A problem with DIAs is that the duration may be longer than can be matched with a bond portfolio. The insurer will not want to take the uncovered risk, so there should be additional premium in the cost of the DIA to cover that risk. The insurer is taking reinvestment risk. If bonds backing the DIA turnover at a lower interest rate while the insurer still has the liability, there will be an actuarial shortfall in the de facto assets backing the DIA. This also would be a feature of say buying a SPIA at age 50.
If a DIA or SPIA is held in a trad IRA, the indexing of tax brackets to inflation will provide some inflation protection, proportionate with tax bracket. For the DIA in a tIRA to satisfy RMDs prior to payout, a QLAC would be used.
If a DIA or SPIA is held in a trad IRA, the indexing of tax brackets to inflation will provide some inflation protection, proportionate with tax bracket. For the DIA in a tIRA to satisfy RMDs prior to payout, a QLAC would be used.
Statistics: Posted by Northern Flicker — Thu Jun 06, 2024 1:36 am — Replies 17 — Views 1352