Split Annuity

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Split annuity. An annuity is a type of contract between an individual and an insurance company. The first tier can be an immediate or deferred annuity. A split annuity is typically used when an investor has a large sum of money and wants to receive an immediate income while still having money set aside for a future investment goal.

This allows you to receive payments from the annuity right away and collect bigger payments starting at some point in the future after the money has accumulated tax deferred. Yes you can split the proceeds of your retirement fund into a living and a guaranteed annuity or you can buy either two living or two conventional annuities from two different service providers. The two annuities that are combined to form a split annuity strategy are a period certain immediate income annuity and a fixed rate multi-year guaranteed annuity of the same duration structured in such a way 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 most commonly 10 years.

The Split Annuity is a combination of an immediate annuity and a deferred annuity structured to provide immediate income much of which is after tax dollars return of premium while returning the original premium before taxes. Stock funds based on. A split-funded annuity is a type of annuity that uses a portion of the principal to fund immediate monthly payments and then saves the remaining portion to fund a deferred annuity.

With a split-funded annuity you use part of your money to purchase an immediate annuity while the rest goes toward a deferred annuity. Some call this strategy a split annuity or combination annuity. The effects of different inflation rates can be illustrated easily.

The split annuity tax strategy is 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. However you cannot convert a conventional annuity into a living annuity or. The second choice is to transfer the amount awarded to you whether a specific dollar amount or percentage of total contract value via a direct transfer to your IRA.

Example Suppose you have 100000 in a bank certificate of deposit about to mature and you want to receive an income while keeping a portion invested. The purpose of a split annuity is to provide an income stream and to re-build principal at the same time. The Split Annuity calculator was created for advisors and provides the flexibility you need.