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Portfolio rebalancing question - Variable Annuity
Old 10-13-2009, 07:34 AM   #1
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Portfolio rebalancing question - Variable Annuity

I have a variable annuity from USAllianz called High Five. Normally I would put a VA on the equity side of the ledger for rebalancing purposes. This product allows me to take the money and run and I get to take the highest account balance in the last five years. I am subject to no withdrawal penalties come Aug 2012 and my that is within the 5 year window of my Oct '07 high. Currently my balance is $123K, come August '12 I can walk away with $146,500 even if the current balance at that time is below that figure.

So for rebalancing purposes this year would you consider this a fixed asset or an equity?
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Old 10-13-2009, 07:54 AM   #2
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I have a variable annuity from USAllianz called High Five.
I'll wager the VA got the name from what the sales team does after the buyer signs on the dotted line...;D

EDIT: Ooops. Sorry, that wasn't helpful and didn't answer your question.
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Old 10-13-2009, 07:55 AM   #3
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Assuming your principal is protected (is this some sort of an EIA-type product?), I'd consider it a fixed asset worth $123K appreciating to $146,500 in August 2012, at which time I'd cash it out. As far as you are concerned, it's probably more like a bond than a stock, although it sounds like it could be worth even more if the market continues its recovery.
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Old 10-13-2009, 08:21 AM   #4
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Thanks and yes Ziggy that is correct. There is a chance it could be worth more come Aug 2012 if the market trends upward, and I can walk away with that balance as well. Given the promise of the $146500 come Aug 12th I am inclined to treat this VA as a fixed asset for the purpose of overall portfolio rebalancing at this time as you suggested. Irregardless of opinions on the merit of VA's I want to be sure I treat it properly for my own calculations. Thanks again.
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Old 10-13-2009, 09:50 AM   #5
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I want to be sure I treat it properly for my own calculations. Thanks again.

Just don't forget that if you adjust your AA treating the VA as a fixed investment now, you'll need to invest those dollars in fixed investments when they come out of the VA. This won't be any different than if you had a bond or CD maturing, etc. But attractive fixed investments are hard to come by now..... and may or may not be in Aug, 2012. So plan ahead.
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