From Michael Yavorsky at The Brokers Source LTD [michaely@brokerssource.com, (412) 847-0773]
The Situation:
- Jack is a male age 78. As a business owner, he purchased a series of Deferred Annuities with Income Riders to serve as his own pension in retirement. Now at age 78, he is ready to initiate income on one of these contracts to further supplement his income.
- Aside from the income need, Jack’s contract also has considerable gain, $241,751. Jack is at a lower tax rate than his beneficiaries, another benefit to initiating his income now.
- His current annuity has an Income Withdrawal Base of $729,985. At a 6.00% income factor, that would kick off $43,799 annually in Guaranteed Lifetime Income.
- The current contract value is $659,151 with a $417,400 cost basis.
The Solution:
Advisor Presents:
Rather than initiating the Income Rider, Jack also explores the amount of guaranteed lifetime income that the current contract value would provide if the $659,151 was 1035 exchanged to a new Single Premium Immediate Annuity (SPIA).
Current Annuity Monthly Income Annual Income
Income Rider $3,649.92 $43,799.10
SPIA Payment Monthly Income Annual Income
Life with Installment Refund $4,057.65 $48,691.80 (an 11% improvement)
Life with 10 Years Certain $4,644.64 $55,735.68 (a 27% improvement)
Implementation:
- Outside of the income increase, Jack likes having control with several different SPIA payment choices. He decides to give his income a raise.
- Jack decides to take the 10 Years Certain Guarantee versus the Full Return of Premium Guarantee (Installment Refund) to maximize the Guaranteed Lifetime Income he will receive.
End Result:
- Jack is very pleased with his increased income. Also, the Single Premium Immediate Annuity he chose allows for Payment Advances (up to 6 months) and Commutation Options (Withdrawal of a portion of the value) so he has not given up complete control of accessing the funds if he needs them in a pinch.
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