Real World Annuity Examples

You’ve taken the time to learn about annuities and have a general understanding of how they work, but enough of the text book definitions.  Let’s take a look at some real world examples of how annuities have helped these people below solve the unique financial situations facing them.

Case Study: Calvin

61 year old Calvin is retiring in 7 years.  He has $800,000 in mutual funds and has no pension.  Other income will be approximately $2600 from Social Security.  Calvin has concerns about the ups and downs of the stock market and wants to get out while the market has recovered.  Since Calvin lives alone, he is also concerned who will care for him if he is sick or injured.  He wants his principle to be protected from loss.  When he retires, he wants to have a guaranteed income.


Solution for Calvin

  1. Create a guaranteed income that he cannot outlive
  2. Provide a financial benefit for heirs if Calvin dies
  3. Provide monies for nursing care
  4. Protect his principle from loss

Purchase a $300k annuity from two insurance companies.  His total annuity reallocation will be $600k.  The remaining $200k will be moved to a mixture of Money Market accounts and CD’s with his bank.

Both annuities will be Fixed Indexed Annuities (FIAs) with income rider provisions.  If he begins taking income in 7 years, the annuities will provide him a guaranteed lifetime annual income of $53,482 + $31,200 Social Security Income for a total of $84,682.  More importantly, if he requires nursing care even while in his home, he will receive an additional $23,310 for as long as he requires care.  If the care is required for the remainder of his life, he will receive a total lifetime payment of $107,992.00.  In the mean time, if Calvin should die, any monies remaining in his FIA will pass directly to beneficiaries probate free.


Case Study: Carlos and Suzy

65 year old Carlos is retired.  55 Year old Suzy is still working but plans to retire in 10 years.  Currently, Carlos has approximately $300,000 in a 401k from his previous employer.  Suzy has approximately $200k in her 401k and earns $65k annual income.  Carlos receives $28,800 for social security + an additional $1,100/year for a pension.  Total current household annual income is $94,900.  They want there income to continue after Suzy retires in 10 years.  They also have great concerns about the money in Carlos’ 401k as it is in mutual funds and subject to another huge loss like they experienced in 2008.


Solution for Carlos and Suzy

Suzy does not have access to her $200k in her 401k until she separates service in 10 years. Carlos and Suzy can easily live on her $65k annual income and Carlos social security payments of $28,800/year plus his $1,100 pension.  Carlos can purchase a $300k annuity with his 401k money.  With the right annuity product, his money can grow at a guaranteed rate of 10% simple interest/year and provide guaranteed protection from loss.  His payments in 10 years will be $39,700 and will be guaranteed for life.  If Suzy’s 401k grows to approximately $325,000 in 10 years.  She could place that in an immediate annuity which will pay in today’s dollars approximately $21,750/year.  Suzy is also expecting a social security benefit of $26,400/year.  Total income in 10 years for Carlos and Suzy will be $116,650.00.


Case Study: Russell

Russell is 60 years old,  retired, unmarried, and wants to travel the world to surf.  He has approximately $1.1 Million in retirement funds that were once in stocks.  However, Russell managed to liquidate his stocks before the 2008 crash and placed virtually all of his money in CD’s.  Unfortunately, Russell has seen very little growth with his bank CD’s and needs to be able to guarantee a lifetime income of at least $60,000/year.


Solution for Russell

Russell’s CD’s are coming due at different intervals over the next 2 years.  Russel could buy a mixture of Immediate and a single Fixed Indexed Annuities (FIA) with an Income Rider Provision.  The FIA would be purchased immediately for $400k.  Russell would receive a 10% bonus ($40,000) making it grow to $440,000 on day one.  With the right annuity product, that annuity can grow at a guaranteed rate of 8% compounded interest every year until he intends to begin payments in 5 years. In 5 years, the annuity income rider will provide guaranteed for life payments of $26,928/year.

Also, in year one, Russell had $800k in CD’s coming due which he converted into immediate annuities.  The payments of the immediate annuities provided him with annual immediate income of $53,220.  Russel did not hit his first year goal of $60K, but he was able to get acceptably close at $53,200.

In year 2, Russell had another CD come due of $205k which was also converted into an immediate annuity.  That gave him a total income of $67,800.  The $67,800 annual income would continue until year 5.  In year 5, the FIA with Income Rider was activated and added to his current income.  His new guaranteed income will be $94,728.  Russell plans to also begin receiving social security payments of $31,200 which brings his new lifetime income to $125,928.00.

AnnuitySeeker Can Help You Reach Your Goals

The above examples  are just a few ways annuities can be used to address a number of unique financial situations.  If you’d like to learn more about how specific annuity products can help you meet your financial goals, allow AnnuitySeeker to connect you to a licensed Annuity Advisor in your area.  Click here to learn more.