Please Advise on this Question... Thanks

[scagnt83]

It's like the match on a 401(k) contribution. You don't get to keep it until you are VESTED in it. With the vast majority of 401(k) plans, you are vested after 5 years of employment. With bonus annuities, you are "vested" according to this vesting schedule/timeline.

If you "quit the program" before then, you lose this "bonus".

I cant agree. A bonus on an annuity is nothing like matching on a 401k. Matching on a 401k is free money... a bonus on an annuity is just a different path that leads to the same destination. Extremely different concepts.


You are correct that they are similar in the vesting part of it.... but there are IA bonuses that have no vesting schedule at all... just like there are many 401k plans that require no vesting on the match (around 30% - 40% of small plans).

 

[SanDiego619]

There's no such thing as a bonus. A "bonus" is just an advance payment of interest. It isn't even that, really. It is an agreement to maybe pay into the product an advance of interest IF the contract is fully honored.

Any time I run into a client who talks about bonuses and "what's the bonus on this product" I give them this talk.

Caps, spreads, bonuses -all hocus-pocus. The company is going to make money one way or another.

Do I use bonuses as a selling point? Sure. But as soon as clients start trying to make comparisons as to bonuses from other companies, I have to explain exactly what a bonus is.

Interest is interest, and as pointed out, to get a 20% bonus you're going to have a product with a very long commitment and/or horrible spread/cap and/or some other gotcha.

Lets not forget about the instant vesting upon death though. You've done the family a favor by having someone sign a policy on their deathbed (figuratively of course). You're gonna get charge back but instant bump for that money.