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SPLIT-ANNUITY
Understanding Split-Annuities:
A Balanced Approach to Retirement Income
A split-annuity is a strategic financial product that combines both immediate and deferred annuities to provide a balanced approach to income generation and growth potential. This approach aims to offer a reliable income stream while allowing for tax-deferred growth, making it an attractive option for retirees looking to optimize their financial plans.
A split-funded annuity, also known as a combination annuity, strategically allocates your investment between an immediate annuity and a deferred annuity. This approach allows you to begin receiving payments right away from the immediate annuity, providing an instant income stream for your current needs. Simultaneously, the remaining portion of your investment is placed into a deferred annuity, where it can grow tax-deferred over time. Once the deferred annuity matures, it starts to provide larger payments, enhancing your financial security in the future. This dual strategy effectively balances immediate income with long-term growth, making it an attractive option for comprehensive retirement planning.
Is a Split-Funded Annuity Right for you?
Many individuals seek not only to generate the retirement income they need but also to preserve their principal. Bank savings often fall short of providing sufficient returns, and exposing your retirement savings to market volatility can be nerve-wracking. Fortunately, there is a solution that offers guaranteed, tax-advantaged income along with principal preservation: the split annuity.
A split-annuity combines the benefits of two distinct annuities: an immediate annuity and a tax-deferred annuity. The immediate annuity provides you with monthly income almost immediately, ensuring that a portion of your investment delivers regular payouts. While this leads to minimal growth in the immediate annuity due to the quick payout, the remaining funds are placed in a tax-deferred annuity. This allows them to grow at a minimum rate of 3%, potentially reaching up to 7%, without being taxed until withdrawal. This dual strategy enables you to enjoy a reliable income stream while simultaneously growing your remaining funds tax-deferred with principal protection.
The structured approach of a split annuity produces immediate tax-advantaged income for a promised period, ultimately restoring your original principal by the end of that period. Whether or not a split annuity is suitable for you depends on your specific retirement objectives. If your goals include dependable income, tax deferral, and principal preservation, the split-annuity concept is worth exploring. It can be particularly beneficial if you are currently living off interest from a brokerage account or similar investments. This strategy helps mitigate the concerns of daily market volatility, enabling you to enjoy the finer things in life with greater financial peace of mind.
A split-annuity offers a harmonious blend of immediate income security and long-term growth potential, making it an excellent choice for optimizing your retirement plan. By combining the stability of immediate annuities with the growth opportunities of deferred annuities, you can secure a dependable income stream and enhance your financial future. Speak with a trusted financial advisor to explore if a split annuity is the right fit for your retirement strategy and to customize a plan that meets your individual goals.
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