All About Split Annuities
Annuities have been a sound financial plan for people who have retired and have no other means of earning income. Immediate annuity provides fixed income to retirees over a certain period of time and a major portion of this income is not taxed. Deferred annuity accumulates tax free income and the return becomes equal to the originally invested amount after a specific time period. There are various advantages of investing in one single annuity. The advantages increase if investment is made in the combination of two types of annuity.
As stated earlier split annuity is a combination of both annuity strategies. The return gained from this annuity is tax efficient. By opting for split annuity; you gain the advantage of steady return and accumulation of return. Steady return is gained from the amount of money invested in immediate annuity and accumulation of return is a part of deferred annuity. The accumulated return; in case of deferred annuity equals to the originally deposited amount. Once the tenure of these annuities is over; the money can be reinvested and the program can be restructured.
Split annuity program is a combination of single premium deferred and immediate annuity programs. This is an intelligent decision as it provides tax efficient income. When you opt for split annuity; you gain a steady and fixed flow of income from immediate annuity over a specific period of time. During this tenure; deferred annuity accumulates on fixed interest basis and your starting investment amount is restored. After this period is over; you can restructure the program according to your needs and re-invest in the program.
The investor gains a fixed amount of return each month from immediate annuity package. The return does not change according to varying market conditions.
When you purchase split annuity you gain the benefit of getting a smooth and fixed flow of income from immediate annuity program. The return does not change with changes in market and economy.
The huge portion of the amount earned from annuity plan is not charged with tax and you are not liable to pay Social Security tax on the income earned from this annuity. Only the total amount of return from deferred annuity is counted as income. The amount being accumulated each year or month is not considered as income.
The successors and beneficiaries of a split annuity package even gain benefit. They gain additional death benefits in case of death from deferred annuity investment. Returns from immediate annuity package are even offered to the beneficiary.
Split annuity program keeps your capital secure and you constantly gain from tax efficient income for the mutually agreed period of time. In case of deferred annuity; your return equals to the amount of your initial deposit of capital.
Split annuity plan can be very difficult to understand as it includes the combination of two different forms of annuities which are very hard to understand. The total amount of investment in each annuity; needs to be calculated using different factors and these annuities need to be arranged in right way in terms of options. After structuring split annuities in appropriate manner; you can easily enjoy the various benefits offered by this strategy after retirement.
Article Source: FxTradingStock.com
About the Author
Learn more about split annuity. Stop by Nathan Rogerson's site where you can get a free guide on annuities and what it can do for you.
by: Nathan Rogerson
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Word Count: 551
Date: Sun, 2 Jan 2011
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