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Latest Report is First in a New “Annuity Basics” Information Series

WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today published new research illustrating how tax-deferred investments in variable annuities can produce higher retirement income at the same risk level as other investments, especially when investing in tax-inefficient asset classes, while protecting against longevity risk.

The report, Optimizing Tax-Deferred Investing and Retirement Income Using Variable Annuities, cites four key learnings:

  • Variable annuities offer significant tax advantages relative to mutual funds over longer holding periods, even after accounting for lower taxes on dividends and long-term capital gains.
  • The tax advantages of variable annuities are amplified when holding tax-inefficient investment options, such as bond funds and high-turnover equity open-end funds.
  • When income is generated from a variable annuity using annuitization, the investor obtains meaningfully higher income after a deferred investment period than what can be safely obtained from a mutual fund portfolio.
  • By maximizing income using a deferral and annuitization strategy for a portion of client assets, more aggressive investment of the remaining assets is possible, driving higher overall asset growth over time.

The report is the first in a series of brief, informative publications on the basics of annuities. Annuity Basics will use a research-based approach to providing education and insights into annuity features and concepts. The publications will show the value of annuities for maximizing retirement income and protecting against systemic risks such as market downturns and inflation, as well as idiosyncratic risks like longevity and long-term care needs.

Each report is designed to be a 10-minute read focusing on a specific feature or concept related to annuities and annuity value. The reports will complement the IRI Retirement Saving and Income Handbook, which explains the basic features of each type of annuity and contrasts them with non-annuity alternatives. All reports will be available on the public research page of the IRI website.

IRI will build a robust catalog of annuity resources over time, addressing topics such as guaranteed lifetime income benefits on variable and fixed indexed annuities, death benefits, income strategies using annuitization, long-term care riders, registered index-linked annuities and index strategies, and non-qualified annuity titling.

“Many financial professionals are unfamiliar with annuities, and often those who are somewhat or even very knowledgeable are only familiar with the annuities they tend to use most,” said Frank O’Connor, Vice President, Research. “The advisor who frequently uses variable annuities may know much less about fixed indexed annuities, and vice versa. Annuity Basics will dissect the features and benefits of each type of annuity and provide clear, concise information using illustrations, infographics, and plain English descriptions.”

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Contact: Dan Zielinski

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