Variable Annuities are a security under the jurisdiction of FINRA and the domiciled state department of insurance where the transaction takes place. Because variable annuities are a security, only registered representatives can sell them through their broker dealer. Fee based variable annuities could be sold be a registered investment adviser.
The most important concept to understand when it comes to retirement planning is that it is a process of shifting consumption. The decision that must be made is how much am I going to consume today and how much do I need tomorrow. In todays’ low interest environment this question is easier to understand. In order to have $100 a month in retirement, I have to defer consumption of a certain amount today, depending upon my age and years to retirement.
Once it is clear in our minds that retirement planning isn’t about beating the stock market, winning a jackpot, or winning a national lottery, we can address the issue of how to shift those funds that represent our deferred consumption. The best place to start is with an advisor who will listen to you and communicate clearly with you. That advisor will be careful to measure your risk tolerance. The advisor doesn’t want you staying awake at night worrying about losing money in your retirement plan, which is what happened to many in 2008. The advisor will ask a battery of questions that measure your expectations and compares that with your willingness to experience loss. Eventually a picture will emerge that will give the advisor a snapshot of your current thinking about investing. The good adviser will continue reviewing your risk tolerance throughout the period of time that investment advice is being given.
The advisor will take that information and compile recommendations of funds that would be suitable to help you meet your objectives and yet are sufficiently diversified to offer a degree of protection for the assets that you will invest. The adviser will offer you choices. He may suggest that these assets be held in a variable annuity. The annuity has certain features that might be important to you.
The variable annuity will frequently feature both fixed and variable options. The variable annuity will usually allow you to shift assets as your risk tolerance changes. For example, at age 60 after several years of having a variable annuity, you might experience a windfall, perhaps a legacy. You might want to become more aggressive with your variable annuity. You will be able to shift funds to accomplish this change easily. If later reverses make you more tentative, you can return your funds into fixed or very conservative options. This ability to shift is an important feature of the variable annuity.
Ultimately the results of the annuity will be a function of the options which you select. While that might seem daunting, in fact, if you selected funds in your “comfort zone” you will most likely be pleased with the results. The main point is the process of shifting those dollars from current consumption to future consumption. When you start spending them you will not remember how much of a return you made in a given year.
The variable annuity also has the benefit of being an annuity. That means that you can select to receive your money in retirement as a life-long stream of income. The return on such an annuity can be remarkably high. The company will probably offer alternative distribution plans to meet your specific needs. There will probably be a survivor option so that your spouse could receive the balance of payments if you don’t reach a specified age or haven’t exhausted the initial fund. Some companies that issue variable annuities will allow you to continue to manage your money in the annuitization process. Then the results won’t be guaranteed and can rise and fall with the values of the underlying securities.
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Once it is clear in our minds that retirement planning isn’t about beating the stock market, winning a jackpot, or winning a national lottery, we can address the issue of how to shift those funds that represent our deferred consumption. The best place to start is with an advisor who will listen to you and communicate clearly with you. That advisor will be careful to measure your risk tolerance. The advisor doesn’t want you staying awake at night worrying about losing money in your retirement plan, which is what happened to many in 2008. The advisor will ask a battery of questions that measure your expectations and compares that with your willingness to experience loss. Eventually a picture will emerge that will give the advisor a snapshot of your current thinking about investing. The good adviser will continue reviewing your risk tolerance throughout the period of time that investment advice is being given.
The advisor will take that information and compile recommendations of funds that would be suitable to help you meet your objectives and yet are sufficiently diversified to offer a degree of protection for the assets that you will invest. The adviser will offer you choices. He may suggest that these assets be held in a variable annuity. The annuity has certain features that might be important to you.
The variable annuity will frequently feature both fixed and variable options. The variable annuity will usually allow you to shift assets as your risk tolerance changes. For example, at age 60 after several years of having a variable annuity, you might experience a windfall, perhaps a legacy. You might want to become more aggressive with your variable annuity. You will be able to shift funds to accomplish this change easily. If later reverses make you more tentative, you can return your funds into fixed or very conservative options. This ability to shift is an important feature of the variable annuity.
Ultimately the results of the annuity will be a function of the options which you select. While that might seem daunting, in fact, if you selected funds in your “comfort zone” you will most likely be pleased with the results. The main point is the process of shifting those dollars from current consumption to future consumption. When you start spending them you will not remember how much of a return you made in a given year.
The variable annuity also has the benefit of being an annuity. That means that you can select to receive your money in retirement as a life-long stream of income. The return on such an annuity can be remarkably high. The company will probably offer alternative distribution plans to meet your specific needs. There will probably be a survivor option so that your spouse could receive the balance of payments if you don’t reach a specified age or haven’t exhausted the initial fund. Some companies that issue variable annuities will allow you to continue to manage your money in the annuitization process. Then the results won’t be guaranteed and can rise and fall with the values of the underlying securities.