Hi Nora - what a great post on the Insured Annuity Strategy. For those that don't know - this is a very commonly used strategy for those who would like to reduce taxes and increase cashflow - so in other words, pretty much everyone.

There is one catch though - in that you have to be in good health in order to get an insurance premium low enough that the strategy will make sense. If you are of "average" health for people your age - then the quotes generated by insurance policy illustration software is the going rate. If you qualify as healthier than average then the strategy will really start to look like a no brainer. Unfortunately, if you are below average health then the strategy may become untenable as the insurance premiums are too high...

I suppose the other flipside is that you DO give up the use of the $500,000 (in this case) which may tie your hands if you need to make an "extraordinary" one time purchase (i.e. for an emergency). If that is something you are worried about, then you could always do a half and half strategy - i.e. do the insured annuity strategy for $400,000 and keep $100,000 on hand just in case. (Okay, I realize that's not technically half and half... :) )

For those who would like serious peace of mind - this is definitely a strategy worth investigating.