Income now or income later: a Core Income 7 ® hypothetical case study
Sarah, a 60-year-old, is planning to retire soon. Working with her financial professional, Sarah has created a strategy that’s appropriate for her financial objectives: • Protect her retirement savings from market losses; • Supplement her guaranteed sources of income (e.g., annual Social Security) to help cover her expenses throughout retirement; and • Create potential to increase her retirement income. As part of her strategy, Sarah purchases a Core Income 7 ® Annuity with the Core Income Benefit rider. Because she is looking for the reassurance of predictable and dependable income for life, Sarah prefers the single payment Level Income option.
Though she is not sure when she wants to start receiving income, she likes that the withdrawal percentages increase by 0.55% every year that she waits. Sarah’s financial professional reminds her that with this approach, there is a surrender charge and market value adjustment (MVA) if the contract is surrendered in the first seven years. Surrendering may result in the loss of all or part of any interest earned and a partial loss of principal. Below are the guaranteed withdrawal percentages available to Sarah based on when she starts taking lifetime withdrawals (at either age 60, 65, or 70). (Please note: If the Increasing Income option were chosen, the withdrawal percentages would be lower.)
Income now (age 60)
5-year wait (age 65)
10-year wait (age 70)
6.30% withdrawal percentage
9.05% 1 withdrawal percentage
11.80% 2 withdrawal percentage
This hypothetical chart is provided to show how this benefit affects income withdrawal payments. It does not predict or project the actual results of a specific client.
1 6.30% (withdrawal percentage at age 60) + 2.75% (0.55% x 5 years) = 9.05% 2 6.30% (withdrawal percentage at age 60) + 5.50% (0.55% x 10 years) = 11.80%
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