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Top Articles - How to Increase Your Spendable Income if You Own a CD
There are several ways to squeeze more income out of a given amount of capital invested in a CD. Let me share with you the split annuity concept.
Here is an example typical of many people. Mary is 75. She is a conservative investor. She has to be becaus
Here is an example typical of many people. Mary is 75. She is a conservative investor. She has to be becaus
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
e she has a limited amount of capital. On the one hand, she has to play it safe; on the other hand she needs to get as much income out of her assets as she can.
She has a $100,000 5 year CD down at the bank. It is paying 4.87% interest a year. Given her
She has a $100,000 5 year CD down at the bank. It is paying 4.87% interest a year. Given her
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
objectives of earning the most she can, not taking any risk of losing the principal and her concern for the fact that prices at the grocery store keep going up, she has at least two problems.
The first is the fact that the interest on her CD is taxable.
The first is the fact that the interest on her CD is taxable.
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
In her 15% bracket, 4.87% nets out to 4.14%. Second, her $100,000 is not growing, so her income is not keeping up with the increases in the cost of living.
Can Mary do better?
Most likely she can. She can increase her after tax spendable income withou
Can Mary do better?
Most likely she can. She can increase her after tax spendable income withou
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
risking her principal pretty easily. She might even be able to increase her $100,000 over time to boot. One of the ways is by using a split annuity.
The concept behind a split annuity is simple. Mary transfers her CD to an insurance company’s split ann
The concept behind a split annuity is simple. Mary transfers her CD to an insurance company’s split ann
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
ity contract. The $100,000 is split into two accounts. The first is an immediate annuity. This pays Mary a monthly income. The balance of the $100,000 is put into a deferred annuity which grows at interest. Let’s take a look at each of these accounts in
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
more detail.
The advantage of the immediate annuity portion is that it can pay Mary a higher income that her CD. Second, unlike her CD, which is all taxed, Mary will pay no tax on a percentage of the income produced by the immediate annuity portion of t
The advantage of the immediate annuity portion is that it can pay Mary a higher income that her CD. Second, unlike her CD, which is all taxed, Mary will pay no tax on a percentage of the income produced by the immediate annuity portion of t
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
e split annuity. Assuming a ten year payout, the amount excluded from tax could exceed 80%.
The benefit of the deferred annuity portion is that it grows tax-deferred. This part of the split annuity is designed to grow the total account back to the orig
The benefit of the deferred annuity portion is that it grows tax-deferred. This part of the split annuity is designed to grow the total account back to the orig
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
nal $100,000 at the end of the chosen time frame. The net result is more income for Mary without increasing her risk.
That is the basic premise of a split annuity. This assumes using one insurance company’s product: a self-contained split annuity contr
That is the basic premise of a split annuity. This assumes using one insurance company’s product: a self-contained split annuity contr
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
act.
However, my experience is that you can do better if you use two insurance companies. By shopping around, you can find an immediate annuity that pays more than the immediate annuity portion of a single split annuity policy. Similarly, you usually ca
However, my experience is that you can do better if you use two insurance companies. By shopping around, you can find an immediate annuity that pays more than the immediate annuity portion of a single split annuity policy. Similarly, you usually ca
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
find a deferred annuity that pays more than the deferred annuity portion of a standalone split annuity contract. So don’t just stop with having your financial planner go grab a split annuity off the shelf. Have him or her find the most competitive immed
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
ate annuity and the most competitive deferred annuity and “make your own” split annuity.
The other advantage of using two products is that some companies offer what’s called a “bonus” annuity. To attract your business, they will give you a bonus for mov
The other advantage of using two products is that some companies offer what’s called a “bonus” annuity. To attract your business, they will give you a bonus for mov
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
ing your money over to them. The amount is a function of interest rates and the length of the deferred annuity; in general, it can range from 5% to 10%. But the key is that the bonus is paid up front, so you earn interest on both the money you put into t
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
e deferred annuity and the bonus right from the get go.
As you have seen above, the plain vanilla split annuity is designed to have you wind up with the same amount of money you started with, but with more spendable income during the annuity time frame.
As you have seen above, the plain vanilla split annuity is designed to have you wind up with the same amount of money you started with, but with more spendable income during the annuity time frame.
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
Using a two insurance company approach and a bonus annuity, you could end up with more spendable income and more money. Put these two facts together and it makes the split annuity approach even more attractive.
But can we do even better for Mary? Possib
But can we do even better for Mary? Possib
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
ly, yes, if she is willing to take a modest risk.
This alternative would place the deferred annuity portion into an equity indexed annuity. This is a subject all to itself, but let me simplify the definition of an equity indexed annuity by saying that i
This alternative would place the deferred annuity portion into an equity indexed annuity. This is a subject all to itself, but let me simplify the definition of an equity indexed annuity by saying that i
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
is an annuity where interest is credited according to the performance of one of the major stock indexes, such as the S&P 500. The annuity can only go up; it cannot go down. If the S&P 500, for example, goes up, the account goes up. If the S&P goes down,
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
the account stays the same. There are some equity indexed annuities that also pay a bonus up front.
If Mary were to choose this alternative, she might be able to end up with an account that is worth more than her original $100,000 at the end of whatever
If Mary were to choose this alternative, she might be able to end up with an account that is worth more than her original $100,000 at the end of whatever
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
time frame she chooses.
I hope you take away at least two points from this article. First, for the many people who are in Mary’s situation (own a CD and need more income), investigating how a split annuity might produce more income would be a smart mov
I hope you take away at least two points from this article. First, for the many people who are in Mary’s situation (own a CD and need more income), investigating how a split annuity might produce more income would be a smart mov
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
. Second, there are a lot of variables that have an effect on whether or not a split annuity is the best solution.
That’s why there are financial planners. Sit down with one; explain your situation and objectives. Maybe a split annuity will fit the bill
That’s why there are financial planners. Sit down with one; explain your situation and objectives. Maybe a split annuity will fit the bill
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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