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A Split Annuity is not an annuity policy but a combination of two annuity products. A fixed period immediate annuity and a single premium tax deferred annuity. Structured in such away as to produce immediate tax-advantaged income for a guaranteed period of time and to restore your original principal at the end of that time period. A Deferred Annuity is used to restore the original principal at the end of the guaranteed period. While the Immediate Annuity provides a guaranteed monthly income for the same time period. Advantages of a Split Annuity 2) Tax-Advantaged Income: Since a significant portion of your monthly income from the Immediate Annuity is considered a return of your original investment, it is tax-advantaged. In our example below, 81% of your monthly income payments would be Tax-Free. 3) Tax-Deferred Growth and Principal Preservation: The Deferred Annuity portion of the split-annuity concept offers tax-deferred growth and you earn an interest rate that historically has been higher than average CD rates. In addition, your original principal is restored at the end of the guaranteed period which allows you to start the process over again at prevailing interest rates.
Please note that the illustration is based on a guaranteed interest rate of 5.50% for 10 years. Withdrawals from an annuity prior to age 59 1/2 may result in a 10% penalty tax imposed by the IRS. Annuities are not FDIC insured. | |||||||||||||||||||||||||||||||||
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