Minimizing Expenses Is Not the Only Issue on Where to Retire

If you’re living off traditional income from ‘safe’ income-based investments, such as GICs and T-bills, to preserve a legacy for your loved ones, consider an annuity/life combo policy to increase your income yet preserve your investment for a legacy.

An annuity/life combo combines a traditional fixed income annuity with a life insurance policy.

The annuity provides a lifetime income while the life insurance benefit maintains your annuity investment for your beneficiaries when you die.

Because the fixed payment of the annuity is made up of an earnings component as well as a return of principal (investment) component, it generally produces a larger total payment then just the interest income of the ‘safe’ investment of equal value. And the latter is all taxable income.

Only the earnings component of the annuity represents taxable income to you. The return of principal portion is untaxed.  Both these portions are fixed for the length of the annuity.

With the larger overall payment of the annuity, a portion of the return of principal can pay for the life insurance policy to replace your annuity/life combo investment for your beneficiaries. 

A combo policy may satisfy the desires of individuals or couples who:

  • Are insurable and between the ages of 65 to 85
  • Are dissatisfied with current low interest rates
  • Want to minimize investment risks while maximizing after tax-retirement income
  • Seek to maximize government benefits and lower taxes
  • Desire a guaranteed income for life, and
  • Want to leave a tax-tree gift to their heirs.

A combo policy is not the answer for everyone. It’s simply a possible solution to your estate planning desires. Give us a call or fill out the card so we can help you find a solution suitable to your situation.

Note that annuities once annuitized cannot be surrendered for value.  Income from deferred annuities is taxed as ordinary income and withdrawals prior to age 59 ½ are subject to a 10% penalty.  Income from annuitization is taxed part as ordinary income and part as return of capital. Any guarantees are based on the claims paying ability of the insurance company. Annuities should be considered long term investments. Annuities are insurance products and subject to insurance related fees and expenses. The purchase of life insurance involves costs, fees, expenses and potential surrender charges and depends on the health of the applicant.  Not all applicants are insurable. If a policy is structured as a modified endowment contract, withdrawals will be subject to tax as ordinary income and withdrawals prior to age 59 ½ are subject to a 10% penalty.  Note that principal and interest of U.S. Treasury securities are guaranteed by the full faith and credit of the U.S.Government.

JD Smith, representative, securities offered through Lowell and Company

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