Split Annuity
Discover the split annuity to generate income and rebuild principal.
A split annuity is the term given to an effective strategy that utilizes two or more different annuity products - one designed to generate monthly income and the other to restore the original starting principal over a set period of time.
The split annuity is a very tax efficient and intelligent investment vehicle, typically using what is known as a single premium deferred annuity and a single premium immediate annuity. Within the split annuity, the immediate annuity repays you a set sum of money each and every month over a specified period of time. The other annuity is left in place to grow on a fixed interest basis, with the goal being that by the time your monthly payments are depleted, the deferred annuity will be fully restored to your original starting principal. You can then restart the process with prevailing interest rates or reevaluate your retirement and investment strategy as needed.
The limits placed on the use of a split annuity are typically related to the issuing ages of the annuity policies, usually 0-85 for non-qualified funds (you have paid taxes on them) and 0-70 for qualified money (you have not yet paid taxes on them). The immediate income period can range anywhere from 3 to 20 years, depending on your principal, insurance carrier, current rates and the objective of the split annuity.
The split annuity can also be used as an exceptional asset management tool to ensure fixed or regular payments are met automatically over a set period of time. For a fixed mortgage payment as an example, the income portion of the split annuity can be credited to an account that is automatically debited for the monthly amount. The deferred annuity is simultaneously rebuilding the principal in the background, set to restore your original amount over a set number of years.
For more information on how to use a split annuity, or to receive a customized financial projection based on your specific requirements, contact us today for a personalized, no-obligation interview. Our planning members excel at providing objective, independent advice, ensuring you can get the most favorable plan possible utilizing annuity products that maximize your income growth and financial security.
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