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.
|
