Annuity Case

[Nate insurance]

Client is 55 years old and needs immediate income. She has about 300k that she will be receiving within a month. She wants to take withdraws and not touch her principle. She will also have to be setup on the 72t as she is under 59 years old. She is worried about growth as she would like to just withdraw the gains. The 72t has her drawing about $14,500 per year so is there any fixed or indexed product that would pay that in gains? Any help would be appreciated.

 

[nathan.lee]

Client is 55 years old and needs immediate income. She has about 300k that she will be receiving within a month. She wants to take withdraws and not touch her principle. She will also have to be setup on the 72t as she is under 59 years old. She is worried about growth as she would like to just withdraw the gains. The 72t has her drawing about $14,500 per year so is there any fixed or indexed product that would pay that in gains? Any help would be appreciated.

In order to withdraw $14,500 per year and not touch the principal, the original $300K will need to earn 4.83% per year. I don't know of any fixed products that can GUARANTEE this amount of interest and NOT touch the principal.

If you could help us get a better understanding of her situation we might be able to provide better advice.

What is her plan for the $300K? Pass to beneficiaries? Is this her entire net worth?

Is this her only source of income? If yes, has she considered the effects of inflation on that $14,500? If she does not choose a fixed or indexed product, what alternatives is she considering to generate this income and protect her principal?

We might be able to find products which could provide a guaranteed annual lifetime income of $14,500 but to my knowledge we can't ALSO protect the full value of the principal.

Hopes this helps as a starting point for further discussion.

 

[Tahoe Ray]

In order to withdraw $14,500 per year and not touch the principal, the original $300K will need to earn 4.83% per year. I don't know of any fixed products that can GUARANTEE this amount of interest and NOT touch the principal.

If you could help us get a better understanding of her situation we might be able to provide better advice.

What is her plan for the $300K? Pass to beneficiaries? Is this her entire net worth?

Is this her only source of income? If yes, has she considered the effects of inflation on that $14,500? If she does not choose a fixed or indexed product, what alternatives is she considering to generate this income and protect her principal?

We might be able to find products which could provide a guaranteed annual lifetime income of $14,500 but to my knowledge we can't ALSO protect the full value of the principal.

Hopes this helps as a starting point for further discussion.

Also, please let us know what state she's in and where the money is coming from...

 

[Josh Landis]

Client is 55 years old and needs immediate income. She has about 300k that she will be receiving within a month. She wants to take withdraws and not touch her principle. She will also have to be setup on the 72t as she is under 59 years old. She is worried about growth as she would like to just withdraw the gains. The 72t has her drawing about $14,500 per year so is there any fixed or indexed product that would pay that in gains? Any help would be appreciated.

Nate Insurance, if the client's goals are $14,500 per year in income without depleting her principal, here is a great option to consider. If there are other goals involved then please share and we can help you further, but based on the information you shared...

There is a product with Annexus that would allow your client to take withdrawals of $14,500 per year. The product also averages 7.17% per year on accumulation which (even with the $14,500 per year withdrawal) would allow your client's principal to grow.

At age 75, after taking $14,500 a year totaling $290k in cumulative withdrawals the principal would grow to $343,299 (based on historicals). Now, this is a fixed-indexed annuity so it is not guaranteed, but if you want flexibility with withdrawals and a chance to grow the principal this is a good option to look at.

This product is available in most states, but not all so if you let us know your state we can help further.

You may also look at splitting it up using a SPIA and FIA.

 

[Nate insurance]

Client is currently in CA and the money is coming from a pension. She does have other sources of income as her husband still works. She would like to pass her money on to beneficiaries. I think her main concern is not touching the principle and withdrawing and living on the $14,500 per year.

Josh- sounds like a pretty good product. How long does the contract have surrender charges?

Thanks for your help guys appreciate it.

 

[Tahoe Ray]

Client is currently in CA and the money is coming from a pension. She does have other sources of income as her husband still works. She would like to pass her money on to beneficiaries. I think her main concern is not touching the principle and withdrawing and living on the $14,500 per year.

Josh- sounds like a pretty good product. How long does the contract have surrender charges?

Thanks for your help guys appreciate it.

Other questions/thoughts:

I'm not sure what type of "pension" (a term that can be loosely used in our industry/by our clients) this is so I don't want to make assumptions about her options.

