 1.40 percent. That's about 2.3 percent
per year in annual fees and expenses.
- First year monthly payments. Insurance companies have a special kind of
wizardry when it comes to calculating things. Figuring out how much your
monthly checks will be during that first and very important year ( as this
year forms a base for future calculations) is based on a combination of
things including life expectancy, gender and an assumed interest rate.
- Death benefits. Don't count on passing any bucks on to anyone special.
Death benefits here don't ever amount to more than the current balances of
what's in your account at best. And, they don't exist if you've owned the
account after 15 years.
There is lots more to this product. And, for those who want the comfort of
knowing that they'll have an income stream for life, it represents one
option.
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