Retirees deserve sympathy because they have to be content with whatever income they people derive from Social Security, pensions and other fixed income sources. There is no denying that frequently they are in need of some guaranteed extra income.
As a retiree, you could possess some surplus money which you can of course profitably deploy to generate additional income. Nevertheless, you will obviously want to take great care and not risk your current principal amount. So, you'll need to explore ways of getting additional income while preserving your precious principal.
One option is a certificate of deposit (CD) that's federally insured. Unfortunately the current rates are so low as to make this an untenable option.
An additional sound solution would be split annuity that will offer consistent annuity payments. In fact, a split annuity can not be thought to be a single annuity policy. It may be best defined as a combination of two annuity policies - a single premium tax deferred annuity that appreciates in value for your upcoming needs and a single premium immediate annuity that offers annuity payments to satisfy present needs.
The immediate annuity will generate a stream of annuity payments that is assured for a time period that you choose. At the end of the period of time, the annuity payments will stop and nothing remains. But during this time, the deferred annuity grows in value. The objective of the deferred annuity is not to produce annuity payments right now, but to let your capital grow to replace the money that has bee exhausted by the immediate annuity. Here is an example in the table below:
|Immediate Annuity||Deferred Annuity|
|Single Premium: $35,000
Term: 10 years
|Single Premium: $68,000 Interest rate: 4.31%
Term: 10 years
|yearly income (91% untaxed)||taxable portion||After 28% tax income||Initial investment
|Final annuity value (at 10 years)|
|$ 3,494||$ 345||$ 3,742||$ 65,000||$100,000|
Thus, in the ultimate investigation, you would have consistently enjoyed monthly annuity payments arising out from the immediate annuity and would have also almost rejuvenated your original investment with the deferred annuity. St the end of the term, in this case 10 years, you could again split the deferred annuity and enjoy annuity payments again. You may or may not want that option depending on prevailing annuity rates.
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