Guaranteed Income Investment: Split Annuity Strategies for Florida Retirees
If you’re looking for a guaranteed income investment that lets you generate predictable retirement income without giving up your original principal, a split annuity strategy may be worth exploring. This approach — sometimes called “having your cake and eat it too” combines a Single Premium Immediate Annuity (SPIA) with a Multi-Year Guaranteed Annuity (MYGA) so that a portion of your money creates income today, while the remainder grows back to your full starting balance by the end of the term.
Below, we walk through how this guaranteed income annuity strategy works, show real dollar examples at several investment levels, and explain the tax treatment that makes it especially attractive for non-qualified (non-retirement) accounts.
The goal: By the end of your chosen term, your account is designed to be worth no less than what you started with — while paying your income along the way.
(Annuity guarantees are backed by the claims-paying ability of the issuing insurance company, not by any bank or government agency, and are not FDIC insured. See “Important Disclosures” below.)
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Serving Florida retirees & pre-retirees
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Guaranteed income, illustrated in plain terms
What Is a Guaranteed Income Investment?
A guaranteed income investment is a strategy — most commonly built with fixed annuities — designed to produce a predictable, contractually guaranteed stream of income while protecting the investor’s original principal from market volatility. Unlike stocks, mutual funds, or variable annuities, the guarantees in this strategy come from insurance contracts, not from market performance.
This makes guaranteed income investments a popular option for:
Investors who are risk-averse or nearing retirement (reducing longevity risk)
People holding a lump sum (inheritance, home sale, business sale, pension buyout) who want income and principal protection
Florida residents seeking tax-advantaged retirement income from non-qualified accounts
What Is a Split Annuity Strategy?
A split annuity strategy divides a single lump sum between two types of fixed annuities:
Income Now
Single Premium Immediate Annuity (SPIA)
Pays you a guaranteed monthly income immediately, for a set number of years.
Growth
Multi-Year Guaranteed Annuity (MYGA)
Grows at a fixed interest rate over the same period, with no withdrawals, so that it reaches your original full investment amount by the end of the term.
Because the SPIA portion is smaller than your total investment but is annuitized (spread out with interest) over the term, and the MYGA portion grows tax-deferred at a fixed rate, the two pieces work together so that at the end of the term your MYGA balance alone is worth your entire original investment — even though you’ve been receiving income the whole time.
How Does a Split Annuity Work? (Step by Step)
You choose a lump sum and a term (commonly 5 years, though other terms are available).
A portion of your funds is placed into a SPIA, which begins paying you guaranteed monthly income right away for the length of the term.
The remaining portion is placed into a MYGA, which earns a fixed, guaranteed interest rate and is never touched until maturity.
At the end of the term, the MYGA has grown back to equal your full original principle.
— meaning you received years of income and still have 100% of your starting balance.
Fixed Annuity vs. SPIA vs. MYGA vs. FIA: What's the Difference?
A split annuity strategy specifically pairs a SPIA with a MYGA to solve for two goals at once: income now, and full principal restoration later. This differs from a Fixed Indexed Annuity, which is a single contract offering growth potential tied to a market index rather than a fixed guaranteed rate.
5-Year Split Annuity Examples
The figures below are illustrative examples based on rates available at the time of publication. Actual SPIA payout rates and MYGA interest rates vary by insurance carrier, issue age, and market conditions at the time of purchase, and are not guaranteed to be available in the future. Contact our office for a current, personalized illustration.
Have a different amount in mind? Request a custom guaranteed income quote for any dollar figure and time horizon.
Tax Treatment: The Exclusion Ratio for Non-Qualified Annuities
If this strategy is funded with a non-qualified account (money that is not inside an IRA, 401(k), or other retirement account), the IRS applies an exclusion ratio to your SPIA income payments. Because part of each payment is treated as a tax-free return of your own principal (basis) rather than taxable earnings, approximately 90% of the income in the five-year example above is not taxable during the term. This is one of the most overlooked tax advantages of a split annuity strategy compared to fully taxable interest income.
By contrast, annuities held in qualified accounts (IRAs, Roth IRAs) follow standard retirement account tax rules, including Required Minimum Distributions (RMDs) where applicable for traditional IRAs.
