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If outliving your money has you worried, here's an immediate variable annuity product that guarantees you an income and promises to pay until you die---no matter what.

Most retirees know that retirement living isn't exactly living on the cheap. Sure, many have paid off their homes, but there are still real estate taxes and insurance premiums and month-to-month expenses.

Add the fact that most people are living much longer then the generation before them, and it's easy to see why having enough money to live on becomes a big concern for those in their golden years.

In an effort to provide investors with a monthly income that's guaranteed to be there for as long as they live, T Rowe Price has recently introduced an immediate variable annuity called The Income Account, (800-469-5304).

"All the studies have shown that the No.1 concern people have in retirement is outliving their assets and here's a product that's been designed to meet that concern, " says Steven Norwitz, vice president at T.Rowe Price Associates.

Norwitz explains that unlike regular tax-deferred variable annuities in which contract owners have to annuitize to get an income stream, this immediate variable annuity starts providing an income within a month of opening the account. Thus, it can provide investors with an income that supplements what they are receiving from other retirement sources such as their pension or Social Security.

In a nutshell, here are some of the features of T. Rowe Price's immediate variable annuity Income Account:

  • Minimum investment. $25,000.

  • Investment choices. You can invest into can into any one, or any combination of, these T.Rowe Price funds: New America Growth, International Stock, Mid-Cap Growth, Equity Income, Personal Strategy Balanced; or Limited-Term Bond fund.

  • Monthly income. Because this is an immediate variable annuity, each month you'll get a fixed monthly payment. Payments are reset every 12 months based upon the performance of your investments.

  • Guarantees. Monthly income is guaranteed for life, and, guaranteed at 80 percent of your initial monthly payment. That means, if you're 65 years old today, ( maximum age for investing is 85), invest $50,000 into the most aggressive stock fund available, (the New America Growth fund), live to be 110 and the stock market is in the tank for the majority of those years, even though the value of your account hasn't grown, the insurance side of this investment guarantees that you'll still get a monthly income check that's no less than 80 percent of your original monthly pay out. (Provided, of course, you didn't make any withdrawals from the account during the first five years of ownership which would alter that guaranteed pay-out amount.)

Then again, if that same 65-year lives to be 110, invests the same amount of money into that same fund and it's performance soars throughout the years, monthly income checks can increase.

Sweet as that may sound, there are always downsides to any investment product. Here are a couple:

  • Costs. Because this is a mutual fund and an insurance product, there are annual fees and expenses on both sides. The average fees and expenses for the fund expenses are estimated at 0.87 percent per year. Mortality and expense charges, paid to Security Benefit Life Insurance Company underwriters of the product, are 1.40 percent. That's about 2.3 percent per year in annual fees and expenses.

  • First year monthly payments. Insurance companies have a special kind of wizardry when it comes to calculating things. Figuring out how much your monthly checks will be during that first and very important year ( as this year forms a base for future calculations) is based on a combination of things including life expectancy, gender and an assumed interest rate.

  • Death benefits. Don't count on passing any bucks on to anyone special. Death benefits here don't ever amount to more than the current balances of what's in your account at best. And, they don't exist if you've owned the account after 15 years.

There is lots more to this product. And, for those who want the comfort of knowing that they'll have an income stream for life, it represents one option.

To read more articles, please visit the column archive.

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