Computerized method and system for providing guaranteed lifetime income with liquidity

• US 5,933,815 A
• Filed: 05/01/1995
• Issued: 08/03/1999
• Est. Priority Date: 05/01/1995
• Status: Expired due to Fees

• Current Assignee: The Equitable Life Assurance Society of The United States (Equitable Holdings, Inc.)
• Original Assignee: The Equitable Life Assurance Society of The United States (Equitable Holdings, Inc.)
• Inventors: Golden, Jerome S.
• Primary Examiner(s): Tung, Bryan
• Assistant Examiner(s): RAO, ANAND SHASHIKANT
• Application Number:
  US08/432,101
• Time in Patent Office: 1,555 Days
• Field of Search: 364/408, 364/401, 364/406, 364/407, 395/144, 395/145, 395/236, 395/235, 395/238, 395/239, 395/242, 395/240, 705/35, 705/36, 705/40
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 20/102 Bill distribution or payments
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

Computerized method and system for administering at least part of a program to provide a person with guaranteed lifetime income with a measure of liquidity using at least an initial contribution of assets such as from an IRA. The amounts of a series of periodic distributions or payments to be made during first and second periods in the person'"'"'s life are calculated based on an information profile and stored financial and actuarial data. The first or "guaranteed" period begins on a given date and has a definite duration, and the second or "life contingent" period begins after the first period and extends for as long as the person or joint annuitant lives. A first portion of the contribution is allocated towards the purchase of at least one guaranteed financial vehicle having a determinable market value at any time so as to be capable of being liquidated and which will provide the person with periodic distributions during the first period. These guaranteed financial vehicles are preferably serially maturing Guaranteed Interest Rate Options. A second portion of the initial contribution is allocated towards the purchase of at least one life contingent financial vehicle such as a life contingent annuity which will provide the person with periodic distributions for as long as the person or joint annuitant lives. A further portion of the initial contribution could be invested in non-guaranteed financial vehicles to provide a greater return, which return is periodically used to purchase additional guaranteed and/or life contingent financial vehicles.

Claims

1. A method performed at least partially by a programmed computer for administering at least part of a program to provide a person with guaranteed lifetime income with a measure of liquidity using at least an initial contribution of assets, the method comprising:

calculating an amount of each of a series of periodic distributions to be made for the person'"'"'s life during at least a first and a second period in the person'"'"'s lifetime based on an information profile provided by the person and stored data, wherein the first period begins on a given date and has a definite duration and the second period begins after the end of the first period and extends at least for as long as the person is alive;

allocating a first portion of the initial contribution towards the purchase of at least one guaranteed financial vehicle having a determinable market value at any time so as to be capable of being liquidated in whole or in part and which will provide the person with at least one of the periodic distributions during the first period; and

allocating a second portion of the initial contribution towards the purchase of at least one life contingent financial vehicle which will provide the person with one or more of the periodic distributions during the second period for as long as the person lives.

2. The method of claim 1 wherein the step of allocating a second portion of the initial contribution comprises allocating an amount exactly equal to the initial contribution less the first portion.

4. The method of claim 1 further comprising:

receiving the initial contribution;

using the first portion of the initial contribution for the purchase of the at least one guaranteed financial vehicle;

using the second portion of the initial contribution for the purchase of the at least one life contingent financial vehicle; and

making payments to the person of the periodic distributions.

5. The method of claim 4 further comprising:

calculating the market value of the one or more guaranteed financial vehicles as of a date a withdrawal may be made of all or part of the first portion of the assets allocated to one or more guaranteed financial vehicles based on an interest rate determined as of the date the withdrawal may be made;

in response to a request by the person to withdraw all of the first portion of the assets, providing the person with an amount equal to the market value of the first portion of the assets allocated to the one or more guaranteed financial vehicles; and

in response to a request by the person to withdraw part of the first portion of the assets, providing the person an amount equal to the part requested by the person and determining the amount of any assets remaining in the first portion of the assets adjusted by the market value of the part withdrawn.

6. The method of claim 5 further comprising reallocating any remaining assets in the first portion towards the purchase of at least one guaranteed financial vehicle having a determinable market value which will provide the person with at least one guaranteed periodic distribution during the first period.

