Very New To Annuities....Need A Few Questions Answered, Please......

[LostDollar]

Five things I have thought of from my consumer experience which are not included in Newby's list above and lack of knowledge about could have had significant repercussions for me in my product purchases.

FIA product with an income rider. @Newby stressed to me in another thread the importance of the agent and consumer knowing when you have to choose whether the lifetime payouts are based on a single life or a joint life. Some carriers require the choice to be made at time of purchase. Others allow waiting until one starts lifetime payouts.

Single or Joint life ownership. I believe it was @Allen Trent that talked in another thread about tax problems annuity holders can face if joint ownership is selected.

And the agent needs to understand how illustrations work and how to get one that matches the prospect's situation for lifetime payouts. I recently spent a very frustrating time of over three weeks duration trying to get an illustration for an FIA income rider product which matched the payout quotes on the carrier's site for the product. I had to solve the problem for them myself. I finally figured out that when, for example, I asked for an illustration starting lifetime payouts after ten years, they had to run the illustration based on the combination of the annuity holder's age increasing ten years AND the contract being in force for 10 years. The agent and the person preparing the illustration did not understand this and repeatedly gave me illustrations showing only the increase of 10 years in the contract holder's life. VERY, VERY, VERY frustrating and I should not have had to figure it out and explain it to them.

Know the difference between guaranteed and possible figures in an illustration. I have had an agent become quite angry with me because I would not accept his recommendation I should use increasing income, rather than level income, for lifetime payouts because of numbers in the illustration. Unfortunately the numbers the agent was expecting me to base my decision on were hypothetical market performance numbers, not the base contract guarantee numbers.

Understand about, and how to explain to the consumer, the differences between level and increasing lifetime payout options some annuity contracts will offer.

 

[MTC]

Five things I have thought of from my consumer experience which are not included in Newby's list above and lack of knowledge about could have had significant repercussions for me in my product purchases.

FIA product with an income rider. @Newby stressed to me in another thread the importance of the agent and consumer knowing when you have to choose whether the lifetime payouts are based on a single life or a joint life. Some carriers require the choice to be made at time of purchase. Others allow waiting until one starts lifetime payouts.

Single or Joint life ownership. I believe it was @Allen Trent that talked in another thread about tax problems annuity holders can face if joint ownership is selected.

And the agent needs to understand how illustrations work and how to get one that matches the prospect's situation for lifetime payouts. I recently spent a very frustrating time of over three weeks duration trying to get an illustration for an FIA income rider product which matched the payout quotes on the carrier's site for the product. I had to solve the problem for them myself. I finally figured out that when, for example, I asked for an illustration starting lifetime payouts after ten years, they had to run the illustration based on the combination of the annuity holder's age increasing ten years AND the contract being in force for 10 years. The agent and the person preparing the illustration did not understand this and repeatedly gave me illustrations showing only the increase of 10 years in the contract holder's life. VERY, VERY, VERY frustrating and I should not have had to figure it out and explain it to them.

Know the difference between guaranteed and possible figures in an illustration. I have had an agent become quite angry with me because I would not accept his recommendation I should use increasing income, rather than level income, for lifetime payouts because of numbers in the illustration. Unfortunately the numbers the agent was expecting me to base my decision on were hypothetical market performance numbers, not the base contract guarantee numbers.

Understand about, and how to explain to the consumer, the differences between level and increasing lifetime payout options some annuity contracts will offer.

Increasing payout options are usual more expensive because the insurance company doesn't know the cost of bonds and options in the future vs just laddering income. JMO.

 

[annon123]

You might want to read this thread here if you haven't already about the reissue of annuities using off shore companies.

More unknown risks these days in fixed annuities

From the business point of view (I used to teach business strategy amongst other things) One of the risks of a company using off shore reinsurers (reissuers is sort of like, but not identical to, when you get a mortgage from a bank they often resell your mortgage to another company fairly quickly although I don't think that market has moved offshore to the extent that the annuity market has - yet anyway; however annuities do not fall under the foreign bank or financial account classification so are regulated differently) is the lack of USA level oversight - which is exactly why some companies move where they are registered to a country with less regulation and oversight. Off shore companies provide a wider set of investment choices for the annuity to be invested in than in the USA - including some that have no USA oversight. What a USA based annuity reissuer can invest in and can do has far more restrictions and has USA oversight (eg not more or less restricted to mutual funds, instead can invest in variable rate products and that variable rate will be determined by the rate of return on the investment - so .

Venture capital being the "backers" of reissuing companies has a second risk - they don't keep what they buy. They try to resell at a higher rate as that is how they make their money (eg company goes public, is part of a merger or is acquired). They also try to cut costs before they do that which may or may not work out well in the long run and the buyer usually takes on a fair bit of debt to buy. Money for repayment of that debt can mean that there can be a cash flow crisis depending on other factors that may or may not be under the buyer's control. They aren't concerned about the long run though. Usually they don't own companies more than 10 years. They care about return on their investment and not the long term success of the company they sell.

If you scroll down this document you will see a brief overview of the issues with off shore reissue. It is reasonably complete although not a source I am familiar with.

An Overview of Offshore Annuities in Wealth Preservation Strategies

An Overview of Offshore Annuities in Wealth Preservation Strategies. Learn about income taxes, Annuity distributions and Non-annuity distributions

protectyou.com

 

[Jackalope]

You might consider American Savings Life (Mesa, AZ) MYGA that writes up to age 95 and continues to pay full commission on all older ages.

They also have liquidity riders at no cost for penalty-free withdrawals of interest or 10%, chronic or terminal illness, and nursing home confinement, along with a penalty-free death benefit rider.

As of 03/06/2025, their 1-year MYGA is 5.25% & 2-year MYGA is 5.50%.

Their currently in Arizona, Arkansas, Iowa, Kansas, Louisiana, Missouri, Montana, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Texas, Utah, and Wisconsin.

They directly contract to the agent at their top commission level (no haircut from an IMO). www.AmericanSavingsLife.com

 

[LostDollar]

You might consider American Savings Life (Mesa, AZ) MYGA that writes up to age 95 and continues to pay full commission on all older ages.

They also have liquidity riders at no cost for penalty-free withdrawals of interest or 10%, chronic or terminal illness, and nursing home confinement, along with a penalty-free death benefit rider.

As of 03/06/2025, their 1-year MYGA is 5.25% & 2-year MYGA is 5.50%.

Their currently in Arizona, Arkansas, Iowa, Kansas, Louisiana, Missouri, Montana, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Texas, Utah, and Wisconsin.

They directly contract to the agent at their top commission level (no haircut from an IMO). www.AmericanSavingsLife.com

I am a consumer, not an agent.

I have seen you post about ASL before.

After comments I have read here about buying annuities, I would be asking an agent that presented ASL to me 2 questions:

What is their AM Best Rating? (B++ would probably remove them from my consideration for a purchase.)

And, with buying a MYGA, my second question would be, How much trouble will you (agent) face doing a 1035 transfer of the funds to another annuity carrier when the MYGA matures? (Say for a different MYGA or to a flexible premium FIA.)

Re AM Best ratings. Again, after comments I have seen here, I would have to have some serious conversations with IMO's, and maybe in a thread here, were I an agent considering selling annuity products for carriers with lower than an A M Best A- rating.