It May Be a Great Time to Refinance Both Your Mortgage and Your Variable Annuity

Share This Article

Share on facebook
Share on linkedin
Share on twitter
Share on email

By: Niko Vamvakas, Vice President, Retirement Planning Solutions

Historically low-interest rates are serving as a “call to action” for many to refinance their mortgage. The economic impact of COVID-19 has caused a significant percentage of people to heed that call to free up cash flow for other needs. They have partnered with their mortgage broker and determined that the cost of refinancing, such as any closing costs, are worth the long-term savings they can enjoy over the next 10 to 30 years, depending upon the length of the old mortgage.
This same logic may apply to owners of variable annuities (VA’s) with an income benefit guarantee.

Why? Because most VA’s with income protection operate similarly to a mortgage. When you invested in the annuity, you and your advisor discussed what your lifetime distribution would be. This is the amount of income you will receive from the insurance company issuing the annuity.

Did you know you could “refinance” this number? With a mortgage, you want to decrease your payment. With your VA, you want to shop around to increase your payment. The end goal with a VA with an income rider is to maximize the amount of protected income you will receive.

Similar to a mortgage, there may be costs involved, like a surrender fee. That This is why you want to work with someone who has in-depth knowledge of the current annuity product landscape to see if there are ways to increase the amount of income you are projected to receive at a reasonable up-front cost. In many cases, locking in a higher rate significantly offsets the upfront costs over time.

The time is right to discuss this strategy and see if it can put you in a position to generate more income when you need it.