Category: Annuity - PFwise.com

QLAC 101 - Which Carriers Have the Best QLACs?

2/7/2020

In our last blogpost, we discussed factors to consider when purchasing QLAC. Now the question - which carriers have the best QLAC products?

We recommend products from AIG, Lincoln, and Principal.

Below is up-to-date information about AIG's QLAC product, including producer and consumer guides, sales ideas, fact sheets, and more. If you are interested in the other carriers' QLAC products, please contact us.

QLAC 101 - Factors to Consider Before Purchasing QLAC

2/6/2020

In our previous blogposts, we discussed what is QLAC and showed an example of QLAC. Now we will discuss what factors to consider before purchasing QLAC.

The decision to purchase a QLAC is a personal one and should take into account your family's needs and financial goals. For instance, you may not want to take RMDs on the entire pretax balance of your IRA if doing so would provide you with more income than you need. But will your financial standing be as strong 20 or even 10 years from now? A QLAC would allow you to enjoy your earlier retirement years knowing that you have guaranteed income in place when you really might need it.

Specifically, the following QLAC related decisions should be considers.

Single or joint life?
If you are married, you can choose a joint contract, which will provide income payments that will continue for as long as one of you is alive. Choosing a joint contract may decrease your income payments—compared with a single life contract—but may also provide needed income for your spouse should you die first.

Include a cash refund death benefit?
When purchasing a QLAC, the income lasts for your lifetime (joint contracts pay income for you and your spouse, as long as one of you is alive). You may also want to consider adding a cash refund death benefit. This provides for a lump sum paid to your beneficiaries if your lifetime payments do not exceed the dollar amount you invested in the QLAC. While a contract without the cash refund death benefit may provide higher income payments, it does not include beneficiary protection for your heirs.

When to start income?
A QLAC should be part of a broader income plan, to help ensure that your essential expenses like food, health care, and housing are covered during retirement—ideally with lifetime income sources such as Social Security, a pension, or lifetime annuities. Deciding on an income start date will depend on how this income stream will best fit into your overall plan. Here are some hypothetical examples of how someone might choose an income start date:

A 70-year-old retiree with an existing income stream that will stop at age 75 (for example, proceeds end from the sale of a business, the retiree stops working part time, inheritance income ceases) might start income at age 76 for the QLAC to replace the income that is ending.
A couple in their late 60s might like to include an income stream that begins at age 80 or 85 as part of their overall plan, to help cover higher anticipated health costs later in retirement.
A couple at age 65 might be comfortable taking withdrawals from their investment portfolio to cover their expenses at the beginning of their retirement, but they are concerned about the potential need for it to last 30 years or more. They might consider a QLAC that provides lifetime income starting at age 85 to help address these concerns.

Need to change the income start date?
For contracts that include a cash refund death benefit, you typically have the ability to change the income date by up to 5 years in either direction (subject to an age-85 maximum). For example, if you initially select age 78 as your income start date, you could subsequently change this date to any time from age 73 to age 83. Of course, the amount of income that you will receive will typically be adjusted to a lower amount if you decide to change the date to an earlier age, and a higher amount if you change the date to a later age.

In our next blogpost, we will show you some of the best QLAC providers.

QLAC 101 - How to Use QLAC?

2/5/2020

In our last blogpost, we discussed what is QLAC, now we will show how to use QLAC to create steady later in life income streams.

Let's say you own one or more traditional IRAs with a total balance of $200,000 as of December 31 of the previous year. You would be limited to using $50,000, which is 25% of $200,000 and is less than $135,000, to fund the QLAC. But if your total IRA balance is worth $540,000 or more, the maximum you can contribute to a QLAC is $135,000. Keep in mind that in both cases the money that remains in your IRA or 401(k) is still subject to RMDs.

An Example
Let's assume a woman is approaching age 70½ and does not need her full RMD to cover current expenses. By investing a portion of her traditional IRA assets in a QLAC at age 70, she would not have to take RMDs on the assets invested in the QLAC, and she would receive guaranteed lifetime income starting at a date of her choice, up to age 85.

