Deferred Income Annuities (DIAs)

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Deferred Income Annuities (DIAs), also known as personal pension plans, are a type of insurance product designed to provide guaranteed future income. By making an initial investment, you secure regular payments starting at a future date, often during retirement. This guide will cover the basics of DIAs and compare them to Deferred Annuities with Guaranteed Lifetime Withdrawal Benefits (GLWBs).

Basics of Deferred Income Annuities

Key Features

  • Investment Options: DIAs can be funded through a lump sum or periodic payments.
  • Payout Start: You choose a future date for the payments to begin, typically during retirement.
  • Income Type: Provides fixed, regular payments.
  • Duration: Payments can last for a lifetime or a specified period.
  • Inflation Adjustment: Optional riders can increase payments to keep pace with inflation.
  • Liquidity: DIAs generally have limited liquidity, with penalties for early withdrawal.
  • Tax Treatment: Growth is tax-deferred until payouts begin.
  • Bequest Options: Limited unless specific riders are purchased.

Advantages

  • Guaranteed Income: DIAs offer stable, predictable income, crucial for retirement planning.
  • Tax Benefits: Funds grow tax-deferred, delaying taxation until you begin receiving payments.
  • Inflation Protection: Optional riders can help maintain purchasing power.

Disadvantages

  • Lack of Liquidity: Limited access to funds without penalties.
  • Potential Inflation Risk: Fixed payments may lose value if not adjusted for inflation.
  • No Bequest Option: Without a death benefit rider, the remaining balance typically does not pass to heirs.

Qualified Longevity Annuity Contracts (QLACs)

QLACs are a type of DIA that allows you to defer Required Minimum Distributions (RMDs) from your retirement accounts until age 85, potentially reducing taxable income in the early retirement years.

Deferred Income Annuities

Comparing DIA vs. Deferred Annuities with GLWB

Deferred Income Annuities (DIAs)

  • Payout Start: Predetermined future date.
  • Income Type: Fixed, guaranteed payments.
  • Flexibility: Low; early withdrawals are penalized.
  • Purpose: Provides a stable, guaranteed income stream for retirement.

Deferred Annuities with Guaranteed Lifetime Withdrawal Benefits (GLWBs)

  • Payout Start: Flexible; withdrawals can begin after a deferral period.
  • Income Type: Lifetime withdrawals are guaranteed, even if the account balance is depleted.
  • Flexibility: High; allows access to account balance.
  • Purpose: Provides lifetime income with more access and flexibility.

Key Differences

  1. Flexibility: DIAs have fixed start dates and limited liquidity, while GLWBs offer flexible withdrawals and access to the account balance.
  2. Liquidity: GLWBs provide higher liquidity and control over funds.
  3. Income Start: DIAs have a set start date, whereas GLWBs offer flexible timing for income start.

Deferred Income Annuity Calculator

Compare deferred income annuity annual lifetime income payouts. The amounts are fixed for life, and there is a contractual guarantee that you will be paid this amount until you die.

How We Can Help

  • Understanding Your Needs: At The Annuity Expert, we recognize that planning for retirement can be overwhelming. You want to ensure a stable income while having flexibility and access to funds. With 15 years of experience as an insurance agency, annuity broker, and retirement planner, we have the expertise to guide you through the complexities of retirement planning. We believe in finding the best solutions at the lowest costs, ensuring your financial security without unnecessary expenses.
  • Solving Your Core Problem: The main problem you face is securing a reliable income for your retirement while managing taxes and maintaining flexibility. The symptoms of this problem include anxiety about future financial stability, confusion about investment options, and concern over tax implications. We understand these concerns and are here to provide clarity and peace of mind.
Deferred Income Annuity Pros And Cons

What We Recommend

  • Step 1: Initial Consultation Contact us for a free initial consultation. During this session, we will assess your financial situation, retirement goals, and concerns. The main benefit is gaining a clear understanding of your needs and how DIAs or other annuities can fit into your plan.
  • Step 2: Customized Plan Development Based on our assessment, we will develop a personalized retirement plan tailored to your specific needs and preferences. We will compare DIAs with other options like Deferred Annuities with Guaranteed Lifetime Withdrawal Benefits (GLWBs). The main benefit is having a customized strategy that ensures a stable income and meets your financial goals.
  • Step 3: Implementation and Ongoing Support Once you approve your plan, we will help you implement it, ensuring all paperwork and processes are handled smoothly. We provide ongoing support to monitor your plan and make adjustments as needed. The main benefit is continuous guidance and assurance that your retirement plan remains aligned with your goals.

Features and Benefits

  • Personalized Quotes: Tailored to your age, location, retirement age, and savings, ensuring a perfect fit.
  • Expert Advice: Benefit from our 15 years of experience, providing reliable and informed guidance.
  • Flexible Solutions: We offer a range of annuity products to suit various needs and preferences.
  • Tax Efficiency: Strategies designed to minimize your tax burden and maximize your income.

Overcoming Objections

  • Cost Concerns: We work to find the most cost-effective solutions without compromising on quality or benefits.
  • Complexity: Our expert team simplifies the process, making it easy to understand and manage your retirement plan.
  • Trust: With 15 years in the industry, our reputation for reliability and expertise speaks for itself.

Failing to plan adequately for retirement can lead to financial insecurity, stress, and a lower quality of life. Conversely, partnering with us ensures a secure, stable income, peace of mind, and a financially comfortable retirement.

Experience the security and confidence that comes with a well-planned retirement. Contact us today for free advice or a quote tailored to your needs. Let The Annuity Expert guide you to a financially secure future.

Deferred Income Annuity Assistance

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Questions From Our Readers

Are deferred income annuities a good idea?

Deferred income annuities can be a good idea for individuals seeking a guaranteed income stream in the future. They provide a way to ensure a stable income during retirement.

What are the disadvantages of a deferred annuity?

While deferred annuities have benefits, they also come with potential disadvantages. Some drawbacks include limited access to funds during the deferral period, potential surrender charges for early withdrawals, and the possibility of lower returns compared to other investment options. Additionally, annuities can be complex and involve fees and expenses that should be carefully considered.

At what age do you have to pay income on a deferred income annuity?

The age at which you must pay income tax on a deferred income annuity depends on when you start receiving payments. Generally, once you begin receiving income from the annuity, it becomes taxable as ordinary income. The specific age can vary based on the annuity contract terms and local tax laws.

Do I need an employer to open a deferred income annuity (DIA)?

No, you don’t need an employer to open a Deferred Income Annuity (DIA). DIAs are personal pension plans that can be opened independently by an individual.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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