When adding an annuity as an asset in the Profile > Net Worth section of a client plan (or when proposing an annuity purchase in the Retirement > Analysis section) you can use the Distributions drop-down box to illustrate how money will be withdrawn from the annuity. Distribution options include regular withdrawals, annuitization, and lifetime income:
The first of these options is Regular Withdrawals - with this option selected, the annuity will be treated similarly to other investments. Annuity income is modeled manually using income distribution cards, which can be set up to withdraw a specific amount each year from the annuity.
For annuities modeled in the Profile, income distributions are added in the Profile > Income section, by clicking Add Income > Distribution:
For proposed annuity purchases in the Retirement module, an income distribution card can be added in the Retirement > Analysis > Action Items by clicking Edit > Add New Items > Income > Distribution:
Within the distribution card, select the annuity bucket you wish to distribute from in the From account field. For existing annuities (Profile > Net Worth), this should correspond with the Account type of your annuity. For proposed annuities (Retirement > Analysis), this should correspond with the account chosen in the Select an account field, i.e. the tax category of the account that is being used to fund the annuity.
With the correct annuity bucket selected, fill out the remainder of the card as if you were modeling a distribution from any other account type. If you are unfamiliar with how to model income distributions in RightCapital, please see this article.
After adding and saving your distribution card, the annuity income can be found in the Retirement > Cash Flows > Summary page, within the Planned Distribution column:
When using Regular withdrawals, the income stream will end at the sooner of:
The end year selected within the Income Distribution card
The year in which the value of the annuity is fully depleted
Similar to other investment accounts, annuities set to Regular withdrawals will be drawn from if necessary to fund cash flow deficits. This depends on your withdrawal sequence, and will only occur if the client's taxable assets are fully depleted.
