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Steve Walther 208-870-7688 swalther@anallianceforlife.com

An Alliance for Life. Maximizing the EQUITY INDEX. A Comparison between Equity Indexed Annuities & Equity Indexed Life Insurance . Steve Walther 208-870-7688 swalther@anallianceforlife.com. Do you Have Clients that own Annuities?. Why? Why Do People Buy Annuities?. Safety?

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Steve Walther 208-870-7688 swalther@anallianceforlife.com

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  1. An Alliance for Life Maximizing the EQUITY INDEX. A Comparison between Equity Indexed Annuities & Equity Indexed Life Insurance Steve Walther 208-870-7688 swalther@anallianceforlife.com

  2. Do you Have Clients that own Annuities? • Why? • Why Do People Buy Annuities?

  3. Safety? • Tax Deferral? • “Rainy Day” Funds? • Income? • To Avoid Probate? • Legacy?

  4. Are there Problems with Annuities? • The 3 “T’s”… • TICKING TAX TIMEBOMB! Taxes

  5. Concerns • Tax Deferred…BUT…the Government will get theirs! • Tax on Withdrawals (Annuitization/Exclusion Ratio vs W/D’s) • Limitations on Withdrawals (both contractually & by the IRS with w/d’s prior to A59 ½) • When Annuitant dies, ALL GAINS ARE TAXABLE TO THE HEIRS AS ORDINARY INCOME.

  6. Concerns • What about Returns? • What are current fixed annuity rates? • 2%, 2.5%, 3%? • What are current Equity Indexed Annuity Cap Rates? • 3%, 3.5%, 4%? (0% Floor)

  7. ANNUITY FACTOID • 90% of Deferred Annuities Pass Onto the Next Generation Without Ever Being Annuitized.* • So…remember to ask your client, “Why Do You Own an Annuity?” * “Ten Things the Average Person Does Not Know About Annuities,” The Source for Senior Living, 2014

  8. ANNUITY REALITY CHECK • There are really good reasons to own annuities. • Guaranteed Income Stream. • Income that you can’t outlive. • Can be “PART” of one’s over all plan. • Make sure your client knows benefits & potential pitfalls before you recommend one. • And if they already own one, remind them why and affirm that their original objectives are still the same as they were at the time of purchase.

  9. Cap Rates All Equity Indexed Products Are NOT Equal. • Equity Indexed Annuity Cap Rate: 3.5% to 4% • Equity Indexed Life Insurance Cap Rate: 11-14% • Why the difference? • Carriers are required to maintain higher reserves for Annuities than for Life Insurance. • The actual Cap Rates will go up & down depending on market volatility, which helps set the price of the options that ultimately determine the crediting for Indexed products.

  10. Cap Rates • So…Why may a Life Insurance Contract be worth a look when considering an Annuity? • Equity Indexed Annuity: 3%-4% Cap • Equity Indexed Life Insurance: 11%-14% Cap!!!

  11. Life Insurance Fact Check: • MEC • Modified Endow Contract • What is it? • Like an annuity, but better! • Can be Single Premium. • Tax Deferred. • TAX FREE DEATH BENEFIT! • 2 of the 3 normal tax benefits of non-MEC Life Insurance. • Withdrawals are taxed as ordinary income (if gain in contract…just like annuity!).

  12. Advantages of Life Insurance: • Tax Deferred Growth (same as Annuity). • Death Benefit Avoids Probate (same as Annuity). • Tax Free Death Benefit (Annuity gains are taxable as ordinary income to heirs). • Much higher Cap Rates • If Non-MEC, Tax Free Distribution via w/d of basis and policy Loans (Annuity withdrawals are taxable). • LIVING BENEFIT RIDERS! (some Annuities have LTC riders that provide access to annuity values with penalty).

  13. Death Benefit Leverages Living Benefit Riders: • Annuities: Contract Owner can use annuity values to pay for Critical, Chronic and Terminal Illness situations. • Life Insurance: Contract Owner can use much higher Death Benefit Value to Leverage greater amount of money.

  14. Annuity: Assumes 24% tax bracket Life: Guideline Minimum DB, 50 yr old Male, STAN N/S. For Agent Use Only, Not For Use With The Public.

  15. For Agent Use Only; Not for Use With The Public

  16. For Agent Use Only; Not for Use With The Public

  17. What about IRA/Qualified Money? • What happens to IRA when owner passes? • RMD: Required Minimum Distribution, A70 ½ • Ordinary Income Tax Rate • What if we took out 5% or at least enough to cover RMD’s and transitioned into Life Contract? • Provides leveraging of Assets for LBR’s. • DB provides liquidity to potentially offset tax owed by IRA beneficiaries.

  18. EIA vs. EIUL Recap: • Ask, “WHY DO YOU OWN AN ANNUITY? • Tax Deferral? Safety? Legacy? “Rainy Day” Funds? • What are current rates with fixed annuities? • Cap rates on Equity Indexed Annuities? • What is a MEC Life Insurance Policy? • MEC Contract hasTax Deferred Growth, Tax Free DB vs. Annuity with Tax Def. Growth, Gains taxable at death to heirs. • A MEC is like an annuity with tax free DB. • Premium Deposit Fund, 2.5% • Opportunities: Look for clients that have annuities! • Single Pay or take money out of annuity over time. • Create more Legacy $$, Create current available cash value, and create more funds available for Critical & Chronic Illness. • IRA & Qualified Funds, RMD’s

  19. An Alliance for Life Maximizing the EQUITY INDEX. A Comparison between Equity Indexed Annuities & Equity Indexed Life Insurance Steve Walther 208-870-7688 swalther@anallianceforlife.com Thank You

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