23W EDN E SDAY, J U LY 8 , 2009T H E E X A M I N ER
YOUR MONEY
FAMILY FINANCES
By Kimberly Lankford
Kiplinger's Money Power
Although most retirees like the
idea of guaranteed income, they
often balk at the idea of giving up
control of their money with an
immediate annuity. As a result,
many retirees have been turning to
deferred variable annuities, which
allow them to invest in the stock
market through mutual-fundlike
accounts.
Deferred variable annuities offer
two types of guarantees. With a
guaranteed minimum withdrawal
benefit, you can take out up to a
certain amount every year -- 5
percent of your initial investment,
for example -- no matter how your
investments perform or how long
you live. Some annuities let you
boost the annual guaranteed with-
drawal amount if your account value
increases.
Another variation, known as a
guaranteed minimum income bene-
fit, also allows you to withdraw up to
a certain amount each year (again, 5
percent is typical). Plus, you always
have the right to convert to a life-
time income stream based on the
original investment amount, even if
the balance in the account has fallen
below that level. Although you give
up control of your money then, you
may be able to increase your annual
withdrawals to 8 percent or more.
The older you are when you annui-
tize, the higher your payouts.
Both of these options provide a
lot more flexibility than immediate
annuities. You don't give up control
of the money, and you can eventu-
ally cash out the annuity if your
investments perform well and your
account balance is worth more than
the guarantees (although you may
owe a surrender charge of up to 7
percent of the initial balance in the
early years).
But that added flexibility comes
at a steep price. Fees on these guar-
antees typically range from 0.6
percent to 1.25 percent of your initial
investment -- on top of a standard
annuity fee of about 1.4 percent per
year, plus the underlying mutual
fund fees. Nevertheless, deferred
annuities with guaranteed benefits
have been popular with people who
retire in their 50s and 60s and who
need to tap their savings right away,
but who also want to benefit from
long-term stock-market growth.
There is bad news for annuity
buyers. Many major insurers are
scaling back on the guarantees
they are offering on new contracts.
For example, some companies have
lowered their guaranteed with-
drawals. Others have raised fees
or minimized their risk by limiting
the types of funds in which you can
invest. And some have discontinued
guarantees entirely.
Send your questions and comments
to moneypower@kiplinger.com.
Keep control with flexible annuities
RETIREMENT
Record unemployment rates
and tight family budgets may mean
heavy traffic at your yard sale this
summer.
Atlanta-based Consumer Credit
Counseling Service gives these tips
for hosting a rummage sale:
� Choose a date. Avoid holi-
day weekends, and make sure it's
approved by your homeowners asso-
ciation or local government. Some
neighborhoods designate a specific
weekend or two each year and do not
allow yard sales at any other time.
� Recruit your neighbors. A mul-
tifamily yard sale has advantages,
like shared advertising costs and
efforts.
� Get the word out. Use signs and
local advertising, and be descriptive
about some key items you have -- if
you have tons of children's items or
furniture, for example. Don't forget
to post on free Web sites like craigs
list.org or garagesalesource.com.
� Price accordingly. Don't expect
to get retail prices for your items. A
good rule of thumb is to price items
in good condition at 25 to 30 percent
of their retail value. Bundling similar
items for one price may help things
move more quickly. Regardless of
your pricing strategy, shoppers
will want to negotiate with you, so
be prepared.
� Not every item is right for a yard
sale. Consider consigning high-end
items such as antique furniture or
specialty items, where they will
likely generate more money.
� Make plans for what is left. If you
intend to donate items left at the end
of the sale, make arrangements for a
charity to pick it up the same day.
Tips for rummage sales
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