Information on Split annuities
People who have taken up annuities as retirement option have gained a lot of financial benefits after retiring. Annuities have been a great method of gaining tax free income. There are different kinds of annuities; instant annuity provides fixed income to retirees over a prolonged period of time, deferred annuities are offering accumulation of tax free income after retirement. If you invest in any one single annuity; you get benefits offered by that annuity program. If you combine different programs; you get additional benefits and greater tax relief.

Split annuity is referred to the combination of deferred annuity and immediate annuity. Split annuity product is a combination of deferred annuity and instant annuity products; this form of annuity provides more income with the added benefit of lower income tax.

Example:
A person holds $100,000; he invests in a split annuity program. $41,500 of his total capital is diverted towards immediate annuity and $58,500 is diverted towards deferred annuity program. This person gets a return of $5,100 each month from the amount invested in immediate annuity over a period of ten years. On the other hand he gets a return of 5% on the amount of money invested in deferred annuity. This return is not given to him every month; this return is accumulated and at the end of 10 years is provided to him. This return equals to the original deposited total. After the tenure of 10 years is over; the amount can be reinvested according to an updated annuity package.

The investor gains a fixed amount of return each month from immediate annuity package. The return does not change according to varying market conditions.

When you purchase split annuity you gain the benefit of getting a smooth and fixed flow of income from immediate annuity program. The return does not change with changes in market and economy.

There are various benefits of split annuity plan over other retirement income plans. Some of these benefits include: Income or return from immediate annuity program is fixed and does not change with changes in markets.A huge percentage of the Income earned from this annuity plan is not taxed and Social Security tax deduction is not levied on this income. The total sum of income earned from deferred annuity is not counted as income until it is collected as income after the specified time period is over.

The successors and beneficiaries of a split annuity package even gain benefit. They gain additional death benefits in case of death from deferred annuity investment. Returns from immediate annuity package are even offered to the beneficiary.

Split annuity program keeps your capital secure and you constantly gain from tax efficient income for the mutually agreed period of time. In case of deferred annuity; your return equals to the amount of your initial deposit of capital.

Understanding the concepts of immediate and deferred annuity programs is very difficult. Due to this; you might even face difficulties while understanding the process of split annuity program. While investing in split annuities; you have to take many factors into consideration. You have to separately calculate the amount you are going to invest in immediate annuity and different annuity. Once you have made the calculation; you can freely enjoy the various benefits provided by split annuity. With the help of split annuity; you keep on getting income to meet day to day expenses and your capital keeps on increasing. This way; you and your successors are financially secure.

Want to find out more about split annuities, then visit Nathan Rogerson’s site on how to choose the best annuity for your needs.

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