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Demystifying Annuities
Thomas PotterIndependent Life Insurance Professional
Plans4Retirement480 221-4206
www.plans4retirement.com
THE DIFFERENT USES OF LIFE INSURANCEAND AN ANNUITY
THE DIFFERENT USES OF LIFE INSURANCEAND AN ANNUITY
LIFE INSURANCE PROTECTS YOUR FAMILY IF YOU DIE
TOO SOON
THE DIFFERENT USES OF LIFE INSURANCEAND AN ANNUITY
LIFE INSURANCE PROTECTS YOUR FAMILY IF YOU DIE
TOO SOON
AN ANNUITY PROTECTS YOU FROM OUTLIVING YOURINCOME IF YOU
LIVE TOO LONG
Annuity Seminar Goals
•Provide you with sound and unbiased
information
Annuity Seminar Goals
•Provide you with sound and unbiased
information
•Acquaint you with annuity:
Types
Annuity Seminar Goals
•Provide you with sound and unbiased
information
•Acquaint you with annuity:
Types
Benefits
Annuity Seminar Goals
•Provide you with sound and unbiased
information
•Acquaint you with annuity:
Types
Benefits
Characteristics
Annuity Seminar Goals
•Provide you with sound and unbiased
information
•Acquaint you with annuity:
Types
Benefits
Characteristics
•What to consider if you are shopping for an
annuity
An annuity is:
A multi-year insurance interest - paying contract that has the insurance company’s guarantees of:
An annuity is:
A multi-year insurance interest - paying contract that has the insurance company’s guarantees of:
•Predictable income you cannot outlive
An annuity is:
A multi-year insurance interest - paying contract that has the insurance company’s guarantees of:
•Predictable income you cannot outlive•The return of your principal and interest earnings
An annuity is:
A multi-year insurance interest - paying contract that has the insurance company’s guarantees of:
•Predictable income you cannot outlive•The return of your principal and interest earnings•Minimum interest earnings in every economic climate
An annuity is:
A multi-year insurance interest - paying contract that has the insurance company’s guarantees of:
•Predictable income you cannot outlive•Protection from market risk•Minimum interest earnings in every economic climate
“Annuities are among the highest rated financial products in consumer satisfaction” (Nat’l Assn of Fixed Annuities)
Three ways to define an annuity
•How interest is credited - fixed rate or equity indexed
Three ways to define an annuity
•How interest is credited - fixed rate or equity indexed
•Methods of investment - single or multiple payments
Three ways to define an annuity
•How interest is credited - fixed rate or equity indexed
•Methods of investment - single or multiple payments
•When or if distributions start - deferred or immediate
Three investment methods
•Fixed rate – contractually stated
Three investment methods
•Fixed rate – contractually stated
•Equity indexed – interest earnings based upon an underlying index e.g. S&P 500
Three investment methods
•Fixed rate – contractually stated
•Equity indexed – interest earnings based upon an underlying index e.g. S&P 500
•Variable – a securities productNo guarantees – principal or earnings – total risk
Three investment methods
•Fixed rate – contractually stated
•Equity indexed – interest earnings based upon an underlying index e.g. S&P 500
•Variable – a securities productNo guarantees – principal or earnings – total riskSeller must have a securities license
Three investment methods
•Fixed rate – contractually stated
•Equity indexed – interest earnings based upon an underlying index e.g. S&P 500
•Variable – a securities productNo guarantees – principal or earnings – total riskSeller must have a securities licenseHigh investment fees
Annuity Benefits•Guaranteed lifetime income
Annuity Benefits•Guaranteed lifetime income
•Annuities avoid probate
Annuity Benefits•Guaranteed lifetime income
•Annuities avoid probate
•Early withdrawals without penalty or surrender charges for:Terminal illnessChronic illnessLong term care
Annuity Benefits•Guaranteed lifetime income
•Annuities avoid probate
•Early withdrawals without penalty or surrender charges for:Terminal illnessChronic illnessLong term care
•Death benefits for survivors
Annuity Benefits•Guaranteed lifetime income
•Annuities avoid probate
•Early withdrawals without penalty or surrender charges for:Terminal illnessChronic illnessLong term care
•Death benefits for survivors
•Numerous payout options
Annuity Benefits•Guaranteed lifetime income
•Annuities avoid probate
•Early withdrawals without penalty or surrender charges for:Terminal illnessChronic illnessLong term care
•Death benefits for survivors
•Numerous payout options
•Creditor proof
Annuity Benefits•Guaranteed lifetime income
•Annuities avoid probate
•Early withdrawals without penalty or surrender charges for:Terminal illnessChronic illnessLong term care
•Death benefits for survivors
•Numerous payout options
•Creditor proof
•Early LIMITED withdrawal of money
Characteristics of annuities
•SAFETY OF PRINCIPAL
Characteristics of annuities
•SAFETY OF PRINCIPAL
•Interest growth is tax deferred
Characteristics of annuities
•SAFETY OF PRINCIPAL
•Interest growth is tax deferred
•Distributions of interest taxed as ordinary income
Characteristics of annuities
•SAFETY OF PRINCIPAL
•Interest growth is tax deferred
•Distributions of interest taxed as ordinary income
•Each contract has an owner, an annuitant, and a beneficiary
Characteristics of annuities
•SAFETY OF PRINCIPAL
•Interest growth is tax deferred
•Distributions of interest taxed as ordinary income
•Each contract has an owner, an annuitant, and a beneficiary
•Annuities are sold by banks, brokerage firms, independent agents and captive agents.
