The following strategy can be very beneficial for an older client who: (1) has a need for stabilized or increased guaranteed cash flow, (2) has a desire to transfer wealth, (3) has charitable inclinations.

Capital Leverage

Client is in their 70’s and has been taking a 5% conservative annual income stream ($65,000) from their account that had been worth $1.3 million. This account has fluctuated downward and is now worth $1 million. This creates the dilemma of receiving a reduced cash flow of $50,000 or increasing the annual distributions to a 6.5% factor, which will also invade capital.

December 2008