retirement planning with annuities - akd...

AKD ConsultantsAdam DworkinCPA188 Whiting StreetSuite 10Hingham, MA [email protected]

Retirement Planning with Annuities

October 01, 2013 of 11, see disclaimer on final page

Estimating Your Retirement Income NeedsYou know how important it is to plan for yourretirement, but where do you begin? One ofyour first steps should be to estimate howmuch income you'll need to fund yourretirement. That's not as easy as it sounds,because retirement planning is not an exactscience. Your specific needs depend on yourgoals and many other factors.

Use your current income as astarting point

Many financial professionals suggest thatyou'll need about 70 percent of your currentannual income to fund your retirement. Thiscan be a good starting point, but will thatfigure work for you? It depends on how closeyou are to retiring. If you're young andretirement is still many years away, that figureprobably won't be a reliable estimate of yourincome needs. That's because a lot maychange between now and the time you retire.As you near retirement, the gap between yourpresent needs and your future needs maynarrow. But remember, use your currentincome only as a general guideline, even ifretirement is right around the corner. Toaccurately estimate your retirement incomeneeds, you'll have to take some additionalsteps.

Project your retirementexpenses

Your annual income during retirement shouldbe enough (or more than enough) to meetyour retirement expenses. That's whyestimating those expenses is a big piece ofthe retirement planning puzzle. But you mayhave a hard time identifying all of yourexpenses and projecting how much you'll bespending in each area, especially if retirementis still far off. To help you get started, here aresome common retirement expenses:

• Food and clothing• Housing: Rent or mortgage payments,

property taxes, homeowners insurance,property upkeep and repairs

• Utilities: Gas, electric, water, telephone,cable TV

• Transportation: Car payments, autoinsurance, gas, maintenance and repairs,public transportation

• Insurance: Medical, dental, life, disability,long-term care

• Health-care costs not covered byinsurance: Deductibles, co-payments,

prescription drugs• Taxes: Federal and state income tax,

capital gains tax• Debts: Personal loans, business loans,

credit card payments• Education: Children's or grandchildren's

college expenses• Gifts: Charitable and personal• Savings and investments: Contributions to

IRAs, annuities, and other investmentaccounts

• Recreation: Travel, dining out, hobbies,leisure activities

• Care for yourself, your parents, or others:Costs for a nursing home, home healthaide, or other type of assisted living

• Miscellaneous: Personal grooming, pets,club memberships

Don't forget that the cost of living will go upover time. The average annual rate of inflationover the past 20 years has beenapproximately 2.4 percent. (Source:Consumer price index (CPI-U) data publishedannually by the U.S. Department of Labor,2012.) And keep in mind that your retirementexpenses may change from year to year. Forexample, you may pay off your homemortgage or your children's education early inretirement. Other expenses, such as healthcare and insurance, may increase as you age.To protect against these variables, build acomfortable cushion into your estimates (it'salways best to be conservative). Finally, havea financial professional help you with yourestimates to make sure they're as accurateand realistic as possible.

Decide when you'll retire

To determine your total retirement needs, youcan't just estimate how much annual incomeyou need. You also have to estimate how longyou'll be retired. Why? The longer yourretirement, the more years of income you'llneed to fund it. The length of your retirementwill depend partly on when you plan to retire.This important decision typically revolvesaround your personal goals and financialsituation. For example, you may see yourselfretiring at 50 to get the most out of yourretirement. Maybe a booming stock market ora generous early retirement package willmake that possible. Although it's great to havethe flexibility to choose when you'll retire, it'simportant to remember that retiring at 50 willend up costing you a lot more than retiring at65.

