NetGuide : Internet Guide

Investing to meet tomorrow’s financial needs is an economic
imperative for most Americans. But taxation, the threat of resurgent inflation,
and limits on personal contributions are major barriers to achieving financial
security.

One of the biggest concerns people face is saving for
retirement. Experts estimate you will need 75 percent of what you earned to
maintain the same estandarad of living when you retire.

According to the Social Security Administration today’s
retirees can only count on corporate pensions and Social Security for 40 percent
of their income at retirement. The remainder must come from other sources to
make up the 60 percent shortfall in your retirement income. The challenge
is…how to close the gap?

Taxation and inflation are barriers to your success in
closing the gap. As taxes take a greater bite out of your earnings, saving for
retirement is more difficult than ever. Inflation can develop your investment
portfolio, reducing your purchasing power and spendable income.

A tax-deferred variable annuity may be your answer. A
variable annuity is a contract with a life insurance company, most often used to
accumulate money for retirement. Variable annuities offer tax advantaged asset
growth similar to IRA or 401(k) plans without contribution limits. In addition,
variable annuities provide professional money management, a hedge against
inflation, investment diversification, high potential return, and substantial
flexibility to meet changing needs.

A tax-deferred variable annuity has three distinct phases
that are important:

1. The investment phase. As you make contributions during
   the investment phase, your money is allocated to one or more separate
   accounts of the company or money manager. the manager in turn invests in
   corresponding portfolios of stocks, bonds, money market instruments and/or
   other securities.

2. The accumulation phase. your contribution immediately
   begins accumulating on a tax-deferred basis. unlike mutual funds, which
   create taxable income each year, earnings in a variable annuity accumulate
   tax-deferred. you have the flexibility to change your account allocations
   should the marketplace of financial objectives change. Most variable
   annuities offer anywhere from four to investment choices or subaccounts,
   many of which are run by large mutual fund companies.

3. The payout phase. you can choose numerous payout options;
   scheduled partial withdrawals, lumps sums, fixed payments for a specified
   period or amount, or an income that you cannot outlive. If contributions are
   made with after-tax dollars, a portion of your payout will be a return of
   principal, free of federal income taxes.

Variable Annuities vs. mutual funds.

Variable annuities provide two important advantages that
mutual funds do not. First, during the accumulation period, money in a variable
annuity grows tax-deferred. Second, the variable annuity provides a lifetime
payout option. In addition, variable annuities are protected property. Except
under certain limited circumstances, the annuity cannot be borrows against or
pledges by you to creditors.

Ask yourself the following questions:Are you a taxpayer
seeking a way to reduce the impact of today’s higher tax rates?have you maxed
out IRA and 401(k) contributions?Do you like the ability to control where your
investment dollars are placed?Are you a retiree facing greater taxation of
Social Security benefits and wondering how to protect yourself?Are you seeking a
life income option and inflation hedge?If you answer yes to the any of the above
questions, a variable annotate may indeed be the solution you seek to your tax
and retirement funding question.

Sweet is a certified financial planner and president of
Midwest Financial Group Inc.