Would You Recomment FIA To..

[FIG]

Fig, I assumed that was what it as. I assume you work at FIG, I spoke with one of your reps a few weeks ago regarding one of these products, can't remember the product, I did some comparison using a lump sum in a 3.7 % rate, non annuity, then took that sum in 10 years and got rates for a SPIA, smaller accumulation but higher payout, plus you pay a substantial fee for this income rider that comes out of the real account value really dragging earnings. It would really be great if a wholesaler would put on a webinar and go over the different products, addressing questions we might ask. I had a client I hadn't spoke with in a couple of years invest 3million in these things, what am i missing? Big sales obviously.

The main difference is once you convert the lump sum into a SPIA you no longer own the asset. Instead you own the rights to the income stream. With an index contract which has an income rider once you turn on the income you still control the right to lump sum the annuity value. Some index contracts don't take the fee from the annuity value unless there are index returns. This means the clients aren't showing a loss or going backwards in those down years. Yes the reality of all of this is we cannot predict the future on any financial vehicle's performance. It's wise to diversify a client's portfolio with several different vehicles and no one can argue that annuities offer great reward if the clients follow the contract terms.

 

[Norwayguy]

Fig, I assumed that was what it as. I assume you work at FIG, I spoke with one of your reps a few weeks ago regarding one of these products, can't remember the product, I did some comparison using a lump sum in a 3.7 % rate, non annuity, then took that sum in 10 years and got rates for a SPIA, smaller accumulation but higher payout, plus you pay a substantial fee for this income rider that comes out of the real account value really dragging earnings. It would really be great if a wholesaler would put on a webinar and go over the different products, addressing questions we might ask. I had a client I hadn't spoke with in a couple of years invest 3million in these things, what am i missing? Big sales obviously.

Bluemarlin08 the big thing about these income riders is the mythical higher accumulation under the rider. Like a SPIA the income amount will continue to pay out until the insureds death and if the full income amount hasn't been paid out it will continue to the beneficiary. The policyholder also reserves the right to dip into the accumulated AV however that can affect the rider... There are many carriers out there that do offer webinars on the riders...Maybe ILIAA will or already has put them out there.

Arnguy please excuse any grammar errors in advance.

 

[bluemarlin08]

Understand, however, using 100,000 lump sum as an example, over the next 10 years the AV may or may not grow, so once one starts taking their payout, each payout reduces the AV, so that ability to access the balance can diminish fairly rapidly, still a potential advantage compared to a SPIA but at the price of lower payouts, right?. So if the fee for the income rider doesn't come from the AV, where does it come from OR is it hidden in the lower payout schedule?

 

[Mr_Ed]

That's correct. She has no savings except for the IRA.

My concern is that she may need the money for emergency because of her not so perfect health. And that the money, if put in an annuity, will be tied up for years.

I'm now more confused than when I started the thread..

Aztec, your concerns are justified.

This woman is NOT someone who should own an annuity.

She doesn't even have six months of living expenses in a liquid account. The IRA is "sort of" liquid, but she'd have to pay tax on it and it might take awhile to get the cash from the IRA trustee.

The only advice you should give this woman is to start to take some withdrawals on the IRA and put it into a savings account at her local bank.

 

[Norwayguy]

Understand, however, using 100,000 lump sum as an example, over the next 10 years the AV may or may not grow, so once one starts taking their payout, each payout reduces the AV, so that ability to access the balance can diminish fairly rapidly, still a potential advantage compared to a SPIA but at the price of lower payouts, right?. So if the fee for the income rider doesn't come from the AV, where does it come from OR is it hidden in the lower payout schedule?

You are right the Income rider has a fee that comes out of the AV and diminishes AV accumulation. Also every distribution from the Rider also decreases the AV. The only problem with Illistrating 10 years of accumulation then putting it into a SPIA is we have no idea what SPIA payouts will be 10 years from now (though I doubt they would be lower than they are today)

Income Riders are not a magic bullet and should be considered as one more option for the agent and client.

 

[Cornelius]

Are there any possibilities of medicaid qualification in the future?

 

[Mr_Ed]

Are there any possibilities of medicaid qualification in the future?

that's another reason why she does not need an annuity.
she already qualifies for Medi-Cal.