During the deferral period, she would rely on Social Security, RMDs from the remaining money in her IRA, withdrawals from investments, and other income, such as part-time work or a sale of a business, to cover expenses. If she invests the $135,000 in a QLAC and defers to age 80, her guaranteed income would be $15,200 a year no matter what happens over time, and she would receive a total of $228,000 in payments if she lived to age 95—or more if she lived longer.

In our next blogpost, we will discuss what factors to consider if you should purchase QLAC or not.

QLAC 101 - What Is QLAC?

2/4/2020

Q. What is QLAC?

A. A QLAC is a Deferred Income Annuity (DIA) that can be funded only with assets from a traditional IRA or an eligible employer-sponsored qualified plan such as a 401(k), 403(b), or governmental 457(b).

The US Treasury Department issued a rule creating Qualified Longevity Annuity Contracts (QLACs) in 2014. QLACs allow you to use a portion of your balance in qualified accounts—like a traditional IRA or 401(k)—to purchase a deferred income annuity3 (DIA) and not have that money be subject to RMDs starting at age 72.

At the time of purchase, you can select an income start date up to age 85, and the amount you invest in a QLAC is removed from future RMD calculations. QLACs address one of the biggest concerns among individuals in retirement: making sure they don't outlive their savings.

Why Purchase QLAC?
There are two main reasons.

First, you can delay required minimum distributions (RMDs) on the money in your QLAC. Without a QLAC, you would be forced to start taking distributions based on the total value of that retirement account at age 72 (formerly 70 ½) - and paying income tax on those distributions. Many people don’t need distributions at that age, and don’t want to pay tax on that money yet. With a QLAC, you won’t have any RMDs on premiums paid until age 85.

Second, longevity. If you are worried about outliving your funds, a QLAC solves the problem. It provides guaranteed monthly income as long as you live. Plus, you get the amount you were promised at purchase, no matter what’s happened to the stock market or interest rate in the interim. You're effectively transferring that risk to the insurer.

In our next blogpost, we will show you a few QLAC examples about how it works.

Will the bill mean I find annuities in my 401(k) plan?

1/18/2020

Q. Will the Secure Act bill mean I could find annuities in my 401(k) plan?

A. Based on an article at Barron's, one provision of the bill eases the path for employers to offer annuities as part of their retirement plans by providing safe-harbor language that takes them off the hook if an insurer whose products they use runs into financial trouble. (The employers continue to have fiduciary duty in picking appropriate products, or annuities in this case.)

Academics have long discussed the merits of having some sort of guaranteed income option inside plans to help retirees when they start drawing on their nest egg. The concern is that the bill leaves the door open to all sorts of annuities, not just the low-cost, simple ones academics favor.

Policy watchers would have liked some framework for what annuities are allowed in a plan. As for when retirement savers will find such options in their plans, State Street's Kahn recommends thinking along the lines of evolution, rather than revolution. Employers have been looking at all sorts of guaranteed lifetime-income options and financial-services companies have been working on solutions for years, including target-date funds that incorporate some sort of guaranteed income option, Kahn says.

If nothing else, the bill will likely bring attention to the need for providing some sort of guaranteed income stream for retirees beyond Social Security.

Protective Guaranteed Income Annuity - All About the Numbers

1/16/2020

The product highlights below show how Protective Guaranteed Income Indexed Annuity provides three times the guarantees with:

Guaranteed Income for Life
Fueled by a 4% roll-up to the benefit base (which can double in 15 years) thanks to opportunities for bonuses along the way.

Guaranteed Rate Cap for Term
A guaranteed rate cap that won't change for the term so you will never be surprised by a lower renewal rate during the withdrawal charge period.

Guaranteed Flexibility
Two unique income options chosen at benefit election, with access to competitive withdrawal rates at key ages both now or later.

How Much Could a $250,000 Single Premium Immediate Annuity (SPIA) Pay?

