Deferred Income Annuities can be structured with several payout options to meet your needs, the needs of both you and your spouse, and/or potential legacy options for your beneficiary(s) (your children and/or grandchildren). The amount of income you receive depends on several factors, including your age and life expectancy, gender, premium amount, and your chosen payout option, and interest rates in effect at the time the policy is issued. The longer you delay taking payments from a Deferred Income Annuity - the higher the payment will be.
Below are two of the most common Deferred Income Annuity payout options, followed by some examples:
Life With Cash Refund Payout Option: If structured correctly, this Deferred Income Annuity payout option will pay income for one lifetime (and the lifetime of one other person if a Joint Life policy), starting at a predetermined time in the future. 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 Payout Option ensures that all your money will go to you or your named beneficiary(s), and not a penny to the insurance company.
Life With Installment Refund Payout Option: If structured correctly, this Deferred Income Annuity payout option will pay income for one lifetime (and the lifetime of one other person if a Joint Life policy), starting at a predetermined time in the future. 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 Payout Option entitles the beneficiary(s) to receive the total of the premium less all payments made on a scheduled installment basis* This payout option also ensures that all your money will go to you or your named beneficiary(s), and not a penny to the insurance company.
In certain situations, the Life With Installment Refund Payout 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 payout 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.
Deferred Income Annuities are a powerful retirement income planning tool and offer many important advantages, including:
> Income can be deferred as short as two years up to 40 years: Income payments must begin by age 85; 70 1/2 for qualified policies.
> Simple: Once a Deferred Income Annuity is funded, the only work on your part is to collect your regular payments starting at a predetermined time in the future (which can be sent directly to your bank account).
> Sound: Deferred Income Annuities are not subject to market losses.
> Secure (helps solve for longevity risk): You receive a stream of guaranteed lifetime income payments starting at a specific time in the future. Deferred Income Annuities provide stable lifetime income which can never be outlived (or which may be guaranteed for a certain period).
> Safety of principal: Deferred Income Annuities are "transfer of risk" tools that are guaranteed by the assets of the insurer. We work with only the highest rated insurance companies in the industry.
> Potential higher income payments: Each Deferred Income Annuity income payment you receive is comprised of three things: (1) a return of your premium, (2) interest, and (3) a component from risk pooling (which only an insurance company can provide).
> Preferred tax treatment (Exclusion Ratio Benefit): Deferred Income Annuities benefit from deferring taxation by spreading out income over time. Each payout includes interest and a return of principal which creates a tax-favored stream of income with an exclusion allowance; whereas a systematic withdrawal approach will tend to front load the taxation. Deferred Income Annuities also differ from other types of annuities which have a "front-loaded" tax burden. A Deferred Income Annuity may also be a good strategy to defer taxes until later in retirement when you may be taxed at a lower rate.
> You can keep up with inflation: Most Deferred Income Annuities offer inflation protection as an optional rider known as a COLA (Cost Of Living Adjustment) which can be chosen at the time of purchase, that can cause income payments to increase at a set rate annually, to help protect your income from the effects of inflation throughout your retirement.
> They are perfect for rollovers: Rolling some of your IRA, 401(k), 403(b) or employer-sponsored retirement plan into a Deferred Income Annuity is an easy way to turn that money into exactly what is was intended for - a steady stream of income, starting at a predetermined time in the future, you can count on for the rest of your life.
> Lifestyle and a smooth transition: Lifestyle is not a five-star mutual fund. Lifestyle is knowing that you or your spouse will have enough money to live comfortably if something happens to one of you. Deferred Income Annuities can help provide a smoother transition for a surviving spouse who may not be as familiar with investing, so he or she can go about his or her life without having to worry about financial security.
> They can cover your loved ones too: You can purchase a Joint Life Deferred Income Annuity 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.
> Avoids probate: If an option with a death benefit is chosen, any remainder in your Deferred Income Annuity can usually efficiently pass outside of probate and be paid to your heirs within days after all required paperwork is received in good order, in a lump sum or in installment payments over time (depending upon the selection you made when the contract was set up). That allows your loved ones to bypass the long, painful and costly probate process - saving them time, court costs, administrative costs and legal fees - and leaves your heirs money instead of family court battles and legal fees.
> Deferred Income Annuities can be easily structured for legacy planning to create a lump sum legacy or an income legacy for your heirs: There is a common misconception that the insurance company keeps what's left of your money when you die. If structured correctly, a Deferred Income Annuity can create (1) a lump sum legacy for your heirs, with 100% of the unused premium passing directly to your beneficiary(s) upon your death or (2) an income legacy for your heirs, leaving an income stream of the unused premium to your beneficiary(s) as part of your overall legacy plan.
Note:Payout options vary and can be used to maximize your income or create a legacy. Death benefits are contingent on the payout option you choose and the amount of income you receive over the life of the policy.
> Protection from cognitive decline: Deferred Income Annuities can help protect you and/or your spouse from the travails of cognitive decline, which could someday limit the ability to make complex decisions about suitable investments and withdrawal strategies.
> Protection from creditors and predators: If you are a high net worth individual looking for both creditor and predator protection - fixed annuities are fully protected and shielded from creditors and frivolous lawsuits in certain states - and can provide the legal safety net needed to fully protect your assets.
> Can be used to create Guaranteed Lifetime Income Annuity Ladders.
> No annual fees.
"Investors planning for retirement
want simple solutions with guaranteed income."
