Income and Capital
Preservation
A Split Annuity is not an annuity
policy but a combination of two annuity products. A
single premium immediate annuity and a single
premium tax deferred annuity. Structured in such
away as to produce immediate income for a guaranteed
period of time and to restore you original principal
at the end of that time period.
Administration
A Single Premium Annuity is used to
restore the original principal at the end of the
guaranteed period. The Single Premium Immediate
Annuity provides a guaranteed monthly income for the
same time period.
Advantages of
a Split Annuity
One advantage of a split annuity is that your
original principal is restored at the end of the
guaranteed period. This allows you to start the
process over again at prevailing interest rates. The
funds placed in the Single Premium Deferred Annuity
policy are available for emergencies with
limitations.
Plan
Limitations
The limits place on the use of a split are annuity
are the issue 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.
Example of a
Split Annuity
$100,000 |
Immediate Annuity
$38,430
at 6.2% |
|
Deferred Annuity
$61,570
at 6.25% |
|
Monthly Income
$485.37 |
|
will grow
to |
|
Annual Income
$5,824.48 |
|
Yr. 1 $65,418
Yr. 2 $69,507 |
for 8 years
for which |
|
Yr. 3 $73,851
Yr. 4 $78,466 |
82%
is not taxed |
|
Yr. 5 $83,371
Yr. 6 $88,581 |
Total Income
before Taxes
$46,595.83 |
|
Yr. 7 $94,118
Yr. 8 $100,000
Original Principal |
Please note that the
illustration is based on a guaranteed interest rate
of 6.25% for 8 years. Withdrawals from an annuity
prior to age 59 1/2 may result in a 10% penalty tax
imposed by the IRS. Annuities are not FDIC insured.
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