This page contains a Flash digital edition of a book.
financial forum
Income Annuities
Income annuities can provide a stable source of income. But are they right for military retirees? Lt. Col. Shane Ostrom, USAF-Ret., CFP®, discusses when you might want to consider them.


 


Get More Information For additional information on income annuities, check out a USAA video on MOAA’s Financial Frontlines blog. Visit http://moaablogs.org/financial/2011/10 and scroll down to “Is purchasing an annuity for lifetime income a good idea?”


 


Annuities as a financial product can be a source of confusion because they come in so many varieties and every insurance company puts its own features on its products. For this article, we’ll focus on “income annuities” only.


An income annuity is the simplest of all annuities. You make a one-time, lump-sum deposit into the annuity, and it provides you income. You can structure the income to meet your needs. A common income option is a monthly lifetime payment for you and your survivor.


Income annuities have been getting a good deal of press lately because of the turbulent stock and bond markets and the lack of guaranteed interest-bearing accounts that pay decent rates of interest. The typical sales pitch for an income annuity is it can guarantee you a stable income for life, while your other stock and bond investments are not dependable.


Is an income annuity right for military retirees? Generally, military retirees do not have a need for an income annuity because they already have one: a military retirement check. In fact, military retirees have two annuities when you take into account Social Security. Both of these income annuities provide cost-of-living increases to boot.


However, military retirees with the following unique financial situations might want to consider income annuities:


You want another source of steady, guaranteed income to help meet your fixed liability needs — monthly bills, debts, mortgage payments, etcetera.


You didn’t enroll in the Survivor Benefit Plan (SBP) to continue your military retirement pay, and you want another plan to compensate for the lack of SBP. You could purchase an income annuity now with a continuing survivor benefit. Or, your survivor could use life insurance proceeds or other investment assets to purchase an income annuity. Point being, survivors often prefer steady, guaranteed income instead of managing investments and dealing with the unknown nature of the economy and the markets.


You took Social Security early, and you want steady income to compensate for the decrease in monthly or survivor’s Social Security income.


You might get a better payout with an income annuity than with interest rates on CDs, bonds, and money market accounts.


Shop carefully. The amount of income differs, so do some research. Some annuities offer cost-of-living adjustments or refunds of principal in case of early death, but keep in mind your income amount will suffer with these options. MO


— Lt. Col. Shane Ostrom, USAF-Ret., is a CFP® in MOAA’s Benefits Information and Financial Education Department. To speak with a financial planner, contact USAA at (877) 913-6622 or www.usaa.com/moaa, or visit www.moaa.org/financialcenter for other resources.


42 MILITARY OFFICER APRIL 2012

Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82  |  Page 83  |  Page 84  |  Page 85  |  Page 86  |  Page 87  |  Page 88  |  Page 89  |  Page 90  |  Page 91  |  Page 92  |  Page 93  |  Page 94  |  Page 95  |  Page 96  |  Page 97  |  Page 98  |  Page 99  |  Page 100