CD’s to annuity

[scagnt83]

So, she loses all that interest now and doesn't see the bonus for 7-10 years.

In other words the 16% bonus is pure bullshit.

No. The bonus starts accumulating immediately year 1.

It is not completely liquid until year 11.

If you Surrender the policy before year 7 you lose it.

You can take either 5% or 10% out of the policy each year free of surrender charges.

 

[fed up]

I would advise your client to put half into the annuity because that money is essentially locked up for 10 years, and ladder equal amounts each month over the next 12 months which creates spendable income each month if she needs it without affecting the larger amount in the annuity

 

[LostDollar]

No. The bonus starts accumulating immediately year 1.

It is not completely liquid until year 11.

If you Surrender the policy before year 7 you lose it.

You can take either 5% or 10% out of the policy each year free of surrender charges.

So year 11 and after the money is actually the annuity holders?

I thought premium bonuses were just bases for income computations but the money was never the annuity holders to withdraw?

Doesn't one also have to pay an annual fee to get the annuity option which includes the bonus?
Which would mean one could actually loose ground with the amount in the annuity in a year where there was no income added?

 

[Allen Trent]

I would advise your client to put half into the annuity because that money is essentially locked up for 10 years, and ladder equal amounts each month over the next 12 months which creates spendable income each month if she needs it without affecting the larger amount in the annuity

If this is her only money, that could be a good suggestion. However, she may have other liquid assets or excess income that liquidity isn't that important.

 

[scagnt83]

So year 11 and after the money is actually the annuity holders?

Yes, you start vesting into it in year 7. 100% of it is yours to withdraw (along with its interest) after y11.

 

[scagnt83]

I thought premium bonuses were just bases for income computations but the money was never the annuity holders to withdraw?

Doesn't one also have to pay an annual fee to get the annuity option which includes the bonus?

No, not all are.

Many Riders do have a bonus, some are just on the Rider value.

There are plenty out there that have a Bonus on the Accumulation Value, that is liquid for the client to withdraw after a certain period of time.

Most Bonuses do not require a fee. Most Income Riders do require a Fee.

 

[LostDollar]

No, not all are.

Many Riders do have a bonus, some are just on the Rider value.

There are plenty out there that have a Bonus on the Accumulation Value, that is liquid for the client to withdraw after a certain period of time.

Most Bonuses do not require a fee. Most Income Riders do require a Fee.

Ok, guess I have to start over with learning about annuities.

I did look again at what I presume to be the flyer for the specific annuity TR said OP is wanting to sell. It still looks to me like one has to pay a non-cancellable surcharge of .95% of something for the life of the annuity in order to get the 16% rate.

That comes across to me as conceptually similar to the idea of paying an advisor an AUM fee of 1%, in order to gain a 6% initial premium bonus increase for the annuity. I don't know how to assess the potential value of an increase in the initial amount of the annuity in exchange for the privilege of paying an annual fee. I'm sure there are some fancy math procedures to do it if you want to give the math procedures some assumptions about the stock market.

I also note the 7 year version of this product seems to show mostly higher rates than the 10 year version and I don't know whether or not that makes it better than the 10 year version. That seems to go with the concept that a premium bonus may not necessarily be the best deal. (More Math I haven't a clue about.) (The 7 year version is also just like the 10 year version, in that one can pay the 1% annual fee and get an "increase" of 6% in the premium bonus amount.)

 

[Allen Trent]

Ok, guess I have to start over with learning about annuities.

I did look again at what I presume to be the flyer for the specific annuity TR said OP is wanting to sell. It still looks to me like one has to pay a non-cancellable surcharge of .95% of something for the life of the annuity in order to get the 16% rate.

That comes across to me as conceptually similar to the idea of paying an advisor an AUM fee of 1%, in order to gain a 6% initial premium bonus increase for the annuity. I don't know how to assess the potential value of an increase in the initial amount of the annuity in exchange for the privilege of paying an annual fee. I'm sure there are some fancy math procedures to do it if you want to give the math procedures some assumptions about the stock market.

I also note the 7 year version of this product seems to show mostly higher rates than the 10 year version and I don't know whether or not that makes it better than the 10 year version. That seems to go with the concept that a premium bonus may not necessarily be the best deal. (More Math I haven't a clue about.) (The 7 year version is also just like the 10 year version, in that one can pay the 1% annual fee and get an "increase" of 6% in the premium bonus amount.)

there is always small print minutiae that not all agents are aware of like a fee or that the bonus given up front can cause the account to have a lower participation rate or annual cap. The wholesalers for the carriers sometimes forget to cover the minutiae of those features as they run out of time talking about the good parts of the product

 

[JAGMARTIN]

Tim,
I found most of the answers were remedial, with the exception of a few. First, establishing trust. Second, the needs of the client (income, purchases in the next few years, current income, benefits for others, tax bracket, etc. It's about knowing your client, who they are, and their risk meter if you will.

Assumptions of the interest is earned may or may not be relevant.

I didn't read all the posts, but what about inflation and taxes?
Forget about penalties, factor this:
4%, 20% effective tax bracket, inflation 7%, $ in a CD
effectively a yield of 2.9%

Tax-deferred, no need for the funds in the near term, and the ability to withdraw 10%. All
remaining the same as above yield, with the same inflationary factor = 4.8 % earnings.

Nearly 2% or 1.9 % more than remaining in the assumptive 4% CD

Assuming no bonuses, penalties, or withdrawals:If there are no bonuses, penalties, or withdrawals, the calculations will remain the same.

Bank- $ 370,440.00 effective dollars at the end of year one

Index Annuity- $377,280.00

From the amount take away the penalty, which generally is 1 Quarter of earnings then add the bonus after knowing your client's intent for the funds, age, etc.

There are many determining factors and variables that need to be taken into account.

In addition, for many states including Florida, Annuities are creditor-proof for a variety of reasons. Medicaid spend-down, lawsuits, upon death paid directly to beneficiaries (more factors). Estate Planning and bypassing probate.

Are the funds qualified or non-qualified?

Married or single?

Just food for thought for all of those that are interested.

 

[scagnt83]

I did look again at what I presume to be the flyer for the specific annuity TR said OP is wanting to sell. It still looks to me like one has to pay a non-cancellable surcharge of .95% of something for the life of the annuity in order to get the 16% rate.

Thats why I said "most" to each phrase.

Most products offering a bonus on Accumulation Value do not charge a Fee. If they do, it is for the Income Rider.

But some (albeit very few) products do charge a Fee. Or have the option of added features for a Fee. Which is the case in the Performance Elite Plus.

You can choose the normal Performance Elite and get a 10% Bonus, with 5% Annual Free Withdrawals.

Or choose the "Plus" version and get a 16% Bonus, 10% Annual Free Withdrawals, Return of Premium, & Enhanced Annuitization. For a Fee of 0.95%

So its more than just receiving an added Bonus, but that is part of it.

Generally speaking, most FIAs do not charge a Fee for the base policy. Fees are normally charged for the Income Rider. But there are exceptions to both of those statements.