12/14/2019

If you are interested in knowing how much your $250,000 could lead to lifetime payment, below is a table from American National showing you an hypothetical example -

Why Every Retiree Needs To Have SPIA In Their Retirement Portfolio

11/30/2019

Q. Why every retiree should consider a Single Premium Immediate Annuity product in his or her retirement portfolio?

A. SPIA should be considered by every retiree for two reasons:

1. Eliminate Longevity Risk
A SPIA is an excellent way to reduce the fear of running out of money. It can allow an individual to spend the growth in their portfolio on travel, new cars, hobbies and other activities of daily living that occur in retirement. Retirement has become a new Life Stage and people want to enjoy retirement but it takes income to do so and a SPIA provides that income and they will receive it as long as they are alive.

2. Avoid Unnecessary Losses in a Down Market
By covering fixed and necessary living expenses with a SPIA, an individual has reduced the risk of loss in retirement portfolio. They no longer need to sell off assets in a downmarket in order to fund everyday living expenses. Their social security and Immediate annuity income cover all those necessary expenses.

How to Turn RMDs Into an Income Advantage

11/27/2019

The Power Series of Index Annuities® with the Lifetime Income Plus FlexS guaranteed living benefit (GLB) rider provide with the flexibility to take Required Minimum Distributions (RMDs) without eliminating rollups or locking in withdrawal rate for life.

See a hypothetical example below - income is guaranteed to grow for the first 10 contract years, even after RMDs begin. Plus, you can wait until you’re in a higher withdrawal age band to activate your rider and lock in more income for life.

How Grandparents Can Use Annuities To Create Multi-Generation Income

11/19/2019

Grandparents can pass retirement income to grandkids. The document below shows how to make it happen.

How to Grow Protected Lifetime Income While You Defer RMDs?

11/6/2019

The document below is a good description of QLAC and how to grow protected lifetime income while you defer RMDs.

Use Numbers to Show Why Delaying Social Security Payments Makes Sense

10/31/2019

Q. Why people usually advise wait until 70 to take social security benefits?

A. It's because you will be buying the best annuity in the world! Here is an example with numbers to illustrate:

Consider someone who is age 66 right now, if she delays taking social security until she is age 70, she will have to pull about $36,000 annually from her savings over the 4 years in order to replace the benefits that she would have gotten if she claimed.

In return, however, when she does claim at age 70, she will get a monthly benefit that is $1,040 higher than it would be had she claimed at age 66. To buy that $1,040 monthly payment with inflation protection as an annuity in the private market, it will cost her $252,000!

So in return for using $150,000 for 4 years, she would get a government annuity that is worth $252,000, that is a discount of 40%!

What Is QLAC and Why It Is Unique And GOOD For You?

9/15/2019

First, What Is DIA?

Is your mindset turning toward how to safeguard your retirement standard of living for many years ahead? A deferred income annuity (DIA) provides protected lifetime income in the future. While the income stream can be started as soon as 13 months after purchase, it also can be delayed for a long time (40 years in some cases).

Bottom line: The longer the deferral period, the larger the income payout amount.

Next, What is QLAC?

A qualified longevity annuity contract (QLAC) is a special type of DIA and it brings added advantages. It allows traditional IRA owners and defined contribution plan participants to ignore the QLAC funds in those accounts when calculating their RMDs. As long as the QLAC distributions are delayed, the associated Required Minimum Distributions (RMDs) and taxes are too.

2 Reasons why a QLAC stands out for modern retirements include:

No other qualified retirement product allows you to defer the start of your guaranteed income payments to as late as age 85
It’s the only way to defer RMDs past age 70½ (other than the “still working” exception)

American National's WealthQuest Citadel 7 Diamond Annuity Products

9/8/2019

Overview
Flexible premium. May include a first year interest rate enhancement. 10% surrender charge free withdrawals each contract year. 7 year surrender period.

PRINCIPAL GUARANTEE FEATURE
The Minimum Guaranteed Surrender Value is return of premiums paid less any cumulative withdrawals.

