Dear Dr. Don,
I am 64 and recently purchased a variable annuity, investing $120,000. I can double my money if I wait 10 years to start drawing on the annuity.

I am confused with the statement, “guaranteed payment for life.” My wife and I are both retired and both have part-time jobs, which we would like to quit so we can start to retire more comfortably. Do we have to wait for 10 years to start drawing on this, so it will last for our lifetime? Hope you can help us.
— Steve Sustain

Dear Steve,
The wrong time to learn more about your annuity contract is after you sign it. That comment is meant more as a caution for others reading this column than to chide you about your decision. The SEC publication “Variable Annuities: What You Should Know” is required reading before entering into an annuity contract.

A deferred variable annuity is an insurance contract, but it is also an investment in a collection of subaccounts that look and act very much like mutual funds. It’s the annuity part that is deferred.

It sounds like your annuity contract has a guarantee of doubling your money over a 10-year holding period. That works out to be about a 7.2 percent annual return on your investment. Let’s hope the guaranteed return is net of fees. That is a pretty attractive guarantee, given the stock market’s recent performance.

Annuity contracts can be quite complex with a lot of different contract provisions, so I can’t speak as an authority about your contract. That said, I would expect you could annuitize the investment now and start receiving income for life. The agent that sold you the contact should be able to explain your options.

You may not like what that means. Waiting 10 years and annuitizing a $240,000 balance will give you a much higher payment stream than annuitizing $120,000 today. You can get a rough read on what your annuity options are by going to and inputting your ages and account balance.

The guaranteed payment for life is based on your ages and whether you are choosing a single life expectancy or a joint life expectancy. Beneficiary and other contract options in your annuity will also influence the size of the payment.

In your shoes, I’d recommend you review your situation with a fee-only financial planner before deciding whether to annuitize your deferred variable annuity. You can find a planner in your area by using either the National Association of Personal Financial Advisors Web site or Bankrate’s tool to help you find a Certified Financial Planner.