Single Premium Immediate Annuity
Live Example (my mother in law)
 

Three years ago my mother-in-law  transferred her low-interest taxable Certificate of Deposit to a Five Year Tax-Deferred Annuity that guaranteed 6.6% per year. The amount deposited was $ 158,536. She had been taking out the interest which gave her $10,463 per year  income (100% taxable as the withdrawals were interest only) 

This year the annuity value was $ 168,000 (even with the interest amounts she has already withdrawn) and offered a surrender value of $ 165,000.

Her problem was that in 2 more years she would in all likelihood be looking at a significant drop in her income since at that time the guaranteed 6.6% will come to it's 5 year end. With the current interest scenario, it's very difficult to visualize finding a carrier with a similarly high interest rate product that she could roll her money into and her retrievable income at that time would probably be less than $8,000 per year.. 

She wanted an investment she could depend on that was was not going to place in her a situation where she would "run out of money," plus a guarantee that if there was residual that amount would go to her heirs.

With my assistance she decided to surrender the annuity (for $ 165,000 ) and reinvest in a Single Premium Immediate Annuity (SPIA). We chose a highly rated insurance company offering a Lifetime Income with an Installment Refund* (explained below).
In her case we did a 1035 exchange so her gain in the  5 Year Annuity would be rolled over into the new SPIA annuity without any immediate tax liability.

What she will now receive on a monthly basis, for as long as she lives, is  $1,524.43, (equaling $18,293.16 yearly). This is a 74% increase over the amount she could take out each year from the annuity and probably will calculate to an even greater  percentage than that 2 years from now when her 6.6% interest rate ceases and she would have needed to select another investment..

Not only does her income increase by 74% but approximately 79% of that income will be received tax-free for approximately 9 years (after which 100% of the income will be taxable.)

The Installment Refund* feature of the annuity guarantees that if she dies prior to receiving the full $165,000 she paid as premium, the insurance company will continue the payments to the beneficiary until this full amount has been received.

In summary we were able to :
●significantly increase her income for her life time on a tax-favored basis,
●guarantee an income for life so she will never face a situation where she "runs out of money" and also ●guarantee the full distribution of the  premium amount which, if not used by her, would end up with her children

She's more secure, both financially and psychologically; relieved that she will never fall into a totally dependent situation; and like all mothers, happy that any monies "left over" will go to her kids.

SPIA's are tremendous tools for retirees and as in the case of my mother in law, solves a set of problems and concerns that no other product can provide.

For an illustration for your parent(s) or yourself, send us an email with the amount of premium to be considered and the name and birth date of the annuitant. We'll get back to you promptly with enough information for you to decide if it will solve the problem.