INTEREST RATE ENHANCEMENT
American National may offer an interest rate enhancement on all premium payments received in the first 36 months of the contract for one year. This enhancement is not guaranteed and is subject to change.

INTEREST RATE GUARANTEE
The declared annual effective interest rate for the initial premium and each subsequent premium payment will be guaranteed for two years from the date the premium payment is received. After two years, the interest rate is declared annually.

MINIMUM GUARANTEED INTEREST RATE:
NAIC Index. See rate sheet for current rate.

RATE LOCK:
60 days for 1035 Exchanges, CD Rollovers, Mutual Fund Transfers and Institutional Transfers

SURRENDER CHARGE SCHEDULE:
Year 1 2 3 4 5 6 7 8+
% 7 7 7 6 5 4 2 0

SURRENDER CHARGE FREE WITHDRAWALS
10% of annuity value as of the beginning of each contract year, including first year

SURRENDER CHARGE WAIVERS*

Confinement
Disability *Availability will vary by state

How To Create Secure Future Retirement Income - Part D

8/24/2019

In last blogpost, we discussed how does DIA work, now we will discuss how to determine if DIA is right for you.

Does DIA Make Sense For You?
These DIA products tend to be most beneficial for pre-retirees between the ages of 55 and 65 who are planning to retire in 5 to 10 years. In addition to reducing market and longevity risk—an advantage of all fixed annuities—DIAs have the following advantages over immediate annuities:

Potentially higher income. Because DIAs have a deferral period, the underlying investments have a longer duration and higher potential return (and higher risk) than annuities that start income payments immediately.
Chance to vary your interest rate exposure. Because you can add to your DIA before taking payments, you have the ability to adjust your interest rate exposure over time. If rates rise and you add new money, that could boost your guaranteed income stream at retirement.
A reason to stay the course. Locking in some guaranteed income through a DIA now may give you the confidence to maintain your target asset mix through market ups and downs, allowing you to establish, and maintain, an asset allocation more consistent with your investment time horizon, risk tolerance, and financial situation.
A means of reducing risk. Pre-retirees tend to shift to more conservative investments as retirement draws closer. Establishing guaranteed income well before retirement with a DIA puts that risk-reduction process in motion automatically. You might also avoid the need to sell equities at the wrong time—in a down market—to pay your expenses, because you've already put a DIA income resource into place.

If you are interested in DIA or other annuity products, please contact us.

How To Create Secure Future Retirement Income - Part C

8/23/2019

In last blogpost, we showed you a case study how DIA could be combined with 401k to create secure retirement income. Now we will explain how DIA works.

How Does DIA Work?
Income annuities are different from other investment options because they offer longevity risk pooling (referred to as mortality credits). Effectively, assets from annuitants with shorter life spans remain in “the mortality pool” to support the payouts collected by those annuitants with longer life spans. Put simply, the longer you live, the more money you will receive. This is why it is so challenging for an individual investor to replicate this income stream.

DIAs are able to leverage the mortality credits and turn a portion of your savings into a stream of income beginning anywhere between 2 and 40 years that will last over your lifetime. By investing in a DIA you are starting the planning process ahead of your retirement age. In return for investing early, you are potentially securing a higher income amount than if you waited and invested in an immediate income annuity.

Why Guarantee Your Income?
Guaranteed income products serve a very particular purpose. They can shift some key retirement risks--longevity and market risk—off your shoulders and onto the issuing insurance company.

When you buy a DIA, you shift the risk of outliving your income to the insurer, who promises to pay you a certain amount of income for either a predetermined period of time or the rest of your life. The insurer also assumes the interest and market risk associated with your DIA investment; even if the market and interest rates are down significantly during your deferral period, you still get the same guaranteed rate of income.

However, DIAs, like any investment product, aren't right for everyone. There is an element of trading growth potential for a guaranteed future lifetime income stream. Part of that trade-off is giving up some flexibility (access), which is why it’s better to allocate a portion, rather than all, of your savings to a DIA. The amount you commit to a DIA is irrevocable, but the tradeoff is being confident that your income will be there when you need it.

