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Taking Stock: Nothing's a guarantee

Malcolm Berko: Annuity guarantees aren't always a sure thing.
By Malcolm Berko Published: January 6, 2013
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However, if the annuity investments were to return less than 6 percent (as many have in the past year), the “guarantee” would kick in and provide you with a regular level of payments.

Unfortunately, any withdrawal of more than $6,720 (6 percent of $112,000) would be considered an “excess withdrawal,” and the $9,000 amount you need is “in excess” by $2,280. So if you took out $9,000, your future GMIB base, originally $112,000, would fall ($86,600 minus $9,000) to $77,600. That's a poke in the eye with a sharp stick. But you could take out $6,720 (not a penny more) without affecting the value of your GMIB, which is available to you in 27 months.

This sounds like much ado about nothing, but many retirees who purchased variable annuities less than 10 years ago are between Iraq and a hot plate and need income now.

Most folks aren't aware that their GMIB can collapse like a house of cards in this low-interest rate environment. It's ironic that the brokerages selling these annuities are one of the reasons rates are so low and may cause you to lose your GMIB. The soiling of capitalism by Bank of America, JPMorgan Chase, Wells Fargo, Goldman Sachs, et al. forced the Fed to aerate the economy by lowering rates to almost zero. Those low rates allowed banks to earn billions. But retirees who worked 45 years, raised kids, paid health insurance premiums, paid mortgages, paid taxes and never took a food stamp can't earn bupkis.

However, your double-wide may be an unexplored asset. Check with your bankster about a reverse-annuity mortgage, which could pay you about $350 or $450 a month tax-free.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com.


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