Owners of Variable Annuities with Living Benefits Protected from Market Storm

Certain living benefit guarantees--particularly guaranteed minimum withdrawal benefits--embedded in variable annuities have provided owners with downside protection during the recent financial market turmoil.

A popular variable annuity -- the one with guaranteed “living benefits” -- may be the riskiest product ever sold by the insurance industry. Risky to the health of the insurance carriers, that is.

If you bought one of these annuities, you will collect your promised, fixed, minimum income benefits even though your investment may have lost 40 percent in market value. Your future benefit, however, may not rise as you expected. Fortunately, there’s a backdoor way of increasing your payout, about which, more below.

Source: Bloomberg

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