In our next blogpost, we will discuss how to determine if DIA is right for you.

How To Create Secure Future Retirement Income - Part B

8/22/2019

In last blogpost, we showed you what is DIA and its advantages. Now we will use a case study to show its value.

Consider a hypothetical example of how a DIA might work under different market conditions.

Imagine a 60-year-old couple with a hypothetical retirement portfolio of $500,000 who wants to generate income starting at age 65. The example below illustrates 2 different ways of creating income:

Option 1
The couple decides to invest their $500,000 in a balanced target asset mix (TAM) (50% stock/40% bonds/10% short term), then starts taking income at age 65. The plan is to use only a Systematic Withdrawal Plan (SWP) with an initial 4% annual withdrawal rate and payments increasing 2.5% on each payment anniversary thereafter.

Option 2
The couple decides to diversify and splits the $500,000 as follows: (1) $250,000 is invested in a balanced TAM for 5 years; then, at age 65, income is taken using a SWP with an initial 4% annual withdrawal rate and payments increasing 2.5% on each payment anniversary thereafter; and (2) $250,000 is used to invest in a joint life deferred income annuity contract with a cash refund and Consumer Price Index (CPI) cost-of-living adjustment (COLA), with payments starting at age 65.

As you can see, assuming average historical returns for the balanced TAM, the portfolio with the guaranteed income generated first-year monthly income that is $248 less than that generated from the portfolio without the guaranteed income. Because deferred income annuities are not exposed to market volatility, the income amount remains consistent regardless of a market downturn. Therefore, when historically low returns are assumed in the example, the portfolio with the guaranteed income outperformed the portfolio without the guaranteed income—generating first-year monthly income that is $361 higher.

One of the strongest reasons to buy a DIA is the foundation it provides for your retirement income plan. You establish a guaranteed level of income no matter what happens over the next several years, and are one step removed from the anxiety of watching the markets move every day with your retirement in sight.

Another consideration with deferred income annuities is the ability to invest incrementally over time by making additional payments. While most income annuities only allow a single investment, DIAs allow you to make additional investments to the annuity before your income payments—each additional investment subject to the interest rates available at the time of purchase—so you can increase your retirement income stream. By building your income plan in increments, you can stagger your investments with a range of interest rates and possibly take advantage of higher interest rates.

In next blogpost, we will discuss how does DIA work.

How To Create Secure Future Retirement Income - Part A

8/21/2019

With pensions increasingly a thing of the past, most Americans now need to build their own streams of income for a retirement that could last decades. The success of your individual retirement income plan will rely on 2 key factors:

Will you be able to create income that truly lasts your entire lifetime?
Will you trust it and stick to that plan even through periods of market volatility?

The Solution - Deferred Income Annuity (DIA)
That's where guaranteed income annuities may be able to help. These products are able to deliver a stream of income that you can rely on for either a predetermined period of time, or for the rest of your life. And, specifically, deferred income annuities (DIAs) let you lock in a stream of guaranteed income years before retirement, while reducing the effect of market volatility on your retirement income plan.

The Advantages of a DIA
The advantage of a DIA is that it offers a degree of certainty.

You can secure a portion of your retirement income years before entering retirement so you don't have to wait until the moment you retire to know what your investment will deliver in income. You can gain peace of mind and some flexibility with your other assets.

For some, using a portion of retirement assets to lock in guaranteed income for the first several years of retirement is an attractive option; knowing the income is secure, some investors may have the confidence to invest part of their retirement assets more aggressively during those early years.

While DIAs are an efficient way to generate income, keep in mind that you are giving up access to the assets you dedicate to this solution and the opportunity for potential market performance.

In next blogpost, we will show you a case study how DIA combined with your 401k investment could provide secure retirement income.

A Customized Retirement Solution From AIG

8/18/2019

A single premium tax deferred fix annuity is a good option for retirees seek fixed income.