Characteristics of annuities
•SAFETY OF PRINCIPAL
•Interest growth is tax deferred
•Distributions of interest taxed as ordinary income
•Each contract has an owner, an annuitant, and a beneficiary
•Annuities are sold by banks, brokerage firms, independent agents and captive agents.
•Any guarantees are backed by the insurance company
Characteristics of annuities
•SAFETY OF PRINCIPAL
•Interest growth is tax deferred
•Distributions of interest taxed as ordinary income
•Each contract has an owner, an annuitant, and a beneficiary
•Annuities are sold by banks, brokerage firms, independent agents and captive agents.
•Any guarantees are backed by the insurance company
•Upon death, proceeds avoid probate.
Characteristics of annuities
•SAFETY OF PRINCIPAL
•Interest growth is tax deferred
•Distributions of interest taxed as ordinary income
•Each contract has an owner, an annuitant, and a beneficiary
•Annuities are sold by banks, brokerage firms, independent agents and captive agents.
•Any guarantees are backed by the insurance company
•Upon death, proceeds avoid probate.
•Creditor proof
Characteristics of annuities
•SAFETY OF PRINCIPAL
•Interest growth is tax deferred
•Distributions of interest taxed as ordinary income
•Each contract has an owner, an annuitant, and a beneficiary
•Annuities are sold by banks, brokerage firms, independent agents and captive agents.
•Any guarantees are backed by the insurance company
•Upon death, proceeds avoid probate.
•Creditor proof
•Minimum amounts are needed to purchase them
Characteristics of annuities
•SAFETY OF PRINCIPAL
•Interest growth is tax deferred
•Distributions of interest taxed as ordinary income
•Each contract has an owner, an annuitant, and a beneficiary
•Annuities are sold by banks, brokerage firms, independent agents and captive agents.
•Any guarantees are backed by the insurance company
•Upon death, proceeds avoid probate.
•Creditor proof
•Minimum amounts are needed to purchase them
•Penalties will be assessed for early liquidation of the annuity
Costs Associated with Annuities
•No commissions – the insurance company pays the producer
Costs Associated with Annuities
•No commissions – the insurance company pays the producer
•No investment fees
Costs Associated with Annuities
•No commissions – the insurance company pays the producer
•No investment fees
•No producer fees – at least from me
Costs Associated with Annuities
•No commissions – the insurance company pays the producer
•No investment fees
•No producer fees – at least from me
•All annuities have surrender/penalties/liquidation charges for terminating the contract before its maturity date
Costs Associated with Annuities
•No commissions – the insurance company pays the producer
•No investment fees
•No producer fees – at least from me
•All annuities have surrender/penalties/liquidation charges for terminating the contract before its maturity date
•If any, all costs are specified in the contract and explained before the purchase by the producer
What is annuitization?
Annuitization is the conversion of your annuity’s account value to aguaranteed stream of income according to your payout option choice.
What is annuitization?
Annuitization is the conversion of your annuity’s account value to aguaranteed stream of income according to your payout option choice.
•Single Premium Immediate Annuities (SPIAs) are annuities that converta one-time premium into an immediate income stream.
What is annuitization?
Annuitization is the conversion of your annuity’s account value to aguaranteed stream of income according to your payout option choice.