7. The method of claim 1 further comprising:

entering into the programmed computer an information profile including a payment plan selected by the person and an amount of the initial contribution.

8. The method of claim 7 further comprising:

determining purchase rates for each of the at least one guaranteed financial vehicle and the at least one life contingent financial vehicle based on the payment plan selected and the stored data;

wherein the step of calculating the amounts of the periodic distributions is implemented by the programmed computer using the following formula;

##EQU2## wherein, t is a date on which a distribution is to be made to the person;

P(t) is the amount of the distribution to be made on date t;

IC is the amount of the initial contribution;

PPF(t) is a payment plan factor at date t which depends on the payment plan selected by the person;

PR(t) is the purchase rate of a given financial vehicle maturing on date t;

d is the difference between a date on which the initial contribution is received and a start date of the first period; and

c is the length of the first period.

9. The method of claim 8 wherein the steps of allocating a first portion and allocating a second portion of the initial contribution comprises calculating an allocation for each financial vehicle as the product of the periodic distribution to be made from the financial vehicle and the purchase rate for the financial vehicle.

10. The method of claim 8 wherein the step of calculating the amount of each of the periodic distributions comprises calculating a level periodic distribution by setting PPF(t)=1.

11. The method of claim 8 wherein the step of calculating the amount of each of the periodic distributions comprises calculating regularly increasing periodic distributions by setting:

PPF (t)=(1+I)^INT((k(t)-d)/n) during the first period, and PPF (t)=(1+I)^INT(c/n) during the second period, wherein;

k(t) is a number of possible distribution dates prior to the date t on which a distribution is to be made,

I is a percentage increase in the periodic distributions, and

n is a number of periods between each of the regular increases in the periodic distributions.

12. The method of claim 8 wherein the step of determining purchase rates for each of the guaranteed financial vehicles comprises calculating a purchase rate for a given guaranteed financial vehicle according to the following formula:

space="preserve" listing-type="equation">PR(t)=(1+i(t)).sup.-(t-sd)/td,

wherein;

i(t) is a predetermined interest rate for a financial vehicle maturing on date t;

sd is a starting date for the program; and

td is a total number of days in a given year.

13. The method of claim 8:

wherein entering an information profile into the programmed computer further includes inputting into the programmed computer at least the person'"'"'s age, gender and marital status, and, if the person is married, whether the at least one life contingent financial vehicle will be contingent on the life of the person alone orjointly with the life of a second person and, if jointly, a survivorship percentage for the at least one life contingent financial vehicle;

further comprising storing in the programmed computer a database of male and female mortality rates and establishing a database of survival probabilities for the person and/or the second person based at least on the mortality rates and the person'"'"'s and/or second person'"'"'s age and gender; and

wherein determining a purchase rate for the at least one life contingent financial vehicle is based at least on the information profile and the survival probabilities.

14. The method of claim 7 further comprising:

revising the information profile entered into the programmed computer; and

calculating a revised amount of each the periodic distributions to be made based on the revised information.

15. The method of claim 1 wherein the person is a retiree and the initial contribution is an amount contained in a retirement account, and further comprising:

calculating minimum amounts required by law to be distributed from the retirement account during the first and second periods;

comparing each of the calculated minimum amounts to each associated calculated periodic distribution; and

generating a message if any given minimum amount exceeds any associated periodic distribution.

16. The method of claim 15 further comprising:

generating and outputting on an output device a report showing at least the revised amounts of the periodic distributions.

17. The method of claim 1 further comprising generating and outputting on an output device a report showing at least the amounts of the periodic distributions.

24. The method of claim 1 comprising the step of allocating a third portion of the initial contribution towards the purchase of at least one non-guaranteed financial vehicle.

25. The method of claim 24 further comprising:

receiving the initial contribution;

using the first portion for the purchase of the at least one guaranteed financial vehicle;

using the second portion for the purchase of the at least one life contingent financial vehicle; and

using the third portion for the purchase of the at least one non-guaranteed financial vehicle.

26. The method of claim 1 wherein the second period starts immediately following the end of the first period and wherein the step of calculating the amount of each of the periodic distributions comprises calculating the amounts so that the periodic distributions are to be made without any break in continuity between the periodic distributions to be made during the first and second periods.

