A Split Annuity Income Strategy, or laddering, involves the purchase of at least two types of fixed annuities, immediate and deferred. The immediate annuity provides the current income stream needed during the first years in retirement. The deferred and indexed annuities in this strategy will provide income in later years.
While the immediate annuity is providing the initial desired income for a specified time, the funds in the subsequent annuities are deferred and growing in value to provide potentially higher income to combat inflation. The Split Annuity Income Strategy can be used with IRA funds or after tax funds. If IRA funds are used, the entire distribution is taxed as ordinary income. With after tax funds, only the gains are taxed as ordinary income.
Employing the Split Annuity Income Strategy provides an excellent hedge against future inflation pressures. Structured properly, the subsequent deferred annuities in the program will allow for an increased income stream for up to 25 years.
This program may not be suitable for everyone. A consultation to determine your goals and objectives is necessary.