Question
Someone is looking for a conversion of a retirement account balance into an annuity in which the balance would be used to purchase the annuity
Someone is looking for a conversion of a retirement account balance into an annuity in which the balance would be used to purchase the annuity that would provide annual payments.
Options 3 and 4 do not have any specific terms (period certain) because they are designed to provide cash refund upon death. Option 1 and 2 make guaranteed payments for 20 years. Option 2 reduces payments to his survivor if he dies over the next 20 years in exchange for higher (than that of option 1) payments while he is alive. In addition to these guaranteed payments, there are uncertain cash dividend distributions (assume $1,200 per year for options 1 and 2) that are not shown.
What would you recommend? chose option 1, or 2, or something else? Explain. Please assume that he will be alive for the next 20 years.
Option 1 Option 2 Option 3 Option4 Income Plan Joint Life with 100% to survivor Joint Life with 2/3 to survivor Single Life with Cash Refund JL with 100% to survivor and Cash Fefund Period Certain Garanteed Income Payment 20 3608.29 20 4359.67 4707.9 3402.07 amount applied to income plan 77,353 Option 1 Option 2 Option 3 Option4 Income Plan Joint Life with 100% to survivor Joint Life with 2/3 to survivor Single Life with Cash Refund JL with 100% to survivor and Cash Fefund Period Certain Garanteed Income Payment 20 3608.29 20 4359.67 4707.9 3402.07 amount applied to income plan 77,353Step by Step Solution
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