A twist on Insured Annuities

For years the Insured Annuity concept has been a popular financial planning strategy for clients age 65 and older. Many advisors have helped clients implement the strategy to increase cash flow during retirement while preserving cash for their loved ones when they die.

With the current low interest rate environment however, advisors are creating Insured Annuity solutions that are not as compelling as they were in the past.

A new Insured Annuity structure to consider

In many Insured Annuity planning situations clients are satisfied with the income they receive from their term deposit/GIC and in most cases, cash flow is not a concern as their main objective is to ensure the gift of the funds when they die. For these clients, offering a solution that enhances the size of the gift may have significant appeal.

Consider the following situation

The chart above shows that the typical Insured Annuity solution has a positive impact on the cash flow while providing the same amount of funds at death as the GIC. By implementing the Insured Annuity with a twist solution, the focus moves from cash flow to estate benefits. Under this solution the cash flow is the same as the GIC but the funds available at death are significantly higher. This approach increases the gift at death by over

$200,000 and would require the GIC to have a rate of return of 6.41% to match this level of total benefit.

In situations where optimizing estate benefits is important to your client consider the Insured Annuity with a twist solution.

Date: July 2015