Split Annuity Concept

Split Annuity Concept Defined

If you or your loved one is disabled, retiree or dependent on wages to pay for your lifestyle needs and medical expenses, then having the principal assets uncovered to the ups and downs of stock-market can be distressing and perhaps even lethal to your fiscal plans. The split annuity concept for structured agreements offers income-tax free ‘cash flow’. It also offers principal safety through the allotment of the structured agreement into two or more payments, each matching life or fixed period annuity for the income with ‘deferred lump sum annuity’ for growth.

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A split annuity is in fact a combination of two annuity plans; single-premium immediate annuity and single-premium tax-deferred annuity. This annuity is well structured to render an immediate assured income for certain time period (usually seven to ten years) and to assure the protection of original principal amount of the client at the end of predetermined time period. As far as the total amount of income is concerned, it largely depends on the money paid in for each plan, current rates, and the terms of contracts.

The Split Annuity Concept

The concept can also be utilized as an outstanding fiscal asset managing tool to make sure that your regular or fixed payments are automatically met. For instance, for the payment of fixed mortgage, the income section of split annuity can be credited easily to a bank account that is debited automatically for monthly payment sum. The deferred annuity also rebuilds principal amount simultaneously in the backdrop and reinstates your original sum over a stipulated time period. Some key advantages of the concept are:

• Reliable regular takings: Immediate split annuity can complement your regular income by facilitating you with guaranteed, predictable and safe cash flow. Based upon your particular income needs, immediate annuities can create regular monthly income stream, anywhere from five to twenty five years.

• Tax advantages: Since a considerable part of your income from immediate annuities is taken as return of original investment, it is actually tax advantage as it saves your money on federal taxes.

• Principal preservation and tax deferred growth: Deferred annuity part of split annuity provides you tax deferred growth, and you can earn the rates that are customarily much more than average bank-rates.

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The payments can be obtained in numerous different modes such as bi-weekly, weekly, quarterly monthly, annual and semi – annual. The payment can be deposited electronically, directly into your savings or checking accounts for your ease.

Regardless of the present marketing circumstances, you can be rest assured that your income will not be less than anticipated, when you enter into split annuity plan. If you want, you can also ask for assured cost of ‘living adjustment feature’, which could even add to the benefits annually offered by a fixed proportion.

In the event of your demise before the conclusion of guaranteed time period, the remaining payments are made to your real estate or beneficiaries as applicable.

To conclude, it is important to be on familiar terms with entire split annuity concept and its essential tips prior to buying the plan.

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