Long post.... complicated topic.
Since I am approaching FIRE, I am doing quite a bit of reading and study.
Up front - I am not promoting VAs... [Don't flame me]... I am asking questions to try to further my understanding. Pesonally, I am a bit wary of VAs.... especially the costly and complex riders. Maybe they can be used successfull... But I am not sure I understand some of the complex riders they make available and how they might work to my advantage. Plus.... most of them have huge fees. However, there are a few VAs out there that have fairly low fees and no loads.
I watched this wealthtrack episode (someone posted a while back) about longevity risk and the role annuities can play.
Chris Blunt - Kimberly Lankford | WealthTrack on blip.tv
I picked up on a comment the NY Life guy made about VAs and thought I would put it out there for discussion. Frankly, I had not thought about using a VA this way.
His comment [paraphrase] - VAs can play a role as a transition strategy. His comment was in the 12 min - 13 min timeframe of the video.
I assume he meant the series of years that one is transitioning from accumulation into decumulation (withdrawal)... but maybe he meant as a permanent transition to a variable payout solution.
What do you think he meant?? Because he did not elaborate. Did he mean use a VA temporarily (during transition to stretch out the hopeful accumulation and use more equity along with the rider to lock-in gains) or use a VA to transition to create the permanent payout solution?
[obviously a savvy investor could use derivatives... but less savvy investors might not feel confident doing that]
Do you think a VA can be used as a viable transition strategy... If so, what are the conditions and parameters that would need to be employed?
It would seem to me that using a VA temporarily
for transition might have some issues. Can a VA be wrapped in an IRA and later be moved out of the VA and into normal mutual funds and remain in the IRA? Can it even be done and retain the tax deferal? I suppose if one were intending to buy a SPIA, they could do a 1035 transfer.
What do you think?
Has anyone seen a back-tested study on a (use a VA temporarily) type of approach?