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 CDs. Unfortunately, Russell has seen very little growth with his bank CDs and needs to be able to guarantee a lifetime income of at least $60,000/year.
Solution for Russell
Russell’s CDs 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 an immediate annual income of $43,200. Russel was unable to achieve his first-year goal of $60K, but he was able to come 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 also plans to begin receiving social security payments of $31,200 which brings his new lifetime income to $125,928.00.
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