Many financial professionalssuggest that you'll needabout 70% of your currentannual income to fund yourretirement.

of 11, see disclaimer on final page

Estimate your life expectancy

The age at which you retire isn't the only factorthat determines how long you'll be retired. Theother important factor is your lifespan. We allhope to live to an old age, but a longer lifemeans that you'll have even more years ofretirement to fund. You may even run the riskof outliving your savings and other incomesources. To guard against that risk, you'll needto estimate your life expectancy. You can usegovernment statistics, life insurance tables, ora life expectancy calculator to get areasonable estimate of how long you'll live.Experts base these estimates on your age,gender, race, health, lifestyle, occupation, andfamily history. But remember, these are justestimates. There's no way to predict how longyou'll actually live, but with life expectancieson the rise, it's probably best to assume you'lllive longer than you expect.

Identify your sources ofretirement income

Once you have an idea of your retirementincome needs, your next step is to assesshow prepared you are to meet those needs. Inother words, what sources of retirementincome will be available to you? Youremployer may offer a traditional pension thatwill pay you monthly benefits. In addition, youcan likely count on Social Security to provide aportion of your retirement income. To get anestimate of your Social Security benefits, visitthe Social Security Administration website

Make up any income shortfall

If you're lucky, your expected income sourceswill be more than enough to fund even alengthy retirement. But what if it looks likeyou'll come up short? Don't panic--there areprobably steps that you can take to bridge thegap. A financial professional can help youfigure out the best ways to do that, but hereare a few suggestions:

• Try to cut current expenses so you'll havemore money to save for retirement

• Shift your assets to investments that havethe potential to substantially outpaceinflation (but keep in mind that investmentsthat offer higher potential returns mayinvolve greater risk of loss)

• Lower your expectations for retirement soyou won't need as much money (no beachhouse on the Riviera, for example)

• Work part-time during retirement for extraincome

• Consider delaying your retirement for a fewyears (or longer)

(www.ssa.gov). Additional sources ofretirement income may include a 401(k) orother retirement plan, IRAs, annuities, andother investments. The amount of income youreceive from those sources will depend on theamount you invest, the rate of investmentreturn, and other factors. Finally, if you plan towork during retirement, your job earnings willbe another source of income.

Handling Market VolatilityConventional wisdom says that what goes up,must come down. But even if you view marketvolatility as a normal occurrence, it can betough to handle when it's your money at stake.

Though there's no foolproof way to handle theups and downs of the stock market, thefollowing common sense tips can help.

Don't put your eggs all in onebasket

Diversifying your investment portfolio is one ofthe key ways you can handle market volatility.Because asset classes often performdifferently under different market conditions,spreading your assets across a variety ofdifferent investments such as stocks, bonds,and cash alternatives (e.g., money marketfunds, CDs, and other short-term instruments),has the potential to help manage your overallrisk. Ideally, a decline in one type of asset will

be balanced out by a gain in another, butdiversification can't eliminate the possibility ofmarket loss.

One way to diversify your portfolio is throughasset allocation. Asset allocation involvesidentifying the asset classes that areappropriate for you and allocating a certainpercentage of your investment dollars to eachclass (e.g., 70 percent to stocks, 20 percent tobonds, 10 percent to cash alternatives). Aneasy way to decide on an appropriate mix ofinvestments is to use a worksheet or aninteractive tool that suggests a model orsample allocation based on your investmentobjectives, risk tolerance level, and investmenttime horizon.

Focus on the forest, not on thetrees

As the market goes up and down, it's easy to

The longer your retirement,the more years of incomeyou'll need to fund it.


become too focused on day-to-day returns.Instead, keep your eyes on your long-terminvesting goals and your overall portfolio.Although only you can decide how muchinvestment risk you can handle, if you stillhave years to invest, don't overestimate theeffect of short-term price fluctuations on yourportfolio.

Look before you leap

When the market goes down and investmentlosses pile up, you may be tempted to pull outof the stock market altogether and look forless volatile investments. The small returnsthat typically accompany low-risk investmentsmay seem downright attractive when morerisky investments are posting negative returns.

