Robert is a 52-year-old business owner. He uses $100,000 to purchase a deferred fixed annuity contract with a 4% guaranteed return.
Over the next 15 years, the contract will accumulate tax deferred. By the time Robert is ready to retire, the contract should be worth just over $180,000.
At that point the contract will begin Index Universal Life Insurance making annual payments of $13,250. Only $7,358 of each payment will be taxable; the rest will be considered a return of principal.
These payments will last the rest of Robert’s life,IUL Benefits. Assuming he lives to age 85, he’ll eventually receive over $265,000 in payments.
Robert’s annuity may have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. His annuity also may have surrender fees that would be highest if Robert took out the money in the initial years of the annuity contact. Robert’s withdrawals and income payments are taxed as ordinary income. If he makes a withdrawal prior to age 59½, a 10% federal income tax penalty may apply (unless an exception applies).