•Single Premium Immediate Annuities (SPIAs) are annuities that converta one-time premium into an immediate income stream.
•A deferred annuity can be annuitized at the end of its term, during theterm of the contract, or not at all.
What is annuitization?
Annuitization is the conversion of your annuity’s account value to aguaranteed stream of income according to your payout option choice.
•Single Premium Immediate Annuities (SPIAs) are annuities that converta one-time premium into an immediate income stream.
•A deferred annuity can be annuitized at the end of its term, during theterm of the contract, or not at all.
•When you annuitize you are trading control of your money fora fixed stream of income from the insurance company
Considerations before annuitizing
•Once you annuitize an annuity you cannot reverse the process
Considerations before annuitizing
•Once you annuitize an annuity you cannot reverse the process
•Before annuitizing your deferred annuity consider exchanging it for animmediate annuity because:
Better interest rates
Considerations before annuitizing
•Once you annuitize an annuity you cannot reverse the process
•Before annuitizing your deferred annuity consider exchanging it for animmediate annuity because:
Better interest rates
More favorable taxation treatment for distributions
Considerations before annuitizing
•Once you annuitize an annuity you cannot reverse the process
•Before annuitizing your deferred annuity consider exchanging it for animmediate annuity because:
Better interest rates
More favorable taxation treatment for distributions
•Be sure of your payout option selection – this is not able to be changed
Annuity payout options
•Period Certain – you select the number of periods you want to receive income
Annuity payout options
•Period Certain – you select the number of periods you want to receive income
•Life/ Joint Life – payments are received as long as one spouse is alive
Annuity payout options
•Period Certain – you select the number of periods you want to receive income
•Life/Joint Life– payments are received as long as one spouse is alive
•Life with Period Certain or Joint Life with Period Certain – you are guaranteedto receive payments for the period you selected or for as long as you live, whichever is greatest. This is the best of both worlds
When an annuity contract matures
•You can take your money (P&I) as a lump sum and pay taxes on theinterest at your ordinary income tax rate.
When an annuity contract matures
•You can take your money (P&I) as a lump sum and pay taxes on theinterest at your ordinary income tax rate.
•You can roll the contract over with the same or different insurer for a new deferred annuity, likely with different terms
When an annuity contract matures
•You can take your money (P&I) as a lump sum and pay taxes on theinterest at your ordinary income tax rate.
•You can roll the contract over with the same or different insurer for a new deferred annuity, likely with different terms
•You can transfer the contract to an immediate annuity to receive periodic income payments.
Who is a good candidate for an annuity?
•Investors who cannot afford to risk/lose principal.
Who is a good candidate for an annuity?
•Investors who cannot afford to risk/lose principal.
•Those who currently have investments in CDs, T-bills, savings accounts or money market accounts and are willing to trade some liquidity for higher returns.
Who is a good candidate for an annuity?
•Investors who cannot afford to risk/lose principal.
•Those who currently have investments in CDs, T-bills, savings accounts or money market accounts and are willing to trade some liquidity for higher returns.
•People that have 401(k)’s and want to protect their gains or a portion of those gains, from possible market risk.
Who is a good candidate for an annuity?
•Investors who cannot afford to risk/lose principal.
•Those who currently have investments in CDs, T-bills, savings accounts or money market accounts and are willing to trade some liquidity for higher returns.
•People that have 401(k)’s and want to protect their gains or a portion of those gains, from possible market risk.
•Those that want a pension-like income stream for a period of time or the rest of their lives
If you can get life insurance
If you can get life insurance
Annuities are probably not good forlegacy purposes
If you can get life insurance
Annuities are probably not good forlegacy purposes
WHY?
If you can get life insurance
Annuities are probably not good forlegacy purposes
WHY?
The proceeds are taxableto your beneficiaries
DISCLAIMER
THESE PRESENTATION POINTS DO NOT REPRESENT TAX
OR LEGAL ADVICE.
CHECK WITH YOUR TAX OR LEGAL ADVISOR IF YOU HAVE ANYQUESTIONS OR CONCERNS, HOW THESE FINANCIAL PRODUCTSMIGHT AFFECT YOUR FINANCIAL CONDITION.
PLANS4RETIREMENT
THANKS FOR ATTENDING
QUESTIONS?
Presented by: Thomas Potter
480 221-4206
www.plans4retirement.com