But before you leap into a different investmentstrategy, make sure you're doing it for the rightreasons. How you choose to invest yourmoney should be consistent with your goalsand time horizon.

For instance, putting a larger percentage ofyour investment dollars into vehicles that offersafety of principal and liquidity (the opportunityto easily access your funds) may be the rightstrategy for you if your investment goals areshort-term (e.g., you'll need the money soon tobuy a house) or if you're growing close toreaching a long-term goal such as retirement.But if you still have years to invest, keep inmind that stocks have historicallyoutperformed stable value investments overtime, although past performance is noguarantee of future results. If you move mostor all of your investment dollars intoconservative investments, you've not onlylocked in any losses you might have, butyou've also sacrificed the potential for higherreturns.

Look for the silver lining

A down market, like every cloud, has a silverlining. The silver lining of a down market is theopportunity you have to buy shares of stock atlower prices.

One of the ways you can do this is by usingdollar cost averaging. With dollar cost

profit or protect against a loss, a regular fixeddollar investment may result in a loweraverage price per share over time, assumingyou invest through all types of markets.Please remember that since dollar-costaveraging involves continuous investment insecurities regardless of fluctuating price levelsof such securities, you should consider yourfinancial and emotional ability to continuepurchases through periods of low price levels.

Don't count your chickensbefore they hatch

As the market recovers from a down cycle,elation quickly sets in. If the upswing lastslong enough, it's easy to believe that investingin the stock market is a sure thing. But, ofcourse, it never is. As many investors havelearned the hard way, becoming overlyoptimistic about investing during the goodtimes can be as detrimental as worrying toomuch during the bad times. The rightapproach during all kinds of markets is to berealistic. Have a plan, stick with it, and strike acomfortable balance between risk and return.

Don't stick your head in thesand

While focusing too much on short-term gainsor losses is unwise, so is ignoring yourinvestments. You should check up on yourportfolio at least once a year, more frequentlyif the market is particularly volatile or whenthere have been significant changes in yourlife. You may need to rebalance your portfolioto bring it back in line with your investmentgoals and risk tolerance. If you need help, afinancial professional can help you decidewhich investment options are right for you.

averaging, you don't try to "time the market"by buying shares at the moment when theprice is lowest. In fact, you don't worry aboutprice at all. Instead, you invest a specificamount of money at regular intervals overtime. When the price is higher, yourinvestment dollars buy fewer shares of stock,but when the price is lower, the same dollaramount will buy you more shares. Althoughdollar cost averaging can't guarantee you a


Asset AllocationAsset allocation is a common strategy that youcan use to construct an investment portfolio.Asset allocation isn't about picking individualsecurities. Instead, you focus on broadcategories of investments, mixing themtogether in the right proportion to match yourfinancial goals, the amount of time you have toinvest, and your tolerance for risk.

The basics of asset allocation

The idea behind asset allocation is thatbecause not all investments are alike, you canbalance risk and return in your portfolio byspreading your investment dollars amongdifferent types of assets, such as stocks,bonds, and cash alternatives.

Different types of assets carry different levelsof risk and potential for return, and typicallydon't respond to market forces in the sameway at the same time. For instance, when thereturn of one asset type is declining, the returnof another may be growing (though there areno guarantees). If you diversify by owning avariety of assets, a downturn in a singleholding won't necessarily spell disaster foryour entire portfolio.

Using asset allocation, you identify the assetclasses that are appropriate for you anddecide the percentage of your investmentdollars that should be allocated to each class(e.g., 70 percent to stocks, 20 percent tobonds, 10 percent to cash alternatives).

The three major asset classes

Here's a look at the three major classes ofassets you'll generally be considering whenyou use asset allocation.

Stocks: Although past performance is noguarantee of future results, stocks havehistorically provided a higher average annualrate of return than other investments, includingbonds and cash alternatives. However, stocksare generally more volatile than bonds or cashalternatives. Investing in stocks may beappropriate if your investment goals arelong-term.

