Stand-Alone Living Benefits

Stand-Alone Living Benefits (SALB), sometimes referred to as “hybrid annuities,” offer the insured a guaranteed stream of income without the need to purchase a traditional annuity. SALB act like insurance policies on investment accounts and begin supplying income if the account is depleted during the lifetime of the insured.

To utilize SALB, the insured must place assets in a SALB eligible investment account. The 4% to 8% lifetime income guarantee provided by the SALB is calculated over the Retirement Income Base in place when the insured purchased the SALB. The guarantee continues payments if the account can no longer support payments guaranteed under the contract and is depleted to zero dollars.

The insured typically does not receive benefits until he or she reaches sixty-five, and SALB fees range from seventy-five to almost 200 basis points. Other fees exist for advisory fees associated with the underlying account. Spousal options are also available to where the surviving spouse will continue receiving payments for his or her lifetime.

SALB do have a few drawbacks, however. Advisors, not the insurance company, manage the accounts on which the insured purchases the SALB. Additionally, the insured cannot purchase SALB on just any account, and the insured is severely restricted in his ability to trade in an account covered by SALB.  

For more on SALB, see William H. Byrnes and Robert Bloink, Stand-Alone Living Benefits—Guaranteeing Lifetime income Without an Annuity, Advisor One, Feb. 11, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.