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No. of Recommendations: 5
Dave,

I hold 5.

Jackson National -- remarkable in that it allows 100% allocation to equity. I have mine in a NASDAQ 100 index fund. Woohoo! Hold onto your hat! I figure, with them guaranteeing 4% of the high water mark annually for joint life, shoot for the stars if they'll let you. Note: New investor probably are held to a lower withdrawal rate. The industry as a whole has pulled back a half point or so.

Nationwide
Ohio National

These two are similar so I'll treat them as one. But performance is a little better with Nationwide.

High fees, conservative investment mix required, but higher guaranteed withdrawal rate. I am deferring start of withdrawals to year 10 (2022 for me) and the rate will be 10.5% of the initial investment, per annum, for joint life (or some lower percentage of the fund highpoint -- forget what it is).

Vanguard

Lower fees, no early withdrawal penalty (the others have a penalty if you withdraw more than the permitted amount in the first 7 years), lower-fee funds, decent performance, conservative mix required, lower guaranteed withdrawal percent -- in my case 4% of high-water mark.

Pacific Life

Higher withdrawal rate than Vanguard and Jackson. In my case 5% of peak value. Moderate fees. Slightly more aggressive asset mix allowed.

Notes:
= Peak value is measured once per year on the investment anniversary.
= Mine are held as IRAs or similar (funded by direct transfer from my Fidelity IRA).
= All are sold through sales people, except Vanguard, where you deal direct.
= All the above descriptions pertain to terms of the particular product I invested in and the particular options within each one that I chose. The companies are always fiddling with their terms, so what is offered today will differ from my deals. Also, terms vary by age of you and spouse.
= You can quit at any time and get your money back (whatever the fund shares are worth at market), less any applicable early withdrawal penalty). When you and your spouse die, the remaining money in your fund goes to your heirs.
= If the fund balance goes to zero due to the combined effects of fees, permitted withdrawals and market performance, the insurance company has to continue to pay you for the rest of your joint life at the permitted withdrawal rate x the peak value.
= If the insurance company goes bellyup and you are due payments under the guarantee, you have a claim against your state's insurance guarantee fund, subject to applicable caps. You also have a claim in bankruptcy along with other claimants, ahead of lenders.

Here's a 6th one that seems reasonable if you can deal with the complexity. I wrote the description below several years ago for a person I know who had invested in it but did not understand it. I read his contract and prospectus and digested it for him as follows. He is 76 today and his wife is older.

"You have $130k in a Transamerica variable annuity with guaranteed lifetime withdrawal benefit. The money is invested in a balanced (domestic stocks, foreign stock, bonds, moneymarket) ETF, and therefore its value varies with changes in market values of the securities.



You can take the money out at any time. However, in the first 5 years, if you take more than the permitted withdrawal there would be a penalty. Penalty is 5% in first year then 4, 3, 2, 1, 0 in succeeding years. A further caveat is you are paying an annual fee in exchange for Transamerica guaranteeing a lifetime income stream from this investmtent and that guarantee is conditioned on your withdrawals being under a certain amount, determined by a complicated formula described below.



The guarantee part of the investment is that Transamerica promises that if you abide by certain rules governing the size of your annual withdrawals it will keep sending you money for the rest of your lives even if the account value goes to zero due to a combination of poor market performance and/or withdrawals that comply with the rules of the guarantee and/or their fees taken out of the account.



I will use the term "permitted withdrawal amount" to mean the maximum that can be taken out without reducing the guaranteed lifetime income stream. But, always bear in mind you can withdraw any amount up to the full value (minus the early withdrawal penalty in the first 5 years I already mentioned) if you are willing to reduce or eliminate the guarantee.



The details of the guarantee are:



The permitted withdrawal amount (for keeping the guarantee intact) is a permitted withdrawal percentage (5%) times a number called "the withdrawal balance." If you wait until Dan's age 80 to start withdrawals, then the percentage will be 6% not 5%.



The Withdrawal Balance is just a computed number resulting from a formula. It is not the value of the account and you cannot withdraw that whole amount.



The Withdrawal Balance started out being equal to the value of the account in year one.



In each subsequent year, the Withdrawal Balance has the potential to go higher, according to a formula explained below. It will never go down, unless you withdraw more than the permitted amount. (If you did withdraw more, then it would go down by the amount of the excess withdrawal).



The formula:



The withdrawal balance is re-computed annually on the anniversary of the investment. The new withdrawal balance for the future is computed tentatively 4 different ways and the method that gives the highest number is the one that the final computation method for that year. The 4 ways are:



1) No change. So, if the other 3 ways would result in a reduction, then this method governs. The new Withdrawal Balance is equal to last year's.



2) The highest value that the account reached on any "monthiversary" during the preceding year. So, the value of your investments is fluctuating all the time due to market fluctuations, fees and withdrawals (or even deposits). They look at this value on one day of each month -- the same day of the month as when you bought the investment to begin with -- and select the high water mark as the potential new withdrawal balance under this method.



3) The old withdrawal balance increased by 5.5%. This method is only available during the first ten years of the investment It is also only available in years you did not take a withdrawal (zero withdrawal -- not permitted withdrawal, but actually zilch). Both things have to be true to use this method -- first 10 years and no withdrawal in last year.



4) Account value at this anniversary date (could be folded into 2 if you just define "monthiversary to include the anniversary)



Your strategy, which seems reasonable given the rules of the game, has been to make no withdrawals in order to take advantage of method #3, with the goal of having a higher guaranteed annual income stream when you do start withdrawals. Market performance has not been good enough for #2 or #4 to give you a better boost, so #3 has governed, with the result that the withdrawal base is now a few thousand dollars above the actual account value. Your withdrawal base is $144k, so your lifetime guaranteed income would be 5% of that per year (a bit over $7k).

I doubt you would want to continue to defer withdrawals beyond the tenth year because you would not be getting rewarded by an automatic boost in the withdrawal base."
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