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Combine Immediate Annuities & Life Insurance


Using a simple single premium immediate annuity combined with life insurance is a great strategy for your retirement, according to John W. Homer of Oxford Financial Group.  In Linda Koco’s Annuity News article, “Annuity Plus Life Insurance Equal a Powerful Retirement Income Strategy,” they say that this works best for older clients who have or can transfer to liquid assets.  This combination strategy helps not only to reduce clients’ estate taxes, but also to provide monthly income that is guaranteed over their lifetime.  Homer thinks there is still a good niche for single premium immediate annuities (SPIA’s) and says that the ideal clients are between ages 70 and 90.

Homer’s first strategy using this combination of annuities and life insurance is called a “guaranteed income plan.”  He uses the example of a woman who has $1 million in liquid assets, from which she receives $20,000 per year after paying $10,000 per year in taxes.  His strategy calls for her to take her $1 million and purchase a guaranteed income annuity.  This annuity would pay her $126,000 each year; $74,000 of which she would use to purchase a $1 million life insurance policy.  After buying this life insurance policy, leaving her heirs with her original $1 million investment, the woman would net $46,000 per year from her immediate annuity.  That is after paying taxes on the taxable portion of her income.  She would more than double the amount she had been receiving from her original investment strategy each year.

This strategy and the others suggested by Homer certainly won’t work for everyone, but they can offer some older Americans a great retirement and death benefits to their heirs.  Homer found this to be the only way that clients can have more cash flow after purchasing a very large policy than they do beforehand.  He says that the explanations to clients must be simple and well put so that they understand the benefits of combining immediate annuities and life insurance policies.  Many older clients will also consult other family members, lawyers, and accountants as well.

Written by Rachel Summit

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