American Pathway SolutionsMYG offers:

Five-, six-, seven- or 10-year initial interest rate guarantee options* (10-year term not available in New York)
Up to 15% free annual withdrawals after one year
Activities of Daily Living withdrawal charge waiver in case of emergency

Please see the product flyer below for more details:

Use An Annuity To Pay For College Expenses

8/11/2019

Saving and paying for college can be a challenging goal and you may be among the many people who worry about the financial pressure that funding higher education can bring. Thankfully for parents and grandparents, it's never too early to start saving and there are many options to help you prepare for one of the most important milestones in the lives of your children or grandchildren.

529 plans
A common option used for paying for college and educational expenses is a 529 plan, which is an education savings plan sponsored by a state or state agency. A 529 plan can be purchased not only by parents, but also grandparents and other relatives. When you purchase a 529 plan, your earnings grow tax-deferred and any qualified withdrawals are tax-free. As a child reaches college age, he or she can use the accumulated funds to pay for qualified expenses including tuition, room and board, books and computer equipment. While 529 plans have many advantages and can be useful in preparing for the future, there are limitations to consider as well.

Limitations of 529 plans include:

An account can lose value due to market downturns
You pay penalties if the money is not used for education purposes
The account earnings can affect an application for financial aid
Many plans include yearly fees and administrative costs

Plus, if your child receives a scholarship, you will likely only need a portion of the money saved in your 529 plan. If you end up with remaining funds or if a child decides not to enroll in school, the beneficiary can be changed to another family member. However, if you do not have other family members looking to attend, you may have to pay significant penalties to withdraw your savings for other purposes, depending on the rules of your state's 529 plan.

Using an annuity
One tool to consider as part of an overall college saving strategy is a fixed or fixed indexed annuity. A significant benefit of these products is your account value can grow tax-deferred and is protected from downside market risk. So when the market is up, your money can grow, but when the market is down, you do not lose any of your hard-earned savings. Plus, if your child receives a scholarship or decides to pursue another path besides college, the money in your annuity can be accessed for other purposes.

Keep in mind that annuities are designed to help you reach long-term savings goals. While most annuities allow you to withdraw a certain amount each year without penalty, you'll likely pay charges on withdrawals over that amount during the annuity's withdrawal charge period. This period typically ranges from five to 10 years or more, depending on the annuity.

Helping pay tuition
As with many financial plans, there is no time like the present to begin saving. An annuity purchased when your children are young can assist with tuition costs down the road. One option would be to purchase an annuity with a withdrawal charge period that coincides with the length of time it takes for your child to reach college age. For example, if on your child's 8th birthday you purchase an annuity with a surrender charge period that ends in 10 years; your child will be 18 and entering college. At this time, you'll be outside the withdrawal charge period, meaning you'll have full access to the annuity's value to supplement tuition payments.

It's important to remember that withdrawals from an annuity may be subject to state and federal income tax. In most cases, withdrawals taken before age 59½ will also be subject to a 10 percent IRS penalty.

This Annuity Will Double Income Base In 10 Years

8/6/2019

If you are interested in knowing more about this product from American National, please contact us.

Use Annuity To Prevent 4 Major Retirement Risks

7/24/2019

This article below covers the 4 major retirement risks well and shows why annuity could be an effective tool to prevent these 4 common risks.

Fixed Annuity Sales Surge and An Example of Annuity Products

7/10/2019

New contracts reached a 10-year high as key stakeholders praised a bill before the U.S. Senate which could expand the products to more 401(k) plans.

5 Common Questions About Fixed Indexed Annuities

5/26/2019

Fixed indexed annuities (FIAs) can play an important role in one's retirement plans by offering growth potential, protection from loss due to market downturns, and the option for guaranteed lifetime income. Yet many people are less familiar with annuities in general — and FIAs in particular — than with financial products such as mutual funds. What's more, because FIAs have features of insurance and growth potential, they can seem more complicated than they really are.

