Annuitization is so undervalued!
February 13, 2023 by Sheryl J. Moore
I always love a good read from my dear friend Steve Parrish, JD,RICP,CLU,ChFC,AEP with the Retirement Income Center at The American College of Financial Services. This time, it was with Forbes.
Click HERE to read Reasons You Should Retain Your Deferred Annuity When You Retire
In this piece, he suggests numerous options for dealing with a deferred annuity, once you retire. You can “hold on to the annuity, surrender it, or give it away.”
Despite the many options, Parrish suggests, “it is usually better planning to retain the annuity for your own retirement planning.”
Imagine that!
That said, he explains that there are several options for an annuity that you retain- annuitizing the contract, exercising the Guaranteed Lifetime Withdrawal Benefit (GLWB), and doing a 1035 exchange.
Love, LOVE, LOVE! Steve’s suggestion that “Be sure to compare annuitization of your contract to the use of your GLWB on an after-tax basis.” Annuitization is so undervalued!
My closing remarks are on the 1035 suggestion- note that once the annuity is out of surrender charges, it often makes sense to 1035. Insurance companies nearly always drop the inforce renewal rates on annuities, to paltry levels, once the CDSC ends. However, you need to weigh the minimum guarantees, existing riders, and withdrawal/death benefit options on the old contract, before going through with a tax-free exchange.