Bonds: Historically less volatile than stocks,bonds do not provide as much opportunity forgrowth as stocks do. They are sensitive tointerest rate changes; when interest rates rise,bond values tend to fall, and when interestrates fall, bond values tend to rise. Becausebonds offer fixed interest payments at regularintervals, they may be appropriate if you want

regular income from your investments.

Cash alternatives: Cash alternatives (orshort-term instruments) offer a lower potentialfor growth than other types of assets but arethe least volatile. They are subject to inflationrisk, the chance that returns won't outpacerising prices. They provide easier access tofunds than longer-term investments, and maybe appropriate if your investment goals areshort-term.

Not only can you diversify across assetclasses by purchasing stocks, bonds, andcash alternatives, you can also diversify withina single asset class. For example, wheninvesting in stocks, you can choose to investin large companies that tend to be less riskythan small companies. Or, you could chooseto divide your investment dollars according toinvestment style, investing for growth or forvalue. Though the investment possibilities arelimitless, your objective is always the same: todiversify by choosing complementaryinvestments that balance risk and rewardwithin your portfolio.

Decide how to divide yourassets

Your objective in using asset allocation is toconstruct a portfolio that can provide you withthe return on your investment you wantwithout exposing you to more risk than youfeel comfortable with. How long you have toinvest is important, too, because the longeryou have to invest, the more time you have toride out market ups and downs.

When you're trying to construct a portfolio, youcan use worksheets or interactive tools thathelp identify your investment objectives, yourrisk tolerance level, and your investment timehorizon. These tools may also suggest modelor sample allocations that strike a balancebetween risk and return, based on theinformation you provide.

For instance, if your investment goal is to savefor your retirement over the next 20 years andyou can tolerate a relatively high degree ofmarket volatility, a model allocation mightsuggest that you put a large percentage ofyour investment dollars in stocks, and allocatea small percentage to bonds and cashalternatives. Of course, models are intendedto serve only as general guides. You maywant to work with a financial professional whocan help you determine the right allocation foryour individual circumstances.

Asset allocation isn't aboutpicking individual securities.Instead, you focus on broadcategories of investments,mixing them together in theright proportion to matchyour financial goals, theamount of time you have toinvest, and your tolerancefor risk.


Build your portfolio

The next step is to choose investments foryour portfolio that match your asset allocationstrategy. If, like many other investors, youdon't have the time, expertise, or capital tobuild a diversified portfolio of individualsecurities on your own, you may want toinvest in mutual funds.

Mutual funds offer instant diversification withinan asset class, and if the fund is activelymanaged, the benefits of professional moneymanagement. Investments in each fund arechosen according to a specific objective,making it easier to identify a fund or a group offunds that meet your needs. For instance,some of the common terms you'll see used todescribe fund objectives are capitalpreservation, income (or current income),income and growth (or balanced), growth, andaggressive growth.

Pay attention to your portfolio

Once you've chosen your initial allocation,revisit your portfolio at least once a year (ormore often if markets are experiencing greatershort-term fluctuations). One reason to do thisis to rebalance your portfolio. Because ofmarket fluctuations, your portfolio may nolonger reflect the initial allocation balance youchose. For instance, if the stock market hasbeen performing well, eventually you'll end upwith a higher percentage of your investmentdollars in stocks than you initially intended. Torebalance, you may want to shift funds fromone asset class to another.

In some cases you may want to rethink yourentire allocation strategy. If you're no longercomfortable with the same level of risk, yourfinancial goals have changed, or you're gettingclose to the time when you'll need the money,you may need to change your asset mix.

Annuities and Retirement PlanningYou may have heard that IRAs andemployer-sponsored plans (e.g., 401(k)s) arethe best ways to invest for retirement. That'strue for many people, but what if you'vemaxed out your contributions to thoseaccounts and want to save more? An annuitymay be a good investment to look into.

