"Investors Planning For Retirement Want Simple Solutions With Guaranteed Income.”
You can purchase a SPIA from an insurance company with a single, lump sum amount called a premium. In return, the insurance company promises to make regular payments to you (or to another payee you specify) for the remainder of your life (i.e. “life annuity”) or for a specific period (i.e. “period certain”) – to create your own personal pension. Payments must begin between one month and one year after purchase.
Most investors typically choose to receive monthly payments for life, however, you may choose to receive quarterly, semi-annual or yearly payments instead. These payments can be sent directly to your bank account for ease of use.
The great thing is when you put money in, you know exactly, to the penny, how much income you will receive at any future age. It's like getting an old-fashioned pension plan, but you build it yourself.
In exchange for the guaranteed lifetime income payments, you give up the right to demand the return of your original premium, so the purchase of a SPIA is usually an irrevocable decision that cannot be undone once the free-look period has expired following contract issue.
SPIAs can be funded from non-qualified monies (for example, assets held in individual or joint accounts) or qualified monies (for example, IRAs and assets rolled over from 401(k), 403(b) or employer-sponsored retirement plans). Payments are taxed depending upon the source of the funds you use to purchase it.
To Create Your Own Personal Pension Plan
If creating a guaranteed retirement income stream that you cannot outlive is appealing to you, and you are prepared to commit a portion of your investment and retirement income portfolio assets to that purpose, then a SPIA may be an excellent solution.
Before you decide to buy a SPIA, you need to fully understand the different options available, with complete information on the benefits and limitations that may apply, which may require additional expertise.
We will utilize industry leading software to select the top three SPIAs among the highest rated insurance companies that fit your financial situation and retirement income planning goals, help you make an informed decision to select the SPIA with the best payment term options, then provide you with a Personalized Annuity Illustration unique to your situation.
Simply call Green Pastures at 203.452.8100, email email@example.com or use the Contact Us tab. We’re here to help!
Following is a summary of key features and benefits that SPIAs offer:
SPIAs are issued by life insurance companies and guarantees are backed by the financial strength and claims paying ability of the issuing insurance company. Green Pastures works with only the highest rated insurance companies in the industry.
Annuities, with SPIAs, DIAs, QLACs and FIAs With Income Riders in the forefront, have a monopoly on lifetime income guarantees. There are simply no other financial products that can contractually guarantee lifetime income payments regardless of how long you live.
There are two ways to determine the best SPIA contractual guarantee for your situation:
(1) Provide a lump sum dollar amount to determine how much the SPIA monthly income stream would be, or
(2) Reverse engineer and provide your desired monthly income amount to back into the lump sum dollar amount required to generate the monthly income figure you need.
The reverse engineer method allows you to use as little of your money to contractually solve for your income goals.
If you live a long life and the SPIA account value goes to zero, then the insurance company is on the hook to continue paying you regardless of how long you live. For that simple reason, there is no ROI (i.e. “Return On Investment) calculation for your SPIA until you die. That’s why SPIA’s cannot be compared with typical investments.
If structured correctly, the Life With Cash Refund payment term option guarantees that if the annuitant(s) die(s), the beneficiary(s) will receive a lump sum equaling the premium amount less all payments made to the annuitant(s).
In certain situations, the Life With Installment Refund payment term option can also be used as a tool to control your legacy from the grave by providing installment payments over time to your heirs (instead of a lump sum inheritance). This payment term option can provide a lifetime income stream for you and your heirs - any may help you - help your heirs - save them from themselves - so they cannot access your death benefit proceeds in a lump sum and quickly squander away the money all at one time (which is oftentimes the case).
*Note: If the total payments received prior to the annuitant(s) death equal or exceed the initial premium paid for the policy, then no further payments will be made to the beneficiary(s) upon death.
One of the many advantages of SPIAs is that the payment term can be customized to meet your needs, the needs of you and your spouse, and/or potential legacy options for your children, grandchildren or other beneficiary(s). The amount of income you receive depends on several factors, including your age and life expectancy, gender, premium amount, and your chosen payment term option, and interest rates in effect at the time the policy is issued.
You can purchase a Joint Life SPIA if you want your income to also cover a loved one in retirement - like a spouse. By doing so, you can ensure that income will be paid to both of you throughout your lifetimes.
Some of the available payment term options include:
Single Life Annuities
> Single Life Only
> Single Life With Period Certain
> Single Life With Installment Refund
> Single Life With Cash Refund
Joint Life Annuities
> Joint Life Only
> Joint Life With Period Certain
> Joint :Life With Installment Refund
> Joint Life With Cash Refund
Period Certain Annuities
Below are two of the most popular SPIA payment term options:
Single Life With Cash Refund
If structured correctly, this SPIA payment term option will pay income for one lifetime (and the lifetime of one other person if a Joint Life policy). Additionally, this option guarantees that if the annuitant(s) die(s), the beneficiary(s) will receive a lump sum equaling the premium amount less all payments made to the annuitant(s).* The Life With Cash Refund payment term option ensures that all your money will go to you or your named beneficiary(s), and not a penny to the insurance company.
