Stand Alone Living Benefits
Stand Alone Living Benefits (SALBs) are a new and exciting retirement solution that offer guaranteed income on individually-owned investment portfolies – a feature that really sets SALBs apart from other existing retirement products. SALBs have been generating a great deal of interest since their introduction, as they appeal to investors and advisors who do not use traditional annuities as part of their retirement planning process. SALBs may be an appropriate offering for those investors who are nearing retirement – or are already there.
Generally, SALBs offer a 4% or 5% guaranteed lifetime income guarantee based on a "Retirement Income Base" that is established when the investor's account is opened, with income starting once the investor reaches age 65. Terms and conditions must be met to guarantee lifetime income and may vary by product or issuer.
In this example, the investor would start drawing down $50,000 per year from his or her account at age 65, and, should the account deplete, the insurance contract would continue to pay the income for life.
How SALBs are unique:
Payments of the Guaranteed Income Amount are taken from the investment account. Should the investment account be reduced to zero under the terms of the SALB contract, lifetime payments of the Guaranteed Income Amount will be made by the issuing insurance company based on its claims-paying ability.
About mutual funds and managed accounts:
Mutual funds involve investment risk including possible loss of principal. Investment return and principal value will fluctuate, so your shares, when redeemed, may be worth more or less than their original cost. Mutual funds are securities registered as investment companies with the SEC* and are sold by prospectus. Information about the risks, fees and investment objectives of the fund and other important information is in the prospectus which should be read carefully prior to making an investment decision. The registered representative offering the fund will be able to provide a prospectus.
Managed accounts are also subject to investment risk and possible loss of principal. They are generally considered suitable only for more sophisticated investors who are able to fully evaluate the manager’s investment objectives and techniques and judge whether the associated fees are appropriate. Managed accounts are not registered as securities with the SEC.
Restrictions, Fees and Taxation
The "Stand Alone Living Benefits" (SALBs) require an investor's holdings to remain fully invested in one of the available predetermined investment portfolios at all times, therefore current holdings would need to be liquidated in order to invest. Liquidating current holdings may create a taxable event and could also trigger surrender or transfer fees.
The nature of SALBs is such that younger purchaser, especially those younger than 65 will tend to pay more in fees over the lifetime of the product for the similar potential benefits that older purchasers receive.
Fees for the various platforms generally range from 0.50% to 1.00% in addition to the fee for the SALB.
Ownership of the assets on which the SALB guarantees are based remains with the investor and can be accessed at any time but withdrawals in excess of those permitted by the SALB will diminish or eliminate future guarantees.
Guaranteed lifetime payments are supported by the investor's own assets and will generally be fully or partially taxable. If the investor's account is depleted to zero, the issuing company continues to make payments based solely on its claims-paying ability.
IRS Circular 230 Disclosure: Any information contained in this communication (including any attachments) is not intended to be used, and cannot be used, to avoid penalties imposed under the U. S. Internal Revenue Code. This communication was written to support the promotion or marketing of the transactions or matters addressed here. Individuals should seek independent tax advice based on their own circumstances.
*The U.S. Securities and Exchange Commission (“SEC”) has neither approves nor disapproves these securities, nor have they passed upon the accuracy or adequacy of the prospectus. Any representation to the contrary is a criminal offense.