 |
  |
|
|
|
||||
|
|
A new guaranteed investment plan can serve you for your lifetime. It offers the ultimate in flexibility by allowing you to determine the size and method of withdrawals. The main features are as follows: 2) Cashable at any time 3) The pay-out rate is set by the client and may be changed at any time. (A pay-out rate must start after two years and the funds in the plan must be withdrawn by age 120 - this is not a misprint.) 4) Offers 6 principal pay-out options with an unlimited number of choices within. 5) Lump sum withdrawals may be planned or withdrawn at will. 6) Has high interest rates with terms from 1 to 25 years. 7) You may choose between two methods of compounding interest. 8) For diversification you may choose to have up to 5 different guaranteed counts within the plan, plus a Daily Interest account. 9) The minimum investment is $10,000 but amounts of as little as $2,500 may be added. 10) You may appoint a beneficiary and have a joint account. The plan is offered by an insurance company with an A.M. Best rating of A (excellent). The company has not borrowed any money and therefore does not have ratings from Standard & Poor or from Moody's. The following pay-out options are available: (Interest only). Interest is paid out monthly, quarterly, semi-annual or annually. The payment of interest may be deferred for up to two years, but the interest is taxable in the year it is earned. (Level pay-out). A level stream of payments, at selected times, consisting of a blend of capital and interest until the fund is exhausted. The amount in the payment made up from the capital is not taxable. (Indexed). You can choose how much to withdraw and the index rate to be applied each year. (Tax Only). You determine the amount required to pay the tax on the interest earned. That leaves the remainder in the fund to be compounded and grow, perhaps for estate purposes. (Customized). You not only choose the pay-out rate but you can change it at any time. Should you need to withdraw more than the amount of interest earned, part of the capital may be used. The portion representing the capital would not be taxable. (Fund Exhaustion). Each year a fraction of the fund would be paid out by formula, until the fund is exhausted. THERE ARE NO FEES FOR ADMINISTRATION, NOR TO MAKE CHANGES TO THE PAY-OUT RATE, NOR FOR UNSCHEDULED LUMP SUM WITHDRAWALS. HOWEVER, IF THE CHANGES AND UNSCHEDULED LUMP SUM WITHDRAWAL IN ANY ONE YEAR EXCEED 10% OF THE SIZE OF THE FUND, THEN A MARKET VALUE ADJUSTMENT MAY BE MADE, DEPENDING UPON "THEN" CURRENT INTEREST RATES. What is happening? Simply, the insurance company will invest your money in a bond. If you want a major change in the pay-out rate, or a large unscheduled lump sum payment, then the insurance company will have to sell part of the underlying bond. Depending upon what interest rates then are, a loss may be incurred which will be charged to you.EXAMPLES The plan is extremely flexible. This example shows how it can be used. (The rate of return assumed is 8%.)A 60 year-old man has $100,000 and needs $1,000 per month until he is 65 when his pension cuts in. He then requires $350 per month to buy or lease a new car. At 70, he wants $5,000 to take a trip and also increases his monthly draw to $400 per month. At 75, he again increases the draw, to $900, to help his nephew through university for three years. When he's 80, he enters a retirement home where he needs an increase to $1,000 per month to pay for his keep.
Have a question regarding this article? Use our feedback form to send us a note. © , Fiscal Agents Money Management Newsletter
|
|