Have you spoken to her CPA to make sure that she doesn't qualify for the age 50/55 separation from service exemption (so that she can avoid the 72t)?

Was she given payout options (besides the lump sum)? If so, what were they?

Is she insurable?

Sorry for all the questions but retirement is tricky since there aren't many "do overs"...

 

[Josh Landis]

Client is currently in CA and the money is coming from a pension. She does have other sources of income as her husband still works. She would like to pass her money on to beneficiaries. I think her main concern is not touching the principle and withdrawing and living on the $14,500 per year.

Josh- sounds like a pretty good product. How long does the contract have surrender charges?

Thanks for your help guys appreciate it.

It has two options...

One is a 12 year surrender or the other is an 8 year surrender.

 

[ScottLFB]

Josh - What are you trying to have the client do with Annexus to get the $14,500? Just take the penalty free withdrawal for a few years then active your rider? Or you are solving for a client's lifetime income, but starting the first 5yrs with a 72T.

The problem with this is that Annexus is hypothetical, OP said client doesn't want to touch principle. You are talking about putting someone into a participation product when the market is at all time highs. What is that going to do for the client if the market correction hits in your first Segment of lock in Annexus, you're diving straight into principle.

The problem with the 72T is that the payment stream end up being so low as the factors on the riders are low in that 55-65 age bracket.

If the client is looking for a guaranteed $14,500, then keep out $48K ($14,500 x 4yrs) of your end product (assuming she is allowed to access this money due to separation from service guidelines in her retirement account) and put the remaining $252K in that end product which could be a 10-12% premium bonus Annuity. She will make most of that $48K back just in bonus. By the time that $48K runs out, she will be 60yrs old and can active the income rider on the FIA she put the $252K in to give her a Guaranteed $15K+ per year.

If her goal is not touching principle, guaranteeing the $15k per year, AND wanting to pass on as much to the beneficiaries as possible. Ask you client what the MOST IMPORTANT solve point is as having your cake and eating it too is a nice theory, but certain products are designed to solve for maximums on different things. Take whatever she doesn't need for income coming off the FIA rider and buy a Guaranteed No-Lapse UL to take care of the Beneficiaries.

I'm feeling good today, next case please

 

[Josh Landis]

Josh - What are you trying to have the client do with Annexus to get the $14,500? Just take the penalty free withdrawal for a few years then active your rider? Or you are solving for a client's lifetime income, but starting the first 5yrs with a 72T.

The problem with this is that Annexus is hypothetical, OP said client doesn't want to touch principle. You are talking about putting someone into a participation product when the market is at all time highs. What is that going to do for the client if the market correction hits in your first Segment of lock in Annexus, you're diving straight into principle.

The problem with the 72T is that the payment stream end up being so low as the factors on the riders are low in that 55-65 age bracket.

If the client is looking for a guaranteed $14,500, then keep out $48K ($14,500 x 4yrs) of your end product (assuming she is allowed to access this money due to separation from service guidelines in her retirement account) and put the remaining $252K in that end product which could be a 10-12% premium bonus Annuity. She will make most of that $48K back just in bonus. By the time that $48K runs out, she will be 60yrs old and can active the income rider on the FIA she put the $252K in to give her a Guaranteed $15K+ per year.

If her goal is not touching principle, guaranteeing the $15k per year, AND wanting to pass on as much to the beneficiaries as possible. Ask you client what the MOST IMPORTANT solve point is as having your cake and eating it too is a nice theory, but certain products are designed to solve for maximums on different things. Take whatever she doesn't need for income coming off the FIA rider and buy a Guaranteed No-Lapse UL to take care of the Beneficiaries.

I'm feeling good today, next case please

Scott, as I said in my post it is a fixed indexed annuity, it is not guaranteed, but based on historical averages. 4,500 scenarios over the last 30 years. You are correct that the plan would be to take withdrawals, but not about income rider. In this scenario the client would not want to put an income rider on the product (and there is no mention of an income rider), because if they did, then the principal would be affected like you said. At any rate, this is only an option to consider.

 

[Nate insurance]

So I sent in an application with Allianz Master Dex X and they denied it because they said client had to much liquidity. I sent an application with American General AG global bonus index, we will see what they say.