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How to bring in ample cash flow – even in a low interest rate environment

For many years, retirees could count on a steady “paycheck” from their employer-provided pension plan, along with monthly income from Social Security. Additional income could be generated through personal savings and investments. But, given our low-interest-rate environment today, coupled with a highly volatile stock market, the disappearance of employer-sponsored pensions, and a shaky Social Security program, those days are unfortunately over.

Rather, today’s retirees are “hoping” to generate a livable income on what they’ve saved over the years – and in many cases, they have no guarantee that their income will last for the remainder of their lifetime.

But there are some strategies available that could turn assets into an income stream that is higher (and in some cases, much higher) than what could be generated with the minuscule returns paid by bonds and CDs, without putting principal at risk. And as an added bonus, it can also offer the opportunity to leave a legacy for those you care about.

If the Shoe Fits…

Most people are aware of the story about Cinderella, a beautiful woman living in unfortunate circumstances who later ends up with a handsome prince given that the glass slipper fits her foot perfectly.

When it comes to generating a higher than average income in retirement, it may require using financial tools that are considered a bit ugly by many consumers – but that have the ability to produce some very attractive results.

In this case, a single premium immediate annuity (SPIA) may be used for generating ongoing cash flow for the rest of the recipient’s life – regardless of how long it is needed. When the income recipient passes away, the life insurance policy will pay out a benefit (which is tax-free) to the survivor(s). This, in turn, could be used to purchase an annuity for the surviving spouse and/or others who were relying on the cash flow from the original annuity.

Both the annuity and the insurance policy can be used together, even though their payout triggers can differ. In fact, some experts refer to annuities (an insurance product) as being the “opposite” of life insurance because life insurance pays out when someone dies “too soon,” and annuities can provide financial security for those who may live “too long.”

The cash flow that is paid out from the annuity is not so much determined by interest rates as it is by the life expectancy of the income recipient (also known as the annuitant). And, depending on how long he or she lives, it is possible that they could receive much more than the premium that was paid in.

Individuals and couples aren’t the only ones who can benefit from this type of strategy. For instance, charities could also be able to use the Cinderella method for generating funds. As an example, a charitable organization could purchase an income annuity and a life insurance policy on an individual with whom the entity has an insurable interest.

Are You a Good Candidate for the Cinderella Strategy?

Because all financial goals, needs, and time frames can differ – sometimes substantially – from one person or couple to another, the “glass slipper” won’t fit everyone’s foot. But, you may be a good candidate for the Cinderella Strategy if you:

  • Are between the ages of 70 and 90
  • Are seeking a higher cash flow that what could be earned with more “traditional” safe income-generating alternatives
  • Possess liquid assets
  • Want taxable assets removed from your estate
  • Are tired of worrying about what the stock market and interest rates are doing, especially as it relates to your protection of principal and your retirement income stream

If you still have questions, we are here to help. At Annuity Gator, our focus is on working with retirees and those who are approaching retirement and helping them determine a viable income strategy that is based on their objectives.

So, if you’d like answers, feel free to give us a call at (888) 440-2468 or send us an email via our secure online contact form to set up a time to chat with a retirement income and annuity expert.

How to bring in ample cash flow – even in a low-interest-rate environment

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