If You Knew You’d Get a “B”

Soon, all the kids will be back in school. My daughter can’t wait to see her friends and show off her new outfits. Back-To-School time usually also means plenty of sales which should get the cash registers ringing in your local retail shops.

Since we are just getting started, it’s too early to think about report cards and grades yet….or is it?

What if you knew at the beginning of the year, that your grade at the end of the year would be at least a “B” and no worse – no matter what? Better still, what if you got an “A” in one quarter, and a “C” in the other quarters – and at the end of the year, you got to keep the “A” as your grade for the year?

If that were true, how would you feel about going to school? Would you be more relaxed? Would you want to learn more? Would school be more fun?

Well, GUESS WHAT!!  I can’t do much about Johnny’s math grade, or Susie’s US History Course, but I can provide solutions which may improve your confidence in investing. 

How can you do that, you ask? Variable Annuities can provide  Safe Growth and Safe Income.

Recently, Leslie Scism of the Wall Street Journal wrote “Because of such guarantees, many holders of variable annuities actually saw their accounts increase 6% or more in value last year, when the Standard & Poor’s 500-stock index dropped nearly 39%.” in her article “Long Derided, This Investment Now Looks Wise”.   http://online.wsj.com/article/SB10001424052970204900904574302270919454880.html

Currently, you can earn as much as 6% or more on your principal base when you aren’t using it for income.  That means if you start with $100,000, by the end of the year, you would have $107,000 to draw income from later – no matter what happens in the market. (As long as you leave it there.) And it can grow tax-deferred until you begin to take it out.

What if your account does better than 6%? Also, what if it only does better than 6% for one quarter? Wouldn’t it be great to keep the best quarter and lock it in for the year? Well….you CAN!

What if you could do this every year while you are building your Nest Egg?  What if you went into the school year knowing you would at least get a “B”….and might get an “A”?

Then when you begin to take income from your savings, you can take 5% from the nest egg you’ve built for the rest of your life. The check would go up or stay the same, but never go down. (As long as you aren’t taking more than 5%.) Would that be OK?

There are some drawbacks to a Variable Annuity, which Ms. Scism also points out in her article http://online.wsj.com/article/SB10001424052970204900904574302270919454880.html the most obvious being the cost of the extra protection.  George Lambert also points this out in his article, “The Cost of Variable Annuities” http://www.investopedia.com/articles/pf/06/variableannuity.asp in which he looks at the different types of protection – Growth Protection, Income Protection, and Death Benefit. 

Another drawback is that when you consider investing into a Variable Annuity, you need to take a Long Term approach – like any other investment. Speak with a reliable advisor about whether or not it may be appropriate for you based on your time horizon and income needs at retirement.  Early withdrawals may result in steep surrender charges, although many plans allow you to withdraw as much as 10% with no surrender charge.

The main advantage of course is taking the uncertainty over today’s economy out of the picture. And if you knew you’d get at least a “B”, wouldn’t you sleep better at night?

For more information on annuities, or other investment ideas, you may contact me at http://www.helpmy401k.us. You may also follow me on Twitter at www.twitter.com/deanvoelker. I am also hosting a weekly internet radio podcast at http://www.blogtalkradio.com/401kcoach.

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