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using-a-split-annuity-as-a-balanced-approach-to-retirement-and-estate-planning

Using a Split Annuity as a Balanced Approach to Retirement and Estate Planning
Using a Split Annuity as a Balanced Approach to Retirement and Estate Planning 1600 941 smolinlupinco

Maintaining your standard of living while trying to preserve your wealth for loved ones is a tightrope walk, something you’re probably aware of if you’re close to retiring or already enjoying this milestone in life. Finding a balance between these two goals is especially challenging since your retirement years could span decades. A way to maintain your income stream and hold onto financial assets is by investing in a split annuity.  

The Basics of an Annuity

In a nutshell, an annuity is an investment contract with tax advantages that you hold with an insurer or financial services company. You have the option to pay your premiums annually or by lump sum, and your service will pay over a set term or a lifetime in return. 

For purposes of the split annuity strategy covered below, we’ll highlight “fixed” annuities. These typically provide participants with a guaranteed minimum return rate. There are other annuities options, including “variable” and “equity-indexed,” which are more volatile but have significant upside potential compared to fixed products. 

Annuities can fall into two categories: immediate or deferred. Immediate annuities give you payouts immediately, whereas deferred options begin paying at a predetermined future date. 

Another consideration for annuity earnings is that they are tax-deferred. This means they will increase in value, tax-free until paid or withdrawn. Every payment will have a portion dedicated to standard income tax rates, and the remainder is considered a tax-free return of principal (premiums). 

Deferred annuities tend to grow faster than comparable accounts because of their ability to accumulate earnings on a tax-deferred basis. This perk offsets the modest interest rates they usually offer.

Another feature of annuities that make them attractive is the flexibility of reallocating or withdrawing funds according to your circumstances. Keep in mind that you may have to pay early withdrawal or surrender charges depending on how much you take and at what point this occurs in the annuity’s lifecycle.

Understanding the Split Annuity Strategy

Split annuities are not a single product, but rather two that are often funded by a single investment source. Most split strategies will involve using some of your funds to purchase an immediate annuity, making fixed payments over a specific term, such as 15 years. The funds you have left over then get invested in a deferred annuity that won’t pay out until the initial period has ended. 

The outcome is that once your immediate annuity term has ended, you will have accumulated enough earnings in your deferred annuity to equal what you originally invested. Essentially, if set up correctly, your split annuity will create a fixed income stream for several years that preserves your principal. 

Once the term has ended, reassess what options you have available. For instance, you might decide to have your deferred annuity start sending you payments, reinvest in another split annuity, withdraw a portion of the entire cash value it holds, or consider another investment option altogether. 

If you’d like to learn more about split annuities, reach out to us. We are eager to help you determine the best strategy for your retirement situation. 

© 2022

quarter-3-tax-calendar-2022-essential-deadlines-for-businesses-and-employers

Quarter 3 Tax Calendar 2022: Essential Deadlines for Businesses and Employers
Quarter 3 Tax Calendar 2022: Essential Deadlines for Businesses and Employers 1600 941 smolinlupinco

The following tax-related deadlines during quarter three of 2022 are important for employers and businesses to meet. However, this isn’t a complete accounting of all deadlines that might apply to you. To ensure that you meet all the necessary deadlines for your organization in the third quarter, reach out to our office today to learn more about the filing requirements you may have. 

August 1, 2022

  • The retirement plan report (Form 5500 or Form 5500-EZ) for the 2021 calendar year is due, or you can request an extension to file. 
  • Second quarter reporting of your income tax withholding and FICA taxes (FORM 941) is due, and any tax owed should be paid. There is an exception below under the August 10th deadline.

August 10, 2022

  • If you paid all associated taxes due on time, you should report your second quarter 2022 income tax withholding and FICA taxes (Form 941).