Get the lay of the land

An annuity is a tax-deferred investmentcontract. The details on how it works vary, buthere's the general idea. You invest yourmoney (either a lump sum or a series ofcontributions) with a life insurance companythat sells annuities (the annuity issuer). Theperiod when you are funding the annuity isknown as the accumulation phase. Inexchange for your investment, the annuityissuer promises to make payments to you or anamed beneficiary at some point in the future.The period when you are receiving paymentsfrom the annuity is known as the distributionphase. Chances are, you'll start receivingpayments after you retire.

Understand your payout options

Understanding your annuity payout options isvery important. Keep in mind that paymentsare based on the claims-paying ability of theissuer. You want to be sure that the paymentsyou receive will meet your income needsduring retirement. Here are some of the mostcommon payout options:

• You surrender the annuity and receive alump-sum payment of all of the money youhave accumulated.

• You receive payments from the annuityover a specific number of years, typicallybetween 5 and 20. If you die before this"period certain" is up, your beneficiary willreceive the remaining payments.

• You receive payments from the annuity foryour entire lifetime. You can't outlive thepayments (no matter how long you live),but there will typically be no survivorpayments after you die.

• You combine a lifetime annuity with aperiod certain annuity. This means that youreceive payments for the longer of yourlifetime or the time period chosen. Again, ifyou die before the period certain is up, yourbeneficiary will receive the remainingpayments.

• You elect a joint and survivor annuity sothat payments last for the combined life ofyou and another person, usually yourspouse. When one of you dies, the survivorreceives payments for the rest of his or herlife.

When you surrender the annuity for a lumpsum, your tax bill on the investment earningswill be due all in one year. The other optionson this list provide you with a guaranteedstream of income. They're known asannuitization options because you've electedto spread payments over a period of years.Part of each payment is a return of yourprincipal investment. The other part is taxable

If you've maxed out yourcontributions to your IRAsand employer-sponsoredplans and want to savemore, an annuity may be agood investment to lookinto.


investment earnings. You typically receivepayments at regular intervals throughout theyear (usually monthly, but sometimesquarterly or yearly). The amount of eachpayment depends on the amount of yourprincipal investment, the particular type ofannuity, the length of the payout period, andother factors.

Consider the pros and cons

An annuity can often be a great addition toyour retirement portfolio. Here are somereasons to consider investing in an annuity:

• Your investment earnings are tax deferredas long as they remain in the annuity. Youdon't pay income tax on those earningsuntil they are paid out to you.

• An annuity is free from the claims of yourcreditors in most states.

• If you die with an annuity, the accumulatedvalue will pass to your beneficiary withouthaving to go through probate.

• Your annuity can be a reliable source ofretirement income, and you have somefreedom to decide how you'll receive thatincome.

• You don't have to meet income tests orother criteria to invest in an annuity.

• You're not subject to an annual contributionlimit, unlike IRAs and employer-sponsoredplans. You can contribute as much or aslittle as you like in any given year.

• You're not required to start takingdistributions from an annuity at age 70½(the required minimum distribution age fortraditional IRAs and employer-sponsoredplans). You can typically postponepayments until you need the income.

But annuities aren't for everyone. Here aresome potential drawbacks:

• Contributions to nonqualified annuities aremade with after-tax dollars and are not taxdeductible.

• Once you've elected to annuitize payments,you usually can't change them, but thereare some exceptions.

• You can take your money from an annuitybefore you start receiving payments, butyour annuity issuer may impose asurrender charge if you withdraw yourmoney within a certain number of years(e.g., seven) after your original investment.

• You may have to pay other costs when youinvest in an annuity (e.g., annual fees,investment management fees, insuranceexpenses).

• You may be subject to a 10 percent federal

penalty tax (in addition to any regularincome tax) if you withdraw your moneyfrom an annuity before age 59½, unlessyou meet one of the exceptions to this rule.

