In what state are you looking?
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I've seen some illustrations on laddering...
showing 3.50% on short term SPIA's (I know this is no where near a realistic expectation)
I'm open to anything that allows for immediate annuitization.
I'm not sure that I follow....SPIAs and CDs are often purchased for two very different purposes. A SPIA is meant to distribute a lump sum over a period of time (including life). CDs are normally used for preservation of principle (and in a different interest rate environment, maybe some income).
Maybe you're referencing deferred fixed annuities (and not a single premium immediate annuity)?
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I'm not sure that I follow....SPIAs and CDs are often purchased for two very different purposes. A SPIA is meant to distribute a lump sum over a period of time (including life). CDs are normally used for preservation of principle (and in a different interest rate environment, maybe some income).
Maybe you're referencing deferred fixed annuities (and not a single premium immediate annuity)?
The example that I've seen illustrates putting money in CD for 6 yrs. compared to taking lump sum and putting portion into SPIA earning 3.5% (for 6 yrs.) as it pays out to 0 AND taking larger portion and putting into Deferred Annuity earning 3.5% for 6 yrs.
The idea is that the short term SPIA isn't really about earning interest as much as it is controlling the front end of the laddering.
I think I understand this, but if SPIA rates are lower than money market, etc., why not just direct this money through a MMA?
Maybe I'm just lost...
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jmarkk1 said:The example that I've seen illustrates putting money in CD for 6 yrs. compared to taking lump sum and putting portion into SPIA earning 3.5% (for 6 yrs.) as it pays out to 0 AND taking larger portion and putting into Deferred Annuity earning 3.5% for 6 yrs.
The idea is that the short term SPIA isn't really about earning interest as much as it is controlling the front end of the laddering.
I think I understand this, but if SPIA rates are lower than money market, etc., why not just direct this money through a MMA?
Maybe I'm just lost...
Sounds like your talking about a split annuity concept. The concept is you have someone who has a CD now and needs income but wants to preserve income at the same time. You take a SPIA to provide immediate income and the remaining funds grow back to the original principal amount over a period of time. The benefit to the client is typically more spendable income because even if the client is recieving the same monthly amount as previously with the CD because of the exclusion ratio on the SPIA most of the "income" is from the return of the clients premium and is not taxable.
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American Equity SPIA are usually good
Penn Mutual depending on what payout option you choose
Penn Mutual depending on what payout option you choose
I agree but I would be curious as to what companies the OP (or whoever is illustrating the concept) is using.
Below is an illustration from Equitrust on the concept. They are currently above average for both SPIA and MYGA rates.
View attachment SplitAnnuity.pdf.
I don't know of many carriers paying over 3% on a 6 year MYGA, let alone 3.5%. Still, even though the SPIA portion is paying less than 50bp, it is still more than most money markets. However, with this strategy and in this rate environment, that bucket is basically interchangeable (from a pure #'s standpoint). In fact, if you find a money market that (when factoring in the distributions) comes close to the SPIA on the total payout, it will likely be a better deal should we finally get some higher interest rates 3-4 years down the road.
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