How Jim could use a fixed annuity

This is Jim, a 62 year-old truck driver who is about to retire. Jim is not comfortable relying solely on his pension plan and Social Security for a comfortable retirement. He realizes that we will also need to count on his other savings to supplement his monthly income to maintain his current standard of living.

Issue
Jim figured after his Social Security and rental unit income that his retirement is short by $800 per month. He is concerned about keeping his retirement assets safe and wants a guaranteed income to supplement the money he is scheduled to receive. He also wants his assets keep growing to satisfy future income needs; he’s healthy, and he plans on being around for quite a while.

Proposed Solution
Jim has been a prudent saver and has accumulated $385,000 that he has earmarked to use to supplement his retirement income. A professional Aviva agent proposed a split annuity income strategy from Aviva: one annuity provides immediate income and one to accumulate tax-deferred for future income. The idea is to provide a guaranteed income stream to Jim while growing the deferred annuity back to his original asset value of $385,000.

Jim places $85,000 of his cash into a 10-year-certain single premium immediate annuity that will generate immediate income of $805.61 per month, guaranteed for 10 years. If we assume a 25% federal tax rate his after-tax income from the immediate annuity would be $781.28. Then we have Jim take the remaining $300,000 and place it into a fixed tax-deferred annuity, to grow back to the original asset value.

Results¹
Jim filled in the income gap for his retirement with the help of his Aviva split annuity income strategy. He is guaranteed income for ten years and has tax-deferred growth in the deferred annuity. When the income from the immediate annuity expires in ten years, the split income annuity concept can be used again and Jim can take a portion from his deferred annuity to fund a new immediate income annuity that will a guarantee an income based on his needs at that time and while keeping the remaining funds in the tax-deferred annuity to accumulate.

Year 10 Deferred Annuity Pre-Tax Value: $407,106²
Year 20 Deferred Annuity Pre-Tax Value: $552,452²

How you could use a fixed annuity

The outlook for your retirement may be very different than Jim’s. This split income annuity is just one example of how you can convert savings into retirement income that you can count on, GUARANTEED!

An annuity offers potential income that you can’t outlive. There are many ways to use an Aviva annuity. Annuities can be a prudent planning tool for managing income during your retirement. A local Aviva professional agent can help you identify ways to make an Aviva annuity work for you.

*Withdrawal charges and MVA are imposed retroactively if the contract is surrendered within 12 months of a free withdrawal. Withdrawals may be subject to ordinary income tax and may be subject to a 10% IRS tax penalty if taken prior to age 59 1/2. Withdrawals may also forfeit potential interest credits and if taken during the withdrawal charge period may result in the loss of principal.

¹ The above scenario, proposed solution and results are for illustrative purposes only. This example uses values for MultiChoice Freedom 5 [form MCF5 (08/08)].

²Actual interest will vary depending on the Strategy the client chooses and state availability.

Aviva does not authorize its agents, employees or representatives to give legal, tax or accounting advice. The information contained herein is our understanding of the current laws as they relate to annuities. These laws are subject to change in the future. Please consult your personal advisor for any tax, legal or accounting advice to determine if a single premium immediate annuity or a deferred annuity is right for you.