MANAGING Your Retirement Income
Immediate and Deferred Income Portfolio Strategies
Similar to a traditional investment portfolio that employs diversification strategies to reduce investment risk, we have at our disposal for our clients two distinct types of income portfolio strategies: immediate and deferred. Both strategies employ annuities.
In addition to a guaranteed death benefit prior to the annuitization or income withdrawal starting date, only annuities allow individuals to maximize the liquidation of their assets while providing them with a guarantee that they can never outlive their income.
The difference between immediate and deferred income portfolio strategies and the types of income streams that we include in our clients' income portfolios are discussed below.
Immediate Income Portfolio Strategies
There is one primary type of immediate income portfolio strategy that's available in the marketplace and we recommend to our clients - single premium immediate annuities, or "SPIA's." SPIA's make periodic payments, typically monthly, for a specified number of months or for an individual's lifetime or joint lifetimes as applicable. The payments generally begin one month after purchase of a SPIA, hence the term "immediate."
To learn more about SPIA's, please read Retirement Income VisionsTM November 16, 2009 post, Immediate Income Annuities: The Cornerstone of a Successful Retirement Income Plan.
Deferred Income Portfolio Strategies
While most people are familiar with SPIA's, although they serve a vital function in a diversified income portfolio, deferred income portfolio strategies aren't as well known.
There are two types of deferred income portfolio strategies, both of which are used in our clients' income portfolios as appropriate: (a) deferred income annuities, or "DIA's" and (b) fixed index annuities, or "FIA's" with income riders.
Deferred Income Annuities
While the use of SPIA's is widespread, deferred income annuities, or "DIA's," are currently offered by only a handful of life insurance companies. Like SPIA's, DIA's pay periodic income for a specified period of time or over one's lifetime or joint lifetimes as applicable. Unlike SPIA's, the start date of the payments for DIA's is deferred for at least 13 months from the date of investment. The longer the income start date is deferred, the less the premium, or investment, required.
DIA's are often used as a technique for providing longevity insurance. As such, they are a quasi income portfolio management and income protection tool. Please see the Longevity Insurance section for information about Retirement Income Center's longevity insurance protection strategy.
To learn more about DIA's, please read Retirement Income VisisonsTM November 23, 2009 post, Deferred Income Annuities: The Sizzle in a Retirement Income Plan.
Fixed Index Annuities With Income Riders
The second type of deferred income portfolio strategy that we recommend for our clients' portfolios when appropriate is fixed index annuities, or "FIA's" with income riders. While FIA's have much in common with DIA's, they are an advanced deferred income stream strategy. The next section, Fixed Index Annuities With Income Riders, is devoted to a discussion of this powerful retirement income planning strategy.