Annuity case study

These case studies are for educational purposes only and do not represent any type of guarantee.  Past performance is not a guarantee of future performance.  Always work with your licensed financial professional to discuss any annuity options based on your circumstances.  If you would like to see what an annuity would look like for you schedule an appointment with a Retire Happy Guide Financial Professional.

Amy S. age 54, California

$151,000 IRA from a previous job. Previous balance was $187,000 before market loss.

Position: University Professor

After seeing her account lose $36,000 in a short period of time in a targeted fund. Amy decided to lock in what she had accumulated to protect her remaining principal from potential market risk.   Purchased a 10 year Fixed Indexed Annuity. She is not in a position contribute toward retirement so protecting what she had accumulated with the potential for growth was important to her.  In working with her financial professional, they have discussed a two phase approach for this retirement account.  The first phase approximately 10 years is to protect and accumulate.  The annuity that Amy chose after the financial professional illustrated multiple options was a fixed-indexed annuity designed for accumulation. 

Phase two is to take the surrender value of this phase one annuity and to place it into a fixed-indexed annuity designed for income. In an income annuity, it is designed to provide you with consistent income. Amy chose the lifetime income option which means she will receive a lifetime income for as long as she is alive. Below are hypothetical illustrations for each phase of Amy’s retirement and what it potentially could look like. 

Options client chose:

Phase One

• Age 54
• 10-year fixed indexed annuity.
• 2-year fixed indexed strategy with charge .95%. The client chose a strategy that has .95% index strategy charge which allows the client to receive a higher participation rate when the index has a positive return. 
• Hypothetical illustration: Past performance is not a guarantee of future performance.
• At age 65 Amy’s hypothetical value based on market performance could be:
• Guaranteed: $163,662. The guaranteed contract value assumes an annual interest rate of 0%.  Worst case scenario.
• Most recent 10-year period non-guaranteed. $784,807. Based on the index performance for the most recent 10 calendar years.
• Historical average: $755,717. Historical average over a specified period of time 12/31/2001 – 12/31/2021
• Withdrawal charges: The Free Withdrawal amount is a percentage of the Accumulation Value. The percentage is 5% in the first year and 10% in all remaining years.
• Surrender charges:

Phase Two – fast forward 10 years

• Age 65
• 10-year fixed indexed annuity.
• 2-year fixed indexed strategy with charge .95%. The client chose a strategy that has .95% index strategy charge which allows the client to receive a higher participation rate when the index has a positive return. 
• Hypothetical illustration: Past performance is not a guarantee of future performance.
• At age 65 Amy’s hypothetical value based on market performance could be:
• Guaranteed lifetime annual income: $34,353. The guaranteed contract value assumes an annual interest rate of 0%.  Worst case scenario.
• Most recent 10 year period non-guaranteed lifetime annual income. Starts at $34,353 and potential increases every two years if the market returns a positive, if any, during the 2 year term.
  • Hypothetical non-guaranteed age 65: $34,353 annual income
  • Hypothetical non-guaranteed age 70: $54,047 annual income. Cumulative withdrawals $277,273
  • Hypothetical non-guaranteed age 80: $210,298 annual income. Cumulative withdrawals $1,721,4385
  • Hypothetical non-guaranteed age 90: $829,819 annual income. Cumulative withdrawals $7,443,046
  • Maximum non-guaranteed annual lifetime income withdrawal $1,650,475

• Historical average: Historical average over a specified period of time 12/31/2001 – 12/31/2021
• Historical average period non-guaranteed lifetime annual income. Starts at $34,353 and potential increases every two years if the market returns a positive, if any, during the 2 year term.
  • Hypothetical non-guaranteed age 65: $34,353 annual income. 
  • Hypothetical non-guaranteed age 70: $59,990 annual income. Cumulative withdrawals $279,429
  • Hypothetical non-guaranteed age 80: $246,072 annual income. Cumulative withdrawals $1,790,114
  • Hypothetical non-guaranteed age 90: $1,003,983 annual income. Cumulative withdrawals $7,995,431
  • Maximum non-guaranteed annual lifetime income withdrawal $1,751,448

• Withdrawal charges: The Free Withdrawal amount is a percentage of the Accumulation Value. The percentage is 5% in the first year and 10% in all remaining years.
• Surrender charges: