Covisum Blog

Bonus. Sounds great, right? It sounds like “extra.” Getting a bonus is a good thing… right?It’s easy to understand why bonus annuities can be appealing to consumers. For years, annuity carriers have offered bonus annuity contracts, offering an up-front dollar figure that’s added to the account value, usually upon issue of the contract. This annuity bonus amount is commonly based on a percentage of premium. For example, if an annuity is started with an initial $100,000 premium, and the bonus is 10 percent, then $10,000 will be added to contract value on day one for a total contract value of $110,000.

The bucket strategy is designed to break a retiree’s assets into "buckets" based upon when those buckets are expected to be used to provide retirement income. The buckets nearest today are invested conservatively so that market fluctuations will have little impact on the retiree’s ability to draw a predictable amount from them. The investments in later buckets are invested more aggressively, with the expectation that a higher risk level should provide a higher return over time. In some bucket models, buckets are "refilled" by selling from later buckets during good times in the markets. In other bucket models, the client's asset allocation is allowed to become steadily more aggressive as the client ages. The first option works better for a constrained investor who has just enough retirement savings to meet their needs. The latter works better for someone who is well-funded, with more than enough assets to weather significant dips in the markets.