• Investment gains are taxed at ordinaryincome tax rates, not at the lower capitalgains rate.

Choose the right type of annuity

If you think that an annuity is right for you,your next step is to decide which type ofannuity. Are you overwhelmed by all of theannuity products on the market today? Don'tbe. In fact, most annuities fit into a smallhandful of categories. Your choices basicallyrevolve around two key questions.

First, how soon would you like annuitypayments to begin? That probably depends onhow close you are to retiring. If you're nearretirement or already retired, an immediateannuity may be your best bet. This type ofannuity starts making payments to you shortlyafter you buy the annuity, typically within ayear or less. But what if you're younger, andretirement is still a long-term goal? Thenyou're probably better off with a deferredannuity. As the name suggests, this type ofannuity lets you postpone payments until alater time, even if that's many years down theroad.

Second, how would you like your moneyinvested? With a fixed annuity, the annuityissuer determines an interest rate to credit toyour investment account. An immediate fixedannuity guarantees a particular rate, and yourpayment amount never varies. A deferredfixed annuity guarantees your rate for acertain number of years; your rate thenfluctuates from year to year as market interestrates change. A variable annuity, whetherimmediate or deferred, gives you more controland the chance to earn a better rate of return(although with a greater potential for gaincomes a greater potential for loss). You selectyour own investments from the subaccounts(which invest directly in mutual funds) that theannuity issuer offers. Your payment amountwill vary based on how your investmentsperform.

Shop around

It pays to shop around for the right annuity. Infact, doing a little homework could save youhundreds of dollars a year or more. Why?Rates of return and costs can vary widelybetween different annuities. You'll also want toshop around for a reputable, financially soundannuity issuer. There are firms that make a

A note about variableannuities

Variable annuities are sold byprospectus. You shouldconsider the investmentobjectives, risk, charges, andexpenses carefully beforeinvesting. The prospectus,which contains this and otherinformation about the variableannuity, can be obtained fromthe insurance company issuingthe variable annuity or fromyour financial professional. Youshould read the prospectuscarefully before you invest.


business of rating insurance companies basedon their financial strength, investmentperformance, and other factors. Considerchecking out these ratings.

Immediate vs. Deferred Annuities

Immediate annuities Deferred annuities

Payout begins shortly after the premium ispaid.

Payout begins at some specified future date,allowing time for accumulation.

Purchase with a single premium. Purchase with either a single premium orperiodic premiums.

Contract is usually irrevocable--after you enterinto the contract, it can't be changed.

Contract can be surrendered or exchanged foranother annuity (Section 1035 exchange2 ).

Assets do not accumulate on a tax-deferredbasis. They are distributed using apredetermined formula, such as for life, for afixed period, in a fixed amount, and so on.

Assets accumulate on a tax-deferred basis.When distributions begin, they are made usinga predetermined formula, such as for life, for afixed period, in a fixed amount, and so on.

Each distribution is part tax-free return ofpremium and part ordinary income, dependingon age and the distribution method.

Distributions are first made from anygains/interest earned and taxed at ordinaryincome tax rates; tax-free return of premium isdistributed last.

No tax penalty on lifetime payments startedbefore age 59½.1

A 10 percent nondeductible tax penalty isassessed on the gains (or interest) withdrawnbefore the annuitant reaches age 59½, unlessan exception applies.

1 Unless the immediate annuity is purchased with the proceeds from a deferred annuity.

2 A Section 1035 exchange into another insurance product may result in new or increasedsurrender charges or higher charges, such as annual fees, associated with the new product.Features and benefits of the new product may result in higher costs associated with them andmay not be necessary.

