While variable annuities with income guarantees have gained popularity as a retirement income tool, this next generation of Investment-Only Variable Annuities (IOVAs) could eliminate those needs. Read this paper to learn how well an unguaranteed low-cost Investment-Only VA can replicate a rider’s guaranteed income, thus eliminating the need to pay fees on riders that frequently exceed 2% or even 3% per year.
The purpose of this paper is to examine a variety of scenarios to determine when a guaranteed VA is worth the cost of the additional protection it provides, and when an unguaranteed low-cost Investment-Only VA may provide greater benefit for the client.
The idea of the Tax-Efficient Frontier is actually quite simple. It is a variation on the idea of the efficient frontier, which shows the rate of return you should earn for a given level of risk.
The Tax-Efficient Frontier takes the conversation to a new level, showing that you can actually earn higher returns—and help your client build considerably more long-term wealth—without taking on any additional risk.
Fidelity finds that investors may benefit significantly from deferring taxes on investments that generate large distributions taxed at ordinary income rates, like short-term capital gains or certain types of interest and dividends. How? By replacing those tax-inefficient assets held in taxable accounts with suitable alternatives held in tax-deferred investment vehicles like low-cost variable annuities.
Many advisors underestimate the potential impact of tax deferral on retirement savings. And, many are uncertain how to quantify the value of tax deferral.