CD’s to annuity

[scagnt83]

That comes across to me as conceptually similar to the idea of paying an advisor an AUM fee of 1%, in order to gain a 6% initial premium bonus increase for the annuity. I don't know how to assess the potential value of an increase in the initial amount of the annuity in exchange for the privilege of paying an annual fee. I'm sure there are some fancy math procedures to do it if you want to give the math procedures some assumptions about the stock market.

Its impact to the Client is the same. The Agent does not get paid the 0.95% Fee, that goes to the Carrier. Agent gets paid normal commission schedule.

To make the math easy, with 0% gains in the policy; a 1% fee over 11 years makes the 16% bonus a 5% bonus.

So the 7y and 10y are the same net effect over 11 years if the policy receives no gains.

That means the only real difference is the higher amount of interest received each year by the 10y product with a higher starting value y1.

If you deposit $100k...
$105k x 5% = $5,250 per year
$116k x 5% = $5,800 per year

You commit to 4 extra years for an extra $750 a year in interest. (not counting the compounding)

So theoretically, you should have over $8,250 more in gains after 11 years with the 16% Bonus.

But the real question: "is that worth tying up your money for the extra 4 years?"
And that answer is "it depends on the clients situation"

 

[scagnt83]

I also note the 7 year version of this product seems to show mostly higher rates than the 10 year version and I don't know whether or not that makes it better than the 10 year version. That seems to go with the concept that a premium bonus may not necessarily be the best deal. (More Math I haven't a clue about.) (The 7 year version is also just like the 10 year version, in that one can pay the 1% annual fee and get an "increase" of 6% in the premium bonus amount.)

Interest Rates are inverted right now in the US. Generally speaking, 7 year products tend to have the best benefit in the FIA world right now because of this.

But the big bonuses are given for long term commitment to the product. So that has not changed, the longer your commitment, bigger the bonus.

 

[Allen Trent]

Tim,
I found most of the answers were remedial, with the exception of a few. First, establishing trust. Second, the needs of the client (income, purchases in the next few years, current income, benefits for others, tax bracket, etc. It's about knowing your client, who they are, and their risk meter if you will.

Assumptions of the interest is earned may or may not be relevant.

I didn't read all the posts, but what about inflation and taxes?
Forget about penalties, factor this:
4%, 20% effective tax bracket, inflation 7%, $ in a CD
effectively a yield of 2.9%

Tax-deferred, no need for the funds in the near term, and the ability to withdraw 10%. All
remaining the same as above yield, with the same inflationary factor = 4.8 % earnings.

Nearly 2% or 1.9 % more than remaining in the assumptive 4% CD

Assuming no bonuses, penalties, or withdrawals:If there are no bonuses, penalties, or withdrawals, the calculations will remain the same.

Bank- $ 370,440.00 effective dollars at the end of year one

Index Annuity- $377,280.00

From the amount take away the penalty, which generally is 1 Quarter of earnings then add the bonus after knowing your client's intent for the funds, age, etc.

There are many determining factors and variables that need to be taken into account.

In addition, for many states including Florida, Annuities are creditor-proof for a variety of reasons. Medicaid spend-down, lawsuits, upon death paid directly to beneficiaries (more factors). Estate Planning and bypassing probate.

Are the funds qualified or non-qualified?

Married or single?

Just food for thought for all of those that are interested.

So, So many things wrong with your post. You assume the worst about a CD & assume very high current tax rate & you ignore that taxes will be owed on the Annuity when withdrawn. Lastly, please show me where Annuities in deferral are exempt from Medicaid spend down. Annuities do bypass probate if a beneficiary listed, but CDs also bypass probate when Beneficiary listed, jointly owned or owned by a trust.

I love annuities, but I dont need to show the worst about CDs against the best assumptions of annuity. This client may be better off with an annuity or a bonus FIA, but way more details are needed to figure that out

 

[JAGMARTIN]

It was not my intention to assume the worst about CDs. My intention was based on knowing exactly the needs of the client. Expected use, Income? Yield? Safety? Expected Income in the future, the situation of the client. I turn clients away from annuities in many instances, as well as CDs.

Many well-constructed Medicaid spend-down plans include specific annuities that are geared to avoid attachment. Again, it depends on the situation of the client and delving into
the intentions and protection of their savings. You can disagree, look up the laws of the state(s) that you sell in. The fact is that I am aware of FL, PA, AZ, and many states that
do not include unadmitted annuities in a Medicaid Spend-down Plan. In the business since 1987.

There are advantages to both CDs and Annuities specific to the needs of the client. Many here, just don't do their research.

Respectively

 

[Tahoe Ray]

Many well-constructed Medicaid spend-down plans include specific annuities that are geared to avoid attachment.

What carriers are currently offering those?

To my knowledge, they've almost all been pulled from the market.

 

[Allen Trent]

It was not my intention to assume the worst about CDs. My intention was based on knowing exactly the needs of the client. Expected use, Income? Yield? Safety? Expected Income in the future, the situation of the client. I turn clients away from annuities in many instances, as well as CDs.

Many well-constructed Medicaid spend-down plans include specific annuities that are geared to avoid attachment. Again, it depends on the situation of the client and delving into
the intentions and protection of their savings. You can disagree, look up the laws of the state(s) that you sell in. The fact is that I am aware of FL, PA, AZ, and many states that
do not include unadmitted annuities in a Medicaid Spend-down Plan. In the business since 1987.

There are advantages to both CDs and Annuities specific to the needs of the client. Many here, just don't do their research.

Respectively

The laws I see in places like Florida clearly state the only annuity allowed is one that is non assignable, has no cash value & is irrevocable (other than the CSRA spouse who could own deferred annuity with the funds permitted to be retained for the spouse, etc)

Where can I buy this "unadmitted annuity".