In this blogpost, we answer five questions people commonly ask about FIAs, so you can make more informed decisions about adding annuities to your retirement plans.

1. How can a FIA help my retirement savings grow?
The opportunity to build retirement savings is a feature of FIAs that many people find appealing. FIAs offer the potential for interest credits that are tied to the performance of a stock market index — without having to invest directly in the market. If the index rises, you will receive a portion of that increase in the form of interest credits. If it declines, you may receive zero percent interest credits — but you'll never receive less than zero. What's more, the buildup within an FIA is not taxed until it's withdrawn, similar to retirement savings vehicles such as 401(k)s and non-Roth IRAs.

2. Why won't I benefit from all of the index gain?
This is a trade off: you may be willing to accept some limits on your upside potential in exchange for protection from loss due to market downturns.

3. What happens if the markets go down?
Savings in an FIA won't lose money in a market downturn because they are not invested directly in the markets. What's more, FIAs lock in previous interest gains, so that growth is also protected.

4. How do I use an FIA to help pay retirement expenses?
As annuities, FIAs can provide a guaranteed stream of income. Adding annuities to a retirement income plan can help build a larger retirement "paycheck" that won't fluctuate — unlike withdrawals from investments whose value rises and falls with the market.

5. Where does an FIA fit in my overall retirement plan?
FIAs can help meet a number of your needs, depending on your current mix of financial products, goals and primary concerns. Here are some major benefits:

o Accelerating retirement savings: Unlike 401(k)s and IRAs, FIAs have no contribution limits for non-qualified premium. This feature may be especially appealing if you are older and looking to boost retirement savings, or if you have maxed out annual 401(k) and IRA contributions.

o Protection against longevity risk: Depending on the annuity, you may include an income rider for an additional fee. The rider can be used to provide a source of guaranteed income that can last a lifetime.

o Tax management: Unlike withdrawals from 401(k)s and IRAs, which are fully taxable (except Roth IRAs), you only pay taxes on the interest earned in your FIA for non-qualified premium. Because the income from an FIA is typically made up of a combination of interest and the return of your original premium, only a portion of it is taxable. This feature can help you use FIA income in conjunction with fully taxable withdrawals from other sources to lower your overall tax burden in retirement.

Case Studies from American National About How to Use Annuities

3/24/2019

Case Study: Help Your Parents Stop Worrying

The Challenge: Providing for parents that are resistant to assistance.
The Solution: Joint and Survivor Immediate Annuity

Anthony DiPaolo grew up in a poor New York neighborhood but he was happy as a child as he had a used computer his father had purchased for him that allowed him to go into his own world. After working his way through college, Anthony went to work for a Silicon Valley start-up. He was able to grow and develop his love for computers while working for a company that grew rapidly and gave out stock options. Twenty-five years later Anthony at the age of 47 had accumulated a net worth of ten million as his company was sold and his stock options paid out.

Anthony would visit his parents at least once per year and would ask them if they needed anything. Each time they would tell him they were fine. On a recent trip home Anthony talked to his cousin who would check in on his parents and his cousin told him that his parents really had very little money and were not eating right as they tried to stretch their meager social security benefits. His cousin said they were too proud to ask Anthony for money.

Anthony called his financial advisor back in California and asked him what he could do for his parents. He had offered them money before but they always refused. Anthony‘s advisor told him he could purchase a Joint and Survivor Immediate Annuity for his parents that would provide them sufficient funds to meet their lifestyle needs.

It was money they could not outlive and they would not have to ask Anthony for money. Anthony and his agent went over the application with his parents, had them sign as annuitants, and explained to his parents that they would soon begin receiving checks each month from an insurance company that would pay for their food, clothing, housing and entertainment.

Anthony’s parents were extremely proud people and did not want to ask their son to take care of them but by providing his parents a monthly income that they needed, he eliminated the need for them to ask him for money. Each month they would have enough money to meet all of their needs. Anthony could go home knowing that his parents would have the money to live on while preserving his parents pride in not having to ask their child for money.

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