27. The method of claim 26 further comprising, in the event of a withdrawal during the first period of all or part of the first portion of the assets allocated towards the purchase of the at least one guaranteed financial vehicle, accelerating the beginning of the second period to thereby prevent any break in the continuity between the periodic distributions to be made during the first and second periods.

28. The method of claim 27 wherein only part of the first portion of the assets are withdrawn, further comprising reallocating an amount representing a portion of the first portion of the assets remaining after the withdrawal towards the purchase of at least one guaranteed financial vehicle to provide one or more periodic distributions during the first period until the accelerated beginning of the second period.

29. The method of claim 28 wherein the steps of reallocating the remaining portion of the first portion and of accelerating the beginning of the second period are performed such that periodic distributions like those before the withdrawal are made as a result of these steps after the withdrawal.

3. The method of claim I further comprising calculating the market value of the one or more guaranteed financial vehicles as of a date a withdrawal may be made of all or part of the first portion of the assets allocated to one or more guaranteed financial vehicles based on an interest rate determined as of the date the withdrawal may be made.

18. A computer system for administering at least part of a program to provide a person with guaranteed lifetime income with a measure of liquidity using at least an initial contribution of assets, comprising:

means for inputting an information profile based on data received from the person;

means for storing financial and statistical data necessary for the calculation of a series of financial vehicle purchase rates;

programmed processing means for;

(a) calculating an amount of each of a series of periodic distributions to be made for the person'"'"'s life during at least a first and a second period in the person'"'"'s lifetime based on the inputted information profile and the stored data, wherein the first period begins on a given date and has a definite duration and the second period begins after the end of the first period and extends at least for as long as the person is alive;

(b) allocating a first portion of an initial contribution of assets towards the purchase of at least one guaranteed financial vehicle having a determinable market value at any time so as to be capable of being liquidated in whole or in part and which will provide the person with at least one of the periodic distributions during the first period; and

(c) allocating a second portion of the initial contribution towards the purchase of at least one life contingent financial vehicle which will provide the person with one or more of the periodic distributions during the second period for as long as the person lives; and

means for outputting the calculated amounts of the periodic distributions.

19. The system of claim 18, comprising an output device coupled to the means for outputting.

20. The system of claim 18, comprising a memory device coupled to the means for outputting.

21. The system of claim 18, wherein the programmed processing means calculates said amounts based on target, lifetime income information input to the system, and further calculates the amount of the initial contribution.

22. The system of claim 18 wherein the programmed processing means calculates the amount of the periodic distributions based on the amount of an initial contribution input to the system.

23. A system for processing and administering a client account comprising a combination of serially maturing guaranteed financial vehicles having a determinable market value at any time so as to be capable of being liquidated and at least one life contingent financial vehicle, such that the client account provides the client with lifetime income based at least on an initial contribution of assets, comprising:

means for receiving the initial contribution of assets;

means for calculating an amount of each of a series of periodic distributions to be made for the person'"'"'s life during at least a first and a second period in the person'"'"'s lifetime based on an inputted information profile and stored data, wherein the first period begins on a given date and has a definite duration and the second period begins after the end of the first period and extends at least for as long as the person is alive

means for allocating a first portion of the initial contribution towards the purchase of the guaranteed financial vehicles which will provide the person with periodic distributions during the first period; and

means for allocating a second portion of the initial contribution towards the purchase of the at least one life contingent financial vehicle which will provide the person with periodic distributions during the second period for as long as the person lives;

means for purchasing the guaranteed financial vehicles with the first portion and the at least one life contingent financial vehicle with the second portion; and

means for generating a message on the dates the periodic distributions are to be made.

30. A method performed at least partially by a programmed computer for administering at least part of a program to provide a person with guaranteed lifetime income with a measure of liquidity using at least an initial contribution of assets, the method comprising:

calculating an amount of each of a series of periodic distributions to be made for the person'"'"'s life during at least a first and a second period in the person'"'"'s lifetime based on an information profile provided by the person and stored data, wherein the first period begins on a given date and has a definite duration and the second period begins after the end of the first period and extends at least for as long as the person is alive;

allocating a first portion of the initial contribution towards the purchase of at least one guaranteed financial vehicle having a determinable market value at any time so as to be capable of being liquidated in whole or in part and which will provide the person with at least part of the periodic distributions during the first period;

allocating a second portion of the initial contribution towards the purchase of at least one life contingent financial vehicle which will provide the person with one or more of the periodic distributions during the second period for as long as the person lives; and

investing a third portion of the initial contribution in at least one non-guaranteed financial vehicle.

