Why does the ORP model not include variable annuities?
A variability annuity is an after-tax investment providing tax-deferred returns. Insurance companies are custodians for and promote variable annuities. The tax consequences are that capital gains and dividend tax rates are lower than personal income tax rates, which is the tax rate on the withdrawal of investment returns of the variable annuity. Insurance company charges are a significant drawback to variable annuities. Most ORP users are sophisticated and manage their own retirement plans. Many people use ORP to plan their withdrawals in such a manner as to simulate an annuity without the charges. Thus up to this point there has been no demand to add the complexity of variable annuities to the model. The SEC provides a readable description of variable annuities.