What goes around, comes around. How often have we heard that phrase.  Remember, just a few years ago when Alan Greenspan was lowering interest rates, it seemed like, daily?  Well now we are in the same kind of environment.  The Federal reserve is trying to avoid a recession and stave off inflation at the same time. Guess how they are doing it? Right, they are lowering interest rates. Here we go again, good news for borrowers, bad news for those who have to live off of the interest generated by their holdings.

These folks have seen rates drop by as much as 40% in less than a year.  This is the time when serious mistakes are made in attempting to increase income.  Otherwise conservative individuals are lured into supposedly risk free investments in search in increased income.  This introduced a whole new element of risk - the actual loss of principal.  This represents the most serious risk of all, because once your principal base has eroded, you need more and more interest to generate the same level of income.

You can generate a higher interest income, and you can do it safely.  We can go back to an old concept, the Split Annuity.  This concept combines an immediate annuity with a deferred annuity.. Both of these instruments have solid guarantees and generous tax advantages.

An immediate annuity provides a guaranteed income for a period of time, say 10 years.  This income is guaranteed, and is largely tax free.  The deferred annuity acts like a tax deferred certificate of deposit, and compounds for the same period.  At the end of the ten years, the deferred annuity has a value equal to the initial amount deposited to  the two initial contracts.  If there is still a need for income, the whole process can be repeated.

The result is an income stream generating an after tax income that is consistent with levels that were available 18 months ago.  This can be done with safety and with no risk of principal loss.  If you would like more information about Split Annuities just contact us.