Annuities

FinZot has no annuity feature. Build one from an expense and an income stream.

1. The purchase is a mandatory expense with a one-year effective period, sized as a fixed amount in nominal dollars (expenses and healthcare).
2. The payout is an income stream. Start it at the first payment and end it at the owner’s longevity year, or the second spouse’s for a joint contract (milestones and timing). A level payout is a fixed amount in nominal dollars. A payout with a cost-of-living rider is inflation-adjusted.
3. Tax. A qualified annuity is one Other income stream. A non-qualified annuity is two streams, Other income for the taxable share and Tax-free for the return of basis, split by the contract’s exclusion ratio (income streams).

A variable payout

Size the income stream with a formula. A $40,000 base adjusted by the trailing three-year return over a 4% assumed rate:

40_000 * (1 + ROLLING_AVG(portfolio_return, 3) - 4%)

Or track a dedicated account that holds the contract’s subaccount allocation:

BALANCE("account_id") * 5%

The stand-in account counts toward net worth and can be sold to cover a shortfall, and the payout does not draw it down. A payout can follow the account’s prior close, as in LAG(BALANCE("account_id"), 1) * 5%. It cannot compound off its own prior value, because time-series functions cannot look back at a named formula (formula language).

Not modeled

Mortality credits, surrender charges, income riders, QLAC treatment for RMDs, and the exclusion ratio itself. Do not use the pension feature for an annuity. It derives its benefit from service and pay.