All In One Financial Services

Income Planning

The Basics:

As the name suggests, once immediate annuities are purchased they immediately provide an income stream. The amount of initial premium and the length of time selected will determine the amount of the monthly income. A Single Premium Immediate Annuity contract allows you to turn a fixed asset into a regular source of income in order to pay for expenses over a period of time that you select from 5 - 10 years or even lifetime. You make one premium payment and in return, receive a fixed, guaranteed income. A Single Premium Immediate Annuity may be paid out either as a “Fixed Period Certain Payout” where income is paid over a specified period or a “Life Payout” where income is guaranteed over your entire lifetime regardless of how long you live. These plans can only be issued by insurance companies and is a contract between you and the insurance company.

Americans are living longer than ever. The idea of living a longer, healthier life appeals to all of us, but for many, the tradeoff is outliving our retirement savings. The crippling costs of healthcare and the constant rise of inflation continue to compound this financial predicament. A single premium immediate annuity (SPIA) may help with this dilemma. As we age and expenses rise, the SPIA acts as a self-funded income plan to help keep up with those demands by improving cash flow. Some companies even offer a provision to receive periodic cost of living raises that are built right into the plan.

If a “Period Certain” payout or a “Life with Period Certain” payout is selected and the owner/annuitant dies pre-maturely, the remainder of the payments will continue to be paid to the beneficiaries, up until the time the “Period Certain” is satisfied. For example, if a person selects a “Twenty Year Period Certain” and dies after only receiving payments for ten years, then the beneficiaries will receive the remaining ten years of payments. This usually results in none of the original premium being lost and additional interest is usually earned in most cases. Check specific plan policy contracts for the exact details as plans vary from company to company and plan to plan. 

 Tax Treatment and Advantages:

Thanks to the "exclusion ratio", immediate annuities offer very favorable tax treatment. In fact a large percentage of the fixed immediate annuity income is tax free if the original funds are Non-qualified after tax premiums. This is because a large portion of the income payments is considered a return of your original premium principal and cannot be taxed twice. Qualified funds such as IRA's and 401(k)'s can be used for these plans as well, but would be fully taxable as you never paid taxes on those funds before. For the Non-qualified funds in your portfolio, the tax advantages can be substantial giving you better cash flow and more after tax income. Consult your accountant or tax advisor for complete benefits.

Call 1-888-489-2590
or click here
for your FREE "Guide to Annuities"  

Annuities are not a deposit, not FDIC-insured, not insured by any federal government agency, not guaranteed by any bank or savings association, May go down in value if more than the penalty-free amount is withdrawn during the surrender charge period. A fixed annuity is intended for retirement or other long-term needs. It is intended for a person who has sufficient cash or other liquid assets for living expenses and other unexpected emergencies such as medical expenses. Income taxes are due upon withdrawal for the interest portion of withdrawals on Non-qualified accounts and all withdrawals for Qualified accounts. If withdrawals are made before age-59 1/2, a 10% federal penalty tax may apply. Withdrawals and surrenders may be subject to surrender charges and/or a market value adjustment. See your annuity contract, riders, illustrations and disclosures for complete information, provisions and limitations.