September 15, 2022 

  • Pay your third installment of 2022 estimated income tax if you are a calendar-year C-corporation.
  • For companies that filed for an automatic six-month extension as a calendar-year S-corporation or partnership:
    • Pay all interest, penalties, and owed taxes on your 2021 income tax return filing (Forms 1065, 1120S, or 1065-B). 
    • Make necessary contributions to certain employer-sponsored retirement plans for 2021.

© 2022

4 Essential Estate Planning Documents College-Aged Children Need
4 Essential Estate Planning Documents College-Aged Children Need 1600 941 smolinlupinco

If your child is off to college this year, have you already set up a basic estate plan for them? If not, you’re part of the majority that answers “no” to this question. Fortunately, with summer break already here, you can take this time to sit down with an estate planning attorney to create a plan.

With your child free from school obligations, you can bring them along to learn about the importance of this process and sign off on the necessary documentation before returning to campus this fall. 

Four essential estate planning documents your child should have before next semester

If your child is college-bound, the following four estate planning documents are crucial for them to have:

  1. Last Will and Testament: Even though your son or daughter is only in their late teens or early twenties, having a will drawn up is important. This document handles how their assets should be distributed and can take care of other situations, like guardianship of your grandchild. 
  2. Financial Power of Attorney: This is another essential document that legally empowers you or your spouse to handle your child’s finances on their behalf. You can create a form with “durable” powers should your child become incapacitated. 
  3. Health Care Power of Attorney: If your child cannot make health care decisions on their own due to incapacitation, a health care power of attorney allows your child to appoint someone to do so on their behalf. 
  4. HIPAA Authorization: The Health Insurance Portability and Accountability Act (HIPAA) authorization is essential in making crucial healthcare decisions for your child. This power of attorney option authorizes physicians and other healthcare providers to share information regarding your child’s medical conditions and diagnoses. Without this document, informed decisions about your son or daughter’s condition are difficult.

Contact us right away if you and your child would like to create an estate plan that covers the essentials. We welcome the opportunity to help your family gain peace of mind knowing that your child’s best interests are protected.

© 2022

Simon, Spinelli & Ciambrone Joins Smolin
Simon, Spinelli & Ciambrone Joins Smolin 1200 628 smolinlupinco

Smolin Lupin is pleased to announce the merger of Simon, Spinelli & Ciambrone, a CPA firm headquartered in Spring Lake Heights, New Jersey.

The professional team from Simon, Spinelli & Ciambrone specializes in providing financial, tax, and accounting advice for individuals and businesses in a wide range of industries. The Spring Lake Heights team offers decades of knowledge and experience servicing clients and assisting businesses in meeting their goals. 

“We are thrilled to have Simon, Spinelli & Ciambrone join us in providing the quality accounting and consulting services Smolin has always been known for,” said Ted Dudek, CPA and Managing Member of Smolin. “We believe Smolin will benefit greatly from Simon, Spinelli & Ciambrone’s accounting and tax experience and their focus on building exceptional client relationships.” 

This merger will expand Smolin’s ability to deliver industry-leading financial and accounting solutions throughout New Jersey. Simon, Spinelli & Ciambrone’s unique construction accounting specialization will enhance Smolin’s existing client base in the construction industry. 

“Smolin’s reputation speaks for itself,” comments Stephen M. Spinelli, CPA. “Their many years of industry experience and shared commitment to fostering client relationships make them a perfect fit for our team. Their approach to client satisfaction exactly mirrored ours over the years.”

As part of this merger, a service location for Smolin will remain in Spring Lake Heights in the previous offices of Simon, Spinelli & Ciambrone. 

About Smolin Lupin

Since 1947, Smolin has been committed to providing industry-leading professional financial and accounting services uniquely designed to meet the needs of each and every client. Smolin’s attention to the needs of each client has helped them become the successful and respected CPA firm they are today. Smolin Lupin is an Independent Member of the BDO Alliance USA and one of the NJBIZ Top 20 Public Accounting Firms in New Jersey.

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