31. The method of claim 30 further comprising, at least once after the start of the first period, the steps of:

withdrawing at least part of the third portion invested in the at least one non-guaranteed financial vehicle; and

one of the following;

allocating the amount withdrawn from the non-guaranteed financial vehicle towards the purchase of at least one additional guaranteed financial vehicle having a determinable market value at any time so as to be capable of being liquidated in whole or in part and which will provide the person with additional periodic distributions during the remainder of the first period;

or

allocating the amount withdrawn from the non-guaranteed financial vehicle towards the purchase of at least one additional life contingent financial vehicle which will provide the person with one or more additional periodic distributions during the second period for as long as the person lives;

or

allocating a first part of the amount withdrawn from the non-guaranteed financial vehicle towards the purchase of at least one additional guaranteed financial vehicle having a determinable market value at any time so as to be capable of being liquidated in whole or in part and which will provide the person with additional periodic distributions during the remainder of the first period and a second part of the amount withdrawn from the non-guaranteed financial vehicle towards the purchase of at least one additional life contingent financial vehicle which will provide the person with one or more additional periodic distributions during the second period for as long as the person lives.

32. The method of claim 31 wherein the steps of withdrawing at least part of the third portion and allocating the amount withdrawn towards the purchase of additional financial vehicles are perfomed a plurality of times at regular intervals during the first period.

33. The method of claim 31 further comprising investing at least part of the amount withdrawn from the non-guaranteed financial vehicle in at least one non-guaranteed financial vehicle.

34. The method of claim 30 wherein:

the step of calculating the amount of each of the periodic distributions comprises calculating regularly increasing periodic distributions;

the steps of allocating the first and second portions comprise allocating the first and second portions towards the purchase of the at least one guaranteed financial vehicle and the at least one life contingent financial vehicle, respectively, such that the periodic distributions remain constant over time; and

the step of investing the third portion comprises;

determining a total cost of purchasing the guaranteed and life contingent financial vehicles necessary to provide the increasing periodic distributions as calculated;

calculating the third portion as the difference between the total cost of purchasing the guaranteed and life contingent financial vehicles as calculated and a total amount of the first and second portions as allocated; and

investing the calculated third portion in at least one non-guaranteed financial vehicle.

35. The method of claim 30 wherein the second period does not start immediately after the end of the first period but after the end of one or more sequential intermediate periods which follow the end of the first period, the method further comprising:

at the start of any given intermediate period, withdrawing at least part of the third portion invested in at least one non-guaranteed financial vehicle; and

one of the following;

allocating the amount withdrawn from the at least one non-guaranteed financial vehicle towards the purchase of at least one guaranteed financial vehicle having a determinable market value at any time so as to be capable of being liquidated in whole or in part and which will provide the person with periodic distributions at least during the given intermediate period;

or

allocating the amount withdrawn from the non-guaranteed financial vehicle towards the purchase of at least one additional life contingent financial vehicle which will provide the person with one or more additional periodic distributions during the second period for as long as the person lives;

or

allocating a first part of the amount withdrawn from the at least one non-guaranteed financial vehicle towards the purchase of at least one guaranteed financial vehicle having a determinable market value at any time so as to be capable of being liquidated in whole or in part and which will provide the person with periodic distributions at least during the given intermediate period and a second part of the amount withdrawn from the non-guaranteed financial vehicle towards the purchase of at least one additional life contingent financial vehicle which will provide the person with one or more additional periodic distributions during the second period for as long as the person lives.

36. The method of claim 35 further comprising investing a third part of the amount withdrawn from the at least one non-guaranteed financial vehicle in at least one non-guaranteed financial vehicle.

37. The method of claim 36 wherein the second period starts after the end of a plurality of sequential intermediate periods.

