Our high net worth clients often consider jumbo annuity accounts to meet their investment needs. Annuities are well-regarded for their safety and security, but they are also valuable for growth and income.
Generally speaking, a jumbo annuity is an account funded with a deposit of more than $1 million. Many accounts are larger, however. Several insurance companies accept seven-figure deposits. Some will take up to $3 million without prior approval. Higher amounts are accepted when suitability requirements are met.
There are many reasons individuals and families might need a large annuity account. Sometimes it’s to shelter gains from income taxes, other times it’s to establish an income stream, and still others want a guaranteed death benefit for their heirs. Below, we discuss common reasons our clients use large, high-value investment annuities.
Jumbo Annuities For Growth Accounts
Tax-deferred fixed (multi-year guaranteed annuities) and fixed-indexed accounts are popular investments for high net worth individuals. They provide guaranteed and reliable returns with little fuss. Consumers enjoy safely locking in 5-6% with low-maintenance MYGAs. Or knowing they cannot lose money in an indexed annuity while also benefiting from market growth.
Large, well-capitalized insurance companies rarely encounter solvency issues, unlike some of banks have over the last few years. Non-qualified annuities also grow tax-deferred, meaning no income taxes are due until owners take a withdrawal.
And once an annuity has matured, owners can use the IRS 1035 tax-free exchange rules to move into a new annuity without creating a taxable event as well. Many jumbo annuity accounts are created through 1035 exchanges and defer taxes for many years. Beneficiaries can then use non-qualified stretch rules to mitigate taxes once they’ve inherited the annuity proceeds.
Using Premium Bonus Annuities For Growth & Income
When interest rates are high, several insurance companies offer annuity accounts with premium bonuses. It’s not unusual to see some with bonuses as high as 15%. And after the term has completed, the principal and bonus are free and clear to transfer and invest elsewhere.
Still others will offer even larger bonuses to the income account. These bonuses can be as high as 40% of the invested premium. But they only increase the income payouts and usually come with an annual fee. So these are only appropriate for those who know they want future income.
A more normal annuity bonus might be be in the 7-10% range, but that can make a big difference with larger premiums. We help our clients understand when premium bonuses may or may not be in their best interest.
Annuity Contracts For High Income Needs
Oftentimes, our clients want systematic, guaranteed income payments. Sometimes it’s for a set period, and in other cases, it’s for their lifetimes. There is no better instrument for creating a reliable income stream than an annuity account. And when larger payments are needed, jumbo annuities do the job.
Most often, income payments are established with a large, single premium using a SPIA (Single Premium Immediate Annuity) or an indexed annuity with a GLWB (Guaranteed Lifetime Withdrawal Benefit). The type of policy used depends on the structured income needed and which one offers the preferred payouts. When interest rates are elevated, indexed annuities with GLWB riders will, in many cases, offer better payout factors than SPIA accounts.
Some income annuities pay fixed amounts that won’t change, while others offer increasing income based on inflation metrics or market performance. No matter the type, consumers will receive an internal rate of return assuring payments surpassing their initial deposit. We illustrate all types so our clients can find the contract that best meets their needs. It’s an easy and reliable way to create an income stream that closely resembles a pension payment while maininting control of your principal.
We also assist with annuities for Structured Sales. These jumbo policies are used when someone is selling a business or property and wants to convert their taxable gains into a stream of income. The income stream spreads any those gains (short or long) over a period of time and mitigates a lump-sum taxable windfall. Most commonly,y these are used when a 1031 exchange on a property is no longer desired.
Annuities With An Increasing Death Benefit
Oftentimes, our clients use life insurance to meet estate planning goals. Guaranteed universal life and single-premium life insurance policies are worth exploring. Life insurance policies, however, require medical underwriting and do not always generate the best returns. Especially if someone does not qualify at all… or does not qualify at a reasonable premium.
That’s where an annuity with a guaranteed increasing death benefit works well. There are a few companies specializing in these products and many accept large premium cases.
In short, these annuity contracts offer a guaranteed or enhanced death benefit rider. One popular product increases the owner’s death benefit at a 7% simple interest rate for 15 years, guaranteed. The crediting strategies can increase the policy value even further throughout the life of the annuity. The policy has two ways to grow, but the death benefit increases yearly regardless of anything else.
For those who have trouble finding a suitable life policy, a jumbo annuity with an increasing death benefit can be a great substitute. We help our clients compare these specialized contracts to see if they are a good fit.
The Importance Of Highly Rated Insurance Companies
How much money do you need to get the highest rates? For most annuity policies, it’s $100,000, while some require as much as $250,000 to $500,000. The good news is that most are much less and still offer competitive rates. Several high-yielding fixed annuities only need $10K to begin.
But if you’re searching for jumbo annuities, it’s wise to explore the financials of each company. Most of our clients want an A rated company (at minimum) with a high Comdex score and a strong balance sheet.
The good news is that all companies report their financials yearly and much can be learned from that information. Prospective annuity owners can review their market caps, reserves, profits and losses, and more. And there are many A+ and A++ rated insurance companies offering very competitive interest rates, returns, premium bonuses, and income payouts.
Contact Us To Compare Jumbo Annuity Accounts
We are an independent agency working directly with the leading insurance companies in several categories. Our decades-long relationships allow for negotiating power and flexibility.
This helps our clients secure the best outcomes and solutions for their annuity needs. Contact us today to discuss your insurance and investment needs.