- Leeland Gray
Investors planning for retirement want simple solutions with guaranteed income. Deferred Income Annuities are an important retirement planning tool created to do just that - if you need income later - and you want to take proactive steps to lock in a future guaranteed income stream to help simplify your future financial life - and help solve for longevity risk, so you don't outlive your money.
You can put money into a Deferred Income Annuity now, and then, two to 40 years later, you can activate a stream of income that is guaranteed to last a lifetime even if you live to 100 or beyond. 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, depending upon what age you turn on your income. It's like getting an old-fashioned pension plan, but you build it yourself.
For example, a 55-year-old preparing for retirement could deposit premium now, with the intention of activating a future monthly income stream for life later, beginning at age 65, when he/she plans to retire and will no longer receive a monthly paycheck from his/her employer to cover retirement income and lifestyle needs.
If your investment portfolio suffers losses shortly before you retire, or during retirement, losses coupled with retirement income withdrawals can send your investment portfolio spiraling downward, and you may suddenly find yourself in a serious bind 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 guarantee solutions act as a transfer of risk strategy from your investment portfolio, that is subject to stock market losses, to create your own "pension-like" guaranteed income stream for life, so you don't outlive your money.
Lifetime income guarantee solutions can start immediately, or at a specific time in the future:
Note: The remainder of this discussion focuses on the Guaranteed Income Later solutions. Click on the Guaranteed Income Now drop down tab to learn about the Guaranteed Income Now solutions.
Green Pastures complements the investment management programs with retirement income planning solutions that focus on principal protection, lifetime income guarantees, and legacy planning.
We provide simple retirement income planning solutions - designed to deliver the guaranteed lifetime income part of your retirement income portfolio - lower the risk of your overall investment portfolio - and help solve for longevity risk - so you do not outlive your money.
Don't sweat retirement! Relax with the certainty of guaranteed income for life from a Deferred Income Annuity starting at a later date. Enjoy retirement by taking some risk off your shoulders and sleep better at night from not having to worry so much about outliving your money. The best way to gain an understanding of how Deferred Income Annuities work is to request a Personalized Annuity Illustration unique to your situation - which Green Pastures will be happy to provide.
To learn more about how you may benefit from Green Pastures Guaranteed Income For Life Solutions: Guaranteed Income Later, please call us at 203.452.8100 or 866.479.3258 or email us via the Contact Us tab.
Also, go to the Home Page and sign up to receive our free Monthly E-Update, which includes payout rate updates for Green Pastures Guaranteed Income For Life Solutions: Guaranteed Income Later and other fixed-income opportunities.
"Lifetime income means lifestyle income -
and the peace of mind of never outliving your money."
- Leeland Gray
Any discussion regarding Deferred Income Annuities should include at least a brief discussion regarding Social Security, the foundation block of most folk's guaranteed retirement income plan. Click on the Exhibit F link below.
You can purchase a Deferred Income Annuity from an insurance company with a single, lump sum amount (a premium) and/or you can make additional contributions over time (a flexible premium purchase).* Future income payments are based on rates at the time each individual premium payment is received.
*While most Deferred Income Annuities offer both premium options, it is important to read the Deferred Income Annuity product Fact Sheet for complete information and restrictions that may apply, prior to making any decision to purchase a Deferred Income Annuity product.
In return, the insurance company promises to make regular payments to you (or to another payee you specify) starting at a specific time in the future, for a chosen length of time - most commonly for the remainder of your life - no matter how long you live. Most Deferred Income Annuity investors typically choose to receive monthly payments, 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.
In exchange for the future guaranteed lifetime income payments, you give up the right to demand the return of your original premium.
Note: Some Deferred Income Annuities do offer a Cash Out Option that will allow you to cash out of your Deferred Income Annuity at a discounted amount (a lower amount) before the future income stream begins. You should review a product Fact Sheet, for complete information and restrictions that may apply, prior to making any decision to purchase a Deferred Income Annuity product.
Deferred Income Annuities 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). Deferred Income Annuity payments are taxed depending upon the source of the funds you use to purchase it.
"THE ONLY INVESTING CERTAINTY IS NOTHING IS CERTAIN -
PLAN FOR THE UNPLANNED!"
- Leeland Gray
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 portfolio - and Deferred Income Annuities can help you accomplish this goal.
In addition, as you grow older, the 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 lifetime income guarantee solutions during the retirement income distribution phase. Allocating just a portion of your investment portfolio to a Deferred Income Annuity will provide you with a "pension-like" guaranteed income stream you can count on for the rest of your life starting at a later date, regardless of how your investment portfolio performs.
We believe the best way to utilize Deferred Income Annuities is in conjunction with your investment portfolio. Green Pastures complements the investment management programs with Immediate Income Annuities (learn about Immediate Income Annuities in the Guaranteed Income Now drop down tab section) and Deferred Income 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 Immediate Income Annuities and/or Deferred Income Annuities 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, you risk attitude, where you want to live, your lifestyle, your health, your family's longevity history and what you want to leave your heirs.
While Deferred Income Annuities aren't for everyone, they are a great transfer of risk solution that specifically solves for principal protection, lifetime income guarantees, and legacy planning. If you need to solve for one of these items, then you may want to consider adding a Deferred Income Annuity to your investment portfolio to deliver the guaranteed lifetime income part of your retirement income portfolio starting at a later date - so you don't outlive your money.
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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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