I tell my Sons that if something seems too good to be true, it usually is. That logic surrounded a discussion I had in my office last week with a very nice couple from Boca Raton, Don and Kathy. They had read an article I wrote on variable annuities highlighting questions to ask before purchasing one. These questions help to determine if a variable annuity is an appropriate investment and income strategy.
Don and Kathy are retired and moved to Boca Raton about nine years ago. Their current advisor suggested they purchase an annuity. They were told they would have a guaranteed 6% return, no matter what. They were also told that the cash value would be transferred to their kids upon their death.
Hmm… sounds too good to be true.
Upon review, I discovered that Don and Kathy’s advisor suggested a variable annuity (VA) with an income rider attached. Let me explain what an income rider is.