Fixed vs. Variable Annuities

Fixed Annuities Variable Annuities

Minimum guaranteed interestpaid

Yes No1

Minimum death benefit Yes Yes

Possibility of losing principaldue to fluctuation in investmentvalues

No2 Yes

Multiple investment options No Yes

1 Unless fixed account option is available and elected

2 Guarantees subject to the claims-paying ability of the annuity issuer

Note: Variable annuities are sold by prospectus. You should consider the investment objectives,risk, charges, and expenses carefully before investing. The prospectus, which contains this andother information about the variable annuity, can be obtained from the insurance companyissuing the variable annuity or from your financial professional. You should read the prospectuscarefully before you invest.


How a Variable Annuity Works

1. In the accumulation phase, you (the annuity owner) send your premium payment(s) (all atonce or over time) to the annuity issuer. These payments are made with after-tax funds, andyou may invest an unlimited amount.

2. You may choose how to allocate your premium payment(s) among the various investmentsoffered by the issuer. These investment choices, often called subaccounts, typically investdirectly in mutual funds. Generally, you can also transfer funds among investments withoutpaying tax on investment income and gains.

3. The issuer may collect fees to manage your annuity account. These may include an annualadministration fee, underlying fund fees and expenses which include an investment advisoryfee, and a mortality and expense risk charge. If you withdraw money in the early years ofyour annuity, you may also have to pay the issuer a surrender fee.

4. The earnings in your subaccounts grow tax deferred; you won't be taxed on any earningsuntil you begin withdrawing funds or begin taking annuitization payments.

5. With the exception of a fixed account option where a guaranteed* minimum rate of interestapplies, the issuer of a variable annuity generally doesn't guarantee any return on thesubaccounts you choose. While you might experience substantial growth in yourinvestments, your choices could also perform poorly, and you could lose money.

6. Your annuity contract may contain provisions for a guaranteed* death benefit or other payoutupon the death of the annuitant. (As the annuity owner, you're most often also the annuitant,although you don't have to be.)

7. Just as you may choose how to allocate your premiums among the subaccount optionsavailable, you may also select the subaccounts from which you'll take the funds if you decideto withdraw money from your annuity.

8. If you make a withdrawal from your annuity before you reach age 59½, you'll not only have topay tax (at your ordinary income tax rate) on the earnings portion of the withdrawal, but youmay also have to pay a 10 percent premature distribution tax.

9. After age 59½, you may make withdrawals from your annuity proceeds without incurring anypremature distribution tax. Since annuities have no minimum distribution requirements, youdon't have to make any withdrawals. You can let the account continue to grow tax deferredfor an indefinite period. However, your annuity contract may specify an age at which youmust begin taking income payments.

A note about variableannuities

Variable annuities are sold byprospectus. You shouldconsider the investmentobjectives, risk, charges, andexpenses carefully beforeinvesting. The prospectus,which contains this and otherinformation about the variableannuity, can be obtained fromthe insurance company issuingthe variable annuity or fromyour financial professional. Youshould read the prospectuscarefully before you invest.

*All guarantees are subjectto the claims-paying abilityof the issuing company.


10. To obtain a guaranteed income stream* for life or for a certain number of years, you canannuitize which means exchanging the annuity's cash value for a series of periodic incomepayments. The amount of these payments will depend on a number of factors including thecash value of your account at the time of annuitization, the age(s) and gender(s) of theannuitant(s), and the payout option chosen. Usually, you can't change the payments onceyou've begun receiving them.

11. You'll have to pay taxes (at your ordinary income tax rate) on the earnings portion of anywithdrawals or annuitization payments you receive.

*All guarantees are subjectto the claims-paying abilityof the issuing company.


Disclosure Information -- Important -- Please Review

AKD ConsultantsAdam Dworkin

CPA188 Whiting Street

Suite 10Hingham, MA 02043

[email protected]

October 01, 2013Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2013

IMPORTANT DISCLOSURES

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. Theinformation presented here is not specific to any individual's personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot beused, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer shouldseek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publiclyavailable information from sources believed to be reliable—we cannot assure the accuracy or completenessof these materials. The information in these materials may change at any time and without notice.

of 11

retirement planning with annuities - akd...

Documents