Split Annuity Solution for Income and Tax Savings
If you’d like to take a slice out of your tax bill, the split annuity might be for you. The split annuity generates income, much of which is currently non-taxable. Here’s how it works. (Let’s assume a premium of $100,000.) $70496 of the premium is placed in a deferred annuity to grow, guaranteed at 6% for six years. The remainder ($29,504) is placed in an immediate annuity to give you a monthly check of $462.90 for six years. Of the $462.90, 88.5% is tax free. If your combined federal and state tax bracket is 35%, this $462.90 per month is a taxable equivalent yield of 8.2%. Best of all, at the end of six years, your deferred annuity is worth $100,000—the same as your original premium. It’s a combination of income, tax savings and capital preservation. (This example was provided by USG Annuity & Life Company®, Des Moines, Iowa.)
