Friday, August 06, 2004
Recent client question? www.legacyannuities.com
What is a split annuity?
Split Annuities
Income and Capital PreservationA 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 LimitationsThe 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$38,430at 6.2%
Deferred Annuity$61,570at 6.25%
Monthly Income$485.37
will growto
Annual Income$5,824.48
Yr. 1 $65,418Yr. 2 $69,507
for 8 yearsfor which
Yr. 3 $73,851Yr. 4 $78,466
82%is not taxed
Yr. 5 $83,371Yr. 6 $88,581
Total Incomebefore Taxes$46,595.83
Yr. 7 $94,118Yr. 8 $100,000Original 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.
What is a split annuity?
Split Annuities
Income and Capital PreservationA 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 LimitationsThe 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$38,430at 6.2%
Deferred Annuity$61,570at 6.25%
Monthly Income$485.37
will growto
Annual Income$5,824.48
Yr. 1 $65,418Yr. 2 $69,507
for 8 yearsfor which
Yr. 3 $73,851Yr. 4 $78,466
82%is not taxed
Yr. 5 $83,371Yr. 6 $88,581
Total Incomebefore Taxes$46,595.83
Yr. 7 $94,118Yr. 8 $100,000Original 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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