Single Life With Installment Refund
If structured correctly, this SPIA payment term option will pay income for one lifetime (and the lifetime of one other person if a Joint Life policy). Additionally, this option guarantees that if the annuitant(s) die(s), the beneficiary(s) will continue to receive the annuity payments until the premium is fully recovered. The Life With Installment Refund payment term option entitles the beneficiary(s) to receive the total of the premium less all payments made on a scheduled installment basis* The Life With Installment Refund payment term option ensures that all your money will go to you or your named beneficiary(s), and not a penny to the insurance company.
SPIAs can be purchased with either qualified funds (for example, assets held in IRA accounts) or non-qualified funds (for example, assets held in individual or joint accounts).
When a SPIA is purchased with qualified funds, the entire payment received each month from the qualified SPIA is fully taxable as income, because taxes have never been paid on those funds.
However, when a SPIA is purchased with non-qualified funds, a portion of each monthly income payment is considered a return of previously taxed principal (cost basis) and therefore excluded from taxation. The amount excluded from taxation is called the exclusion and is represented as a percentage of the monthly payout that is calculated by the issuing insurance company.
Relax and enjoy retirement by taking some risk off your shoulders. With the certainty of guaranteed income for life from a SPIA you will be able to sleep better at night from not having to worry so much about outliving your money.
Green Pastures is a big proponent of keeping things simple. When you get to a certain point in life, there's a tendency to want to simplify your life - including your investment and retirement income planning portfolio – Single Premium Immediate Annuities can help you accomplish this goal.
In addition, as you grow older, it is less likely your investment portfolio will be able to recover from significant market losses. While you can hope for higher returns from your investment portfolio, and your flexible Systematic Withdrawal Plan (SWP) to cover your retirement income and lifestyle needs, there is no guarantee the stock market will comply.
You may consider transitioning some of your investment portfolio from shouldering all of the risk during the asset accumulation growth phase, to transferring some of that risk to guaranteed lifetime income solutions during the retirement income distribution phase. Allocating just a portion of your investment portfolio to a SPIA will provide you with a "pension-like" guaranteed income stream you can count on for the rest of your life, regardless of how your investment portfolio performs.
We believe the best way to utilize SPIAs is in conjunction with your investment portfolio. Green Pastures complements the investment management programs with SPIAs and other types of annuities to help construct retirement income portfolios.
For example, a general rule of thumb would be to put 10% of your investment portfolio in a Deferred Income Annuity when you are 10 years from retirement and, over time, transition to 25% to 33% of your investment portfolio in SPIAs and/or DIAs when you retire.
With that being said, each individual's situation is different, and the best blend for you will depend on the size of your nest egg, your risk attitude, your lifestyle, where you want to live, your health, your family's longevity history and what you want to leave your heirs.
While SPIAs aren't for everyone, they are a great transfer of risk solution that specifically solves for principal protection, guaranteed lifetime income, and legacy planning. If you need to solve for one of these items, then you may want to consider adding a SPIA to your long term investment and retirement income portfolio - to deliver guaranteed lifetime income - so you don't outlive your money.
Investors planning for retirement want simple solutions with guaranteed income. SPIAs are an important retirement income planning tool created to do just that. SPIAs are the most efficient way to activate an immediate stream of guaranteed lifetime income payments even if you live to 100 or beyond.
SPIAs are one of the foundations of most retirement income plans that need a guaranteed income floor in addition to Social Security payments or employer pensions (if you should be so fortunate).
If your investment portfolio suffers losses as you near or are in retirement, losses coupled with retirement income withdrawals can send your investment and retirement income portfolio spiraling downward, and you may suddenly find yourself in a serious dilemma on meeting future retirement income planning needs.
During retirement, investors are typically conditioned to put their investments in some sort of traditional "balanced" asset allocation buy-and-hold portfolio of stocks and bonds which conventional wisdom says should perform well over the long run. But such "balanced" portfolios have failed before - and failed badly - as evidenced by the 2000-2002 and 2007-2009 bear markets which forever altered the future retirement income plans of countless investors.
Lifetime income guarantees act as a transfer of risk strategy from your investment portfolio, which is subject to stock market losses, to create your own "pension-like" guaranteed income stream for life, so you don't outlive your money.
Green Pastures complements the investment management programs with retirement income planning solutions that focus on principal protection, lifetime income guarantees, and legacy planning.
SPIAs (Single Premium Immediate Annuities), also called Immediate Annuities, are the original annuity designed to deliver guaranteed lifetime income - lower the risk of your overall investment and retirement income planning portfolio - and help solve for longevity risk - so you do not outlive your money. They are straightforward and efficient in delivering these benefits.
SPIAs are an excellent complement to Social Security, the foundation block of most guaranteed retirement income plans. Any discussion regarding DIAs should include a brief discussion regarding Social Security. To that end, please click on the Exhibit F link below.
"Lifetime income means lifestyle income -
and the peace of mind of never outliving your money."
"The Only Investing Certainty Is Nothing Is Certain -
Plan For The Unplanned!"
Green Pastures Wealth Management LLC | 145 Eden Hill Road | Easton, CT 06612 | Phone 203.452.8100 | Toll Free 866.479.3258
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