NEW YORK ( MainStreet) — Most guaranteed variable annuities aren't generating enough income to cover the cost of their riders, according to a new report.

"The benefit of the annuity is the tax deferral but there's lots of product in the marketplace that have been developed to guarantee retirement income when in fact most investors don't utilize the benefit they are paying for," said Mitch Caplan, CEO with Jefferson National.

The Jefferson National study found that 89.9% of the time investors pay more in fees for a guarantee than they ever receive in income.

"The best way to save for retirement is to use an annuity solely for low cost deferral rather than guarantees, benefits, riders and income, because the annual fee wipes out the benefit of tax deferral," Caplan told MainStreet. "Lifetime income, retirement income and death benefits all require additional costs."

In response, Jefferson National launched the JNF SSgA Retirement Income Portfolio which charges a flat fee.

"We think it's best to invest in a fund that has income producing stock and funds with a volatility overlay," said Caplan.

That's how JNF SSgA Retirement Income Portfolio was designed The minimum required to invest in Jefferson National's Flat Fee Variable Annuity is $25,000. The flat fee is $20 a month, which for an account size of $250,000 is the same as paying 10 basis points compared to 130 basis points for other variable annuities.

Managed by State Street Global Advisors, the portfolio invests in income-generating ETFs.

"We use equity ETFs that focus on companies that have stable dividend growth," said Stephen Coyle, managing director with State Street Global Advisors. "We have a good mix of treasuries, investment grade corporate bonds, high yield and emerging market debt. We also invest in hybrid securities like preferred stocks and convertible bonds."

While the portfolio's asset allocation is 45% in diversified global equities, 45% in fixed income and 10% in hybrids, the flat fee remains $240 a year no matter how much an investor invests.

"Both Jefferson National and State Street have pioneered truly groundbreaking products that have changed the financial services industry," says David Lau, COO with Jefferson National.

Because the fee is low, the portfolio preserves the benefit of tax deferral.

"We are less focused on which asset offers the highest yield and much more interested in which investments are offering the most attractive total return opportunities," Coyle told MainStreet. "The fund is tactical, which means we can overweight those assets we think are the most attractive."

The portfolio also features a target volatility trigger to manage precipitous upswings and downturns.

"The goal of volatility management is to enable investors to take on an allocation of growth assets, which are needed to maximize long-term portfolio gains for a retirement that could last 30 years or more," says Chris Goolgasian, managing director in the Investment Solutions Group with State Street Global Advisors.