Many people want a strategy that will address two of their primary retirement needs: guaranteed lifetime income and a death benefit for their loved ones. But how can you repurpose their assets to achieve both goals at the same time? Here is an idea that may satisfy both needs and exceed your clients’ expectations.

Example:
A client needs $30,000 annual income. The client’s assets are $1,000,000 and he currently draws 3% for annual income needs. The net effect is that the client receives $20,000 of annual income due to 33% ordinary income tax.

There are a few problems with this strategy. First, the annual income is too low after taxes. Also, the current strategy does not maintain the principal as a death benefit for loved ones. The client’s goal is therefore to increase annual income while maintaining the principal as a death benefit.

Proposed strategy:
If the client’s assets are $1,000,000, he could purchase Life-Only SPIA with that money, which has a lifetime payout of $126,000 per year. He can then purchase a $1,000,000 life insurance policy for $74,000 per year. Only 14% of each $126,000 payment will be taxable as ordinary income. The tax impact on the remaining $52,000 is just $6,200. This will give the client $45,800 of annual income, which is more than twice what he had been receiving. Plus, his loved ones will receive the full $1,000,000 tax free!

For a diagram of this example, click here.

If you think you might have a client that would be a good fit for this model, give me a call at (800) 951-3033.

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