38. The method of claim 35 wherein:

the step of calculating the amounts of the periodic distributions to be made during at least the first and second periods comprises calculating the amounts of periodic distributions to be made during the first, second, and all intermediate periods; and

the step of investing the third portion comprises;

determining a total cost of purchasing the guaranteed and life contingent financial vehicles necessary to provide periodic distributions as calculated;

calculating the third portion as the difference between the total cost of purchasing the guaranteed and life contingent financial vehicles as calculated and the first and second portions as allocated; and

investing the calculated third portion in at least one non-guaranteed financial vehicle.

39. A computer usable medium having computer readable program code means embodied in said medium for causing said computer to perform method steps for processing and administering a client account to provide a client with guaranteed lifetime income with a measure of liquidity using at least an initial contribution of assets, the method comprising:

calculating an amount of each of a series of periodic distributions to be made for the client'"'"'s life during at least a first and a second period in the client'"'"'s lifetime based on an information profile provided by the client and stored data, wherein the first period begins on a given date and has a definite duration and the second period begins after the end of the first period and extends at least for as long as the client is alive;

allocating a first portion of the initial contribution towards the purchase of at least one guaranteed financial vehicle having a determinable market value at any time so as to be capable of being liquidated in whole or in part and which will provide the client with at least part of the periodic distributions during the first period; and

allocating a second portion of the initial contribution towards the purchase of at least one life contingent financial vehicle which will provide the client with one or more of the periodic distributions during the second period for as long as the client lives.

40. A system for processing and administering a client account comprising a combination of serially maturing guaranteed financial vehicles having a determinable market value at any time so as to be capable of being liquidated in whole or in part at least one life contingent financial vehicle, and at least one non-guaranteed financial vehicle, the client account providing the client with lifetime income based at least on an initial contribution of assets, comprising:

means for receiving the initial contribution of assets;

means for calculating an amount of each of a series of periodic distributions to be made for the client'"'"'s life during at least a first and a second period in the client'"'"'s lifetime based on an inputted information profile and stored data, wherein the first period begins on a given date and has a definite duration and the second period begins after the end of the first period and extends at least for as long as the person is alive;

means for allocating a first portion of the initial contribution towards the purchase of the guaranteed financial vehicles which will provide the client with periodic distributions during the first period; and

means for allocating a second portion of the initial contribution towards the purchase of the at least one life contingent financial vehicle which will provide the client with periodic distributions during the second period for as long as the client lives;

means for purchasing the guaranteed financial vehicles with the first portion and the at least one life contingent financial vehicle with the second portion;

means for investing a third portion of the initial contribution in at least one non-guaranteed financial vehicle; and

means for generating a message on the dates the periodic distributions are to be made.

41. A method performed at least partially by a programmed computer for administering at least part of a program to provide a person with guaranteed lifetime income with a measure of liquidity using at least an initial contribution of first assets, the method comprising:

calculating an amount of each of a series of periodic distributions to be made for the person'"'"'s life during at least a first and a second period in the person'"'"'s lifetime based on an information profile provided by the person and stored data, wherein the first period begins on a given date and has a definite duration and the second period begins after the end of the first period and extends at least for as long as the person is alive;

matching second assets with a liability to make the calculated distributions, comprising;

allocating a first portion of the initial contribution towards the purchase of at least one guaranteed financial vehicle having a determinable market value at any time so as to be capable of being liquidated and which will provide the person with at least one of the periodic distributions during the first period;

allocating a second portion of the initial contribution towards the purchase of at least one life contingent financial vehicle which will provide the person with one or more of the periodic distributions during the second period for as long as the person lives; and

correlating the first and second portions of the initial contribution with the at least one guaranteed financial vehicle and the at least one life contingent financial vehicle, respectively, in an account designated for the person.

42. The method of claim 41 wherein the step of correlating comprises purchasing the at least one guaranteed financial vehicle with the first portion of the initial contribution.

43. The method of claim 41 wherein the step of correlating comprises purchasing the at least one life contingent financial vehicle with the second portion of the initial contribution.

44. The method of claim 41 wherein the step of correlating comprises investing the first portion in a separate account the assets of which arc matched with liabilities arising from a plurality of guaranteed financial vehicles on an aggregate basis.

45. The method of claim 41 wherein the step of correlating comprises investing the second portion in a general account the assets of which are matched with liabilities arising from a plurality of life contingent vehicles.