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Income Strategies

Increase Your Income with the “Max Plan”

investment planning for familyPlanning for the future is not always easy, yet it is necessary in order to prepare your loved ones for the future and impart the maximum percentage of your assets to your beneficiaries. While there are many wealth management plans available, many do not provide the income necessary to support the individual covered by the plan during their life. At David M. Jones & Associates, we are here, as wealth management experts, to help you make the most out of your finances. That’s why we have designed the “Max Plan” to assist you in managing your income and increasing your rate of return.

The “Max Plan” significantly increases income on a mostly tax-free basis and provides you with guaranteed incomeInvestment Opportunites for the rest of your life. With the “Max Plan,” assets producing a low rate of return (i.e. bonds) are sold in order to purchase immediate annuity. An immediate annuity, is an agreement between you and the insurance company to provide you with guaranteed income for the rest of your life. The annuity has a high payout because it is returned to you in the form of principal and interest. This is beneficial because an annuity is usually not affected by income tax because most of the payments are considered a return of principal. Since this type of annuity is guaranteed only during the annuitant’s life; upon death, these annuity payments will disappear. Therefore, the “Max Plan” capitalizes on this lifetime income and puts the earnings toward a different investment. Using part of the income generated by the annuity payouts, you would purchase a life insurance policy to replace the loss of the initial investment used to purchase the annuity. For example, let’s say that you invested $100,000 to purchase an immediate annuity. From the payouts that you receive from the annuity, you would use part of that income to pay the insurance premium of a $100,000 life insurance policy.

investmentsThis plan is an ideal financial strategy for healthy men or women, aged 70-85, that are dependent on a monthly income or concerned about outliving their savings. With a minimum investment of $100,000, the “Max Plan” has enabled individuals to consistently realize a 4.5 to 6.5 percent net rate of return, which is significantly higher than many other current investment options. Your loved ones will also benefit from this investment strategy because the life insurance will be income and possibly estate tax free to your beneficiaries.

For more information about the David M. Jones & Associates “Max Plan” check out this video on our YouTube channel, which provides a great comparative example that will help you see how the “Max Plan” can positively impact your insurance coverage. To see specifically how the “Max Plan” can affect your income based on your tax bracket, schedule a free consultation at our Florida or California office.

Contact Us Toll-Free: 800-950-8522
Florida: 239-649-7600 | California Office: 805-969-2367

Income Strategies for 70+

Record low interest rates have dramatically changed the income and investment strategies for most people 70 and older, leaving them to ask, “How do I continue to receive the income I need and balance my concerns for safety?”

The good news is, you can have your cake (income) and eat it, too (safety) by utilizing two seemingly competing strategies:

The Immediate Annuity

Consider the advantages of purchasing a single premium immediate annuity (SPIA) with the “no certain” option.

You will receive a guaranteed payment each month for the rest of your life. You cannot outlive it! The payment is typically between seven percent for a person aged 70 up to 13 percent for a person aged 85.

People are surprised at how high the income is but remember, this is a return of your principal as well as interest. And, since most, if not all, of the income you receive is coming from the investment of your own money first, it is not subject to income tax.

However, when you die, the annuity is zeroed out (this is the “no certain” option) and no proceeds are distributed to your estate, but that’s a dilemma that is easily solved by …

Universal Life Insurance

Since the annuity will now be paying you a very high income relative to what you may have been earning, allocate part of that to purchasing a universal life policy. Now when you die, your beneficiaries will inherit the principal you invested to purchase your annuity tax free through the proceeds of your life policy.

As you can see by the “max plan” comparison adjacent, the advantages of simultaneously purchasing an annuity and a universal life insurance policy provide guaranteed income and guaranteed safety. In most cases you will realize a net return between 4.5% – 6.5% per year.

What’s more, there will be very little (if any) income tax due on your annuity income until all your principal has been paid back to you (see exclusion ratio). It is also possible to have the life insurance benefit pass to your beneficiaries free of income and estate taxes.

We always use two different insurance companies for the life insurance and annuity as we are really asking each to make opposite wagers. The life insurance provider is betting you will live past your life expectancy (and so will have funded your policy 100 percent) while the annuity provider is betting you will pass before you’ve used up your principal.

Generally a minimum investment of $100,000 is needed to make this worthwhile. You need to be insurable for the life insurance coverage.

So you see, you really can have your cake and eat it, too. As with any investment, consult your legal and tax professional for advice for how best to structure such a plan.

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California Office

2760 Sycamore Canyon Road
Montecito, CA 93108

Phone: 805-969-2367
Toll-Free: 800-950-8522

Florida Office

4501 Tamiami Trail North, Ste. 419
Bank America Center
Naples, FL 34103

Phone: 239-649-7600
Toll-Free: 800-950-8522