Deferred Income Annuities

Sometimes called longevity insurance or a longevity annuity, a Deferred Income Annuity (DIA) usually begins with a single, upfront payment and eventually pays a set amount starting a given number of years after the policy is purchased.

One of the main advantages is that taxes on the interest earned are not paid until the funds are withdrawn. Other advantages of a Deferred Income Annuity include:

• Higher Returns = Insurance companies usually offer higher interest rates for these products. Because part of the principal is returned with each payment, clients receive larger amounts than they would be provided by interest alone.

• Security = This product provides stable lifetime income which can never be outlived, or which may be guaranteed for a specific period of time. A client’s principal is secure because funds are guaranteed by assets of the insurer, and not subject to financial market fluctuations.

• Simplicity = Once it’s set, the only work required is collecting regular payments; there’s no need to watch markets or track interest rates or dividends.

• Preferable Tax Treatment = Unlike other types of annuities — which have a front-loaded tax burden — a DIA defers taxes until later, when it may be taxed at a lower rate.

• Customization = In addition to a DIA’s built-in flexibility — deciding how much to spend, how long to wait for payments, etc. — clients can choose from various add-ons and options. For example, a “life with cash refund” would return the premium to survivors if the client dies before 85; if the client dies after payments begin, the difference between the premium and payments received would be returned to them.

• No Annual Account Management/Maintenance Charges = 100% of the premium goes towards the client’s monthly income.