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Split annuities are very tax efficient
and intelligent investment vehicles combining two different types
of annuities - a single premium deferred annuity (for asset growth) and
a single premium immediate annuity (for income.).
All this can be done
from one investment amount! One annuity pays you an income each and every
month over a specified period of time.
The other annuity is left in place
to grow, with the goal being that by the time funds in your immediate
(income) annuity are depleted, the deferred (growth) annuity will restore
you to your original starting principal.
This allows you to then restart
the process with new prevailing interest rates.
This is a wonderful to
simply maximize and insure a continuous income while still retaining a
measure of control.
The example below illustrate a potential scenario
(keep in mind that the interest used is purely hypothetical.)
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Example of Split Annuities
Consider a
$100,000 Starting Principal
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Immediate
Annuity
$38,430 at 6.2%
Monthly Income
is $485.37
Annual Income
is $5,824.48 for
eight years. 82%
is not taxed.
Total Income
before taxes is
$46,595.83
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Deferred
Annuity
$61,570
at 6.25%
grows
to
Year 1
$65,418
Year 2 $69,507
Year 3 $73,851
Year 4 $78,466
Year 5 $83,371
Year 6 $88,581
Year 7 $94,118
Year 8 $100,000
Original
Principal Fully Restored
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Note
that in the above illustration, the calculations are based on the guaranteed
interest rates shown over an eight year period. Any withdrawal from an annuity
prior to age 59 ½ may result in a 10% tax penalty by the IRS. Annuities
are not FDIC insured. Contact the Annuities Institute today for more information
on how split annuities can help secure your future retirement goals.
If you select a variable
or combination options, your income payments are subject to market fluctuation.
The value of your annuity contract could increase or decrease. The fixed
annuity guarantee is based on the claims-paying ability of the company you
select, which are the insurance companies that issue the annuity. This product
is not available in all states. The
limits placed on the use of split annuities are issuing ages of the policies,
usually age 0-85 for non qualified funds and 0-70 for qualified funds. The
immediate income periods range from 3 to 20 years.
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