CD’s to annuity

[Allen Trent]

will give her 16% bonus on the move. I

Lol. Any strings attached with the tooth fairy giving 16% bonus?

CD penalty depends on bank, amount & duration but the penalty will be tiny compared to the annuity surrender charge she would face. https://www.forbes.com/advisor/bank... much is a CD,interest or 18 months' interest.

 

[LostDollar]

The place to ask that question is (are) the financial institution(s) where the CD's are. I would expect to see at least a 6 month early withdrawal penalty.

And what are the penalties?

I can not say it any more simply than I already did.

ASK THE FINANCIAL INSTITUTION(S) HOLDING THE MONEY!!!!!

I only have CD's in the $1,000 bracket.

I think the credit unions I use require special permission for CD deposits of over $100,000 or $250,000, I can't remember which and I have no idea what special restrictions they might impose on withdrawals of those large amounts.

With the CD's I buy,
One credit union has a 3 month early withdrawal penalty.
One credit union has a 6 month early withdrawal penalty.
One credit union has a 12 month early withdrawal penalty.

The early withdrawal penalty is the forfeiture of those many months of interest, the principal is not affected.

DO NOT ASSUME THOSE IDEAS CARRY OVER TO YOUR CLIENT'S SITUATION.

ASK THE FINANCIAL INSTITUTION HOLDING THE MONEY !!!!!!

 

[Tahoe Ray]

16% of $360,000 is $57,600. Is that an up front bonus, cash in her pocket, no gimmicks, no strings attached?

(Where can I get one of those?)

Figure out the penalties and get her understanding and agreement in writing, in large, easy to read print, witnessed an notarized.

Lol. Any strings attached with the tooth fairy giving 16% bonus?

CD penalty depends on bank, amount & duration but the penalty will be tiny compared to the annuity surrender charge she would face. https://www.forbes.com/advisor/banking/cds/cd-early-withdrawal-penalty/#:~:text=How much is a CD,interest or 18 months' interest.

It's Athene's Performance Elite 10 Plus.

The bonus starts vesting in year 7.

 

[Allen Trent]

It's Athene's Performance Elite 10 Plus.

The bonus starts vesting in year 7.

I understand that, just wonder if the client is aware her 360k doesn't jump to $420k immediately & that she could get credited 0% in some years, not a locked in fixed rate like her CD. 10 year surrender charge schedule, correct?

Not saying it isn't a good policy for her.....but if a rep doesn't know if CDs have a penalty for early withdrawal, it makes me question whether client is aware of how it works & what the surrender charge is. Lastly, does she understand how taxes work at death on a NQ annuity compared to a CD, etc

 

[Tahoe Ray]

I understand that, just wonder if the client is aware her 360k doesn't jump to $420k immediately & that she could get credited 0% in some years, not a locked in fixed rate like her CD. 10 year surrender charge schedule, correct?

Not saying it isn't a good policy for her.....but if a rep doesn't know if CDs have a penalty for early withdrawal, it makes me question whether client is aware of how it works & what the surrender charge is. Lastly, does she understand how taxes work at death on a NQ annuity compared to a CD, etc

It will look like it jumps to 420k, but you can't surrender it for that.

It's a 10 year surrender but technically the bonus won't fully vest until year 11.

It has some great strategies in it though. It's built for accumulation.

My decision making process would certainly take into account the CD rate and length. It may just be worth moving the CD after maturity if the surrender is within a year or two. There will still be plenty of product options. CD rates have been great recently as most of us know.

 

[DHK]

does she understand how taxes work at death on a NQ annuity compared to a CD, etc

Of course, and I know you know this, but CDs don't have tax deferral of interest earned while NQ annuities do.

And yes, CDs can avoid probate if they have a TOD (Transfer on Death) named.

 

[goillini52]

Of course, and I know you know this, but CDs don't have tax deferral of interest earned while NQ annuities do.

And yes, CDs can avoid probate if they have a TOD .

Do you mean one of these?

 

[Allen Trent]

Of course, and I know you know this, but CDs don't have tax deferral of interest earned while NQ annuities do.

And yes, CDs can avoid probate if they have a TOD (Transfer on Death) named.

The OP didn't mention the clients age/tax bracket, but based on IRS stats, only the highest 10-20% of seniors benefit from tax deferral. For the other 80-90%, tax deferral creates a tax bill at death that didn't exist for the client or creates a large tax bill when a lump sum is taken during lifetime after years of deferral.

For those seniors that are not planning to need the income from the annuity, life insurance can be a much better tax play than NQ annuity ---tax deferred while alive but tax free at death

 

[adjusterjack]

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.

Run, lady client, run as fast as you can from this scam.

 

[Tahoe Ray]

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.

Run, lady client, run as fast as you can from this scam.

She has upside greater than the CD does. It isn't that cut and dry.