by Butch Boley Annuity Sales Consultant

SUMMARY

When evaluating clients’ needs and working to provide solutions that meet and even exceed expectations, it’s natural to consider proven recipes for success. As a producer, you combine your knowledge and experience to carefully explore a variety of carriers and products when designing a particular client case. You may also look into classic concepts and strategies for achieving set goals. Yet not every case lends itself to a predictable conclusion. Sometimes, the best solution for meeting personalized needs in one comprehensive plan can be created by mixing a tried-and-true formula with a non-traditional element. Take, for example, this “deferred” split annuity concept.

THE FACTS

• Retired male, age 61
• Wanting roughly $2,000 a month in income
• $175,000 in a CD coming due
• Looking to defer income until the third or fourth year
• $400,000 real estate asset

THE GOAL

Design a solution to turn the client’s CD money into an income stream of roughly $2,000 a month that doesn’t start until the third or fourth year. At the same time, maximize the growth of the rest of the asset while providing additional benefits to help protect the client’s future and that of his beneficiaries.

COURSE OF ACTION

After taking early retirement, the client needed to put a plan in place for allocating his assets to ensure he would have enough money to live and carry out his retirement plans. The agent began a thorough fact-finding conversation with the client to determine exactly how much he had accumulated and whether any of his assets could be repositioned. The client mentioned that he owned a piece of real estate currently valued at approximately $400,000. He planned to sell, but wanted to wait for at least five years to see if he could potentially recover some of the property’s market value lost the past few years.

The client also noted that he had $175,000 in a CD coming due that he didn’t want to renew because of low interest rates. The agent suggested using the traditional split annuity concept to preserve a portion of the asset while letting it accumulate in an indexed annuity and using another portion of the funds to generate an immediate income through a single premium immediate annuity (SPIA). The client, however, was adamant about not taking income from this solution until either the third or fourth year, so the agent called Creative Marketing for help.

We recognized an opportunity to explore other annuity options to meet this client’s unique financial needs. After doing our due diligence, we suggested the agent position a portion of the client’s funds into a Lincoln New Directions® 8 annuity, rather than a SPIA. As one of the few options that would allow for early annuitization, the client could start taking income after the second year as he desired. At the same time, the rest of the client’s CD money could indeed be put in an indexed annuity to grow tax-deferred resulting in a bigger payout later in life.

THE SOLUTION

By placing $110,000 of the client’s original $175,000 money into a New Directions 8 annuity, the client would receive $1,950 a month of income when annuitizing after year two. As an added bonus, the client would earn a respectable rate of return for the first two years and benefit from a higher guaranteed annuitization factor than most new five-year SPIAs would have offered.

The additional $65,000 of CD money would then be used to purchase a Lincoln OptiPoint® 10 annuity with Lincoln’s Lifetime IncomeSM Edge rider. This would provide the client with a premium bonus, an opportunity to lock in a higher payout the longer he waited to take income, a nursing home benefit in the event he need it and a payout to beneficiaries in death. In essence, the client would enjoy all of the benefits of a traditional split annuity concept, but with a twist to fit his unique needs.  

THE RESULT

For the client: By finding a solution that would allow the client to defer taking income for a specified period of time while maximizing the growth of his asset, he could enjoy the retirement he had planned. At the same time, he could hold on to his real estate asset until a later date when he decided the return on investment would be more suitable, which would provide the supplemental retirement income he needed to meet his $2,000 a month goal.

For the agent:

When concocting a workable solution for meeting your clients’ needs, remember that your Annuity Sales Consultant can serve as a key ingredient for success.

FOR AGENT USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC. 11946 - 2011/9/20

Agents may not give tax, legal, accounting or investment advice. Individuals should consult with a professional specializing in these areas regarding the applicability of this information to his/her situation.

Fixed indexed annuities are issued by The Lincoln National Corporation and distributed by Lincoln Financial Distributors, Inc. The Lincoln National Corporation does not solicit business in the state of New York, nor is it authorized to do so. Contractual obligations are backed by the claims-paying ability of The Lincoln National Corporation. Lincoln Financial Group is the marketing name for Lincoln National. Product features, limitations and availability vary by state. Fixed indexed annuities are not available in New York. Carefully consider the risks, expenses, potential loss of principal and clients’ individual objectives before reallocating existing monies into these products. Guarantees are backed by the claims-paying ability of the issuing insurance company.