This is general educational information, not individualized tax advice. Please consult a qualified tax professional about your specific situation.
Benefits and Limitations of a Guaranteed Income Strategy
Potential Benefits
- Guaranteed monthly income for a defined term
- Principal is designed to be fully restored by the end of the term
- No exposure to stock market volatility during the term
- Favorable tax treatment on income from non-qualified accounts
- Flexible — can be structured for virtually any dollar amount or duration
Limitations to Understand
- Annuity guarantees rely on the financial strength and claims-paying ability of the issuing insurance company
- Funds allocated to the MYGA portion are generally illiquid until maturity; early withdrawals may incur surrender charges
- SPIA income payments are typically fixed and not adjusted for inflation unless a specific rider is selected
- Rates shown are illustrative and change based on market conditions, carrier, and issue age
- Annuities are not FDIC insured and are not deposits at, or guaranteed by, any bank
Guaranteed Income for Life and Broader Retirement Income Planning
A split annuity strategy is typically used for a defined term (such as 5 year split annuity), but for retirees who want guaranteed lifetime income, other annuity structures — such as a lifetime SPIA or an FIA with a lifetime income rider — may be more appropriate. As part of comprehensive retirement income planning, our office helps Southwest Florida clients evaluate different annuity investment options, including:
Why Work With a Local Annuity Advisor
Tyler G. Harrelson, CES, CLTC, CFS
Tyler G. Harrelson, CES, CLTC, CFS, and the team at The Art and Science of Successful Planning serve retirees and pre-retirees throughout Florida and in person in Southwest Florida with independent, needs-based guidance on annuities, retirement income planning, and wealth preservation. As an independent financial services firm, we are not limited to a single insurance carrier, which allows us to compare guaranteed income and split annuity options across multiple companies to find rates and terms suited to your goals.
Investment Advisory Services are offered through The Art and Science of Successful Planning, a Registered Investment Advisor registered in the state of FL. Tyler G. Harrelson, CES, CLTC, CFS, P.A. is a licensed insurance agency doing business as The Art and Science of Successful Planning and is independent of the Registered Investment Advisory. This communication is intended for individuals residing in FL. No offers may be made or accepted from any resident outside the specific states referenced.
Frequently Asked Questions
What is a guaranteed income investment?
A guaranteed income investment is a strategy, typically built using fixed annuities, that provides a contractually guaranteed stream of income while protecting the investor’s original principal from market risk. Guarantees are backed by the issuing insurance company.
What is a split annuity strategy?
A split annuity strategy divides a lump sum between a Single Premium Immediate Annuity (SPIA), which pays guaranteed income immediately, and a Multi-Year Guaranteed Annuity (MYGA), which grows at a fixed rate, so the account returns to its original value by the end of the term.
How does a split annuity work?
Part of your money goes into a SPIA that pays monthly guaranteed income for a set number of years. The rest goes into a MYGA earning a fixed interest rate with no withdrawals, growing back to equal your full original investment by the end of the term.
What's the difference between a SPIA and a MYGA?
A SPIA converts a lump sum into immediate guaranteed income payments, typically without growing the underlying principle. A MYGA is a fixed-rate, tax-deferred growth vehicle that does not pay income unless you elect withdrawals and is designed to grow your balance over a set number of years.
Is annuity income from a split annuity taxable?
It depends on the account type. In a non-qualified account, a portion of SPIA payments is treated as a tax-free return of principal under the IRS exclusion ratio — often making roughly 90% of the income non-taxable during the term in examples like the ones above. Annuities in qualified accounts (IRAs) follow standard retirement account tax rules. Consult a tax professional for your specific situation.
Is my principal really guaranteed with this strategy?
The strategy is designed so that, absent early withdrawals or surrender charges, your MYGA balance returns to your full original investment by the end of the term. This guarantee is backed by the claims-paying ability of the issuing insurance company — it is not FDIC insured and is not a bank deposit.
What amounts and terms are available for a split annuity?
Split annuity strategies can be structured around virtually any investment amount and time horizon, though 5-year terms are common. Contact our office for a custom illustration based on your goals.
Do I have to be a Florida resident to work with your firm?
This communication and our advisory services are intended for individuals residing in Florida. Contact our office to confirm eligibility based on your state of residence.
