I Really Want to Get into the Annuity Market, but Have Reservations...
Bluefin646
Expert
- 41
Doesnt want iul, non qual.
If the client is dead set on a VA, I would recommend looking at SunAmerica. They have some pretty decent income riders. Especially if the income begins at age 65 or later.
Of course, the downside for any annuity product for this particular client is the fact that they are under 59 1/2. Just make sure they aren't going to need any money from it for 8+ years.
InsuranceCat
New Member
- 11
The best way to get involved with annuities is to review your existing client base and determine which clients would benefit from managed blocks of money.
For fixed annuities, the fundamental base form is a fixed-income product.
You can find fixed annuities that have no fees that would apply to the client if they hold it for the intended duration. Under these scenarios, the client gets paid to give capital to the insurance company for some prescribed period of time and there are early termination fees or interest clawbacks if they leave too early. People often talk about these as CD alternatives. At one point MYGAs were all the rage with fixed interest.
To describe the indexed side, it is the interest earned on the policy is tied to some client-selected calculation of an external index, similar to a floating rate policy. For the policies that I write, the indexed side is simply a floating interest rider attached to a fixed annuity. If the client/producer is looking for higher yields, you can go across the carrier credit quality spectrum, contract duration, and also with extra restrictions such as MVAs or additional restrictions on liquidity. Outside of those aggressive plays, annuities are easy to understand.
However an important note is that the fixed annuity industry has dramatically changed in the past 10 years, with the growth of benefit riders for some enhancements to income/death benefit/LTC. This partially is because fixed annuities are fundamentally fixed-income products and the interest rate environment is at an all time low. Rider products often come with ongoing fees. The other thing too to note is that once they are attached to the policy, they often are best held for lifetime. While this may be a point of objection, it should be obvious that if a client wants a lifetime income product then they should hold it for a lifetime.
Additional rider products make for an interesting twist in suitability. The upside to the client is that the additional optional rider allows you to go across duration while keeping safety and security to generate additional performance of the intended rider benefit. Riders can be used to support growth or to drag down growth to generate a secondary guarantee. Guaranteed benefit riders can be used if you do not fundamentally trust the insurance carrier, as the benefits to the client are predetermined. Some insurance companies even generate a separate policy number for the rider.
For fixed annuities, the fundamental base form is a fixed-income product.
You can find fixed annuities that have no fees that would apply to the client if they hold it for the intended duration. Under these scenarios, the client gets paid to give capital to the insurance company for some prescribed period of time and there are early termination fees or interest clawbacks if they leave too early. People often talk about these as CD alternatives. At one point MYGAs were all the rage with fixed interest.
To describe the indexed side, it is the interest earned on the policy is tied to some client-selected calculation of an external index, similar to a floating rate policy. For the policies that I write, the indexed side is simply a floating interest rider attached to a fixed annuity. If the client/producer is looking for higher yields, you can go across the carrier credit quality spectrum, contract duration, and also with extra restrictions such as MVAs or additional restrictions on liquidity. Outside of those aggressive plays, annuities are easy to understand.
However an important note is that the fixed annuity industry has dramatically changed in the past 10 years, with the growth of benefit riders for some enhancements to income/death benefit/LTC. This partially is because fixed annuities are fundamentally fixed-income products and the interest rate environment is at an all time low. Rider products often come with ongoing fees. The other thing too to note is that once they are attached to the policy, they often are best held for lifetime. While this may be a point of objection, it should be obvious that if a client wants a lifetime income product then they should hold it for a lifetime.
Additional rider products make for an interesting twist in suitability. The upside to the client is that the additional optional rider allows you to go across duration while keeping safety and security to generate additional performance of the intended rider benefit. Riders can be used to support growth or to drag down growth to generate a secondary guarantee. Guaranteed benefit riders can be used if you do not fundamentally trust the insurance carrier, as the benefits to the client are predetermined. Some insurance companies even generate a separate policy number for the rider.
technology11
New Member
- 9
I want to make sure that when I sell something, I can sell it with confidence that I'm doing what's best for my clients.
would definitely not use IRA money
but on immediate annuities the interest paid is long term rates
just be sure person is in good health.
PS: am writing on indexed Universal Life
be careful they sell on interest returns but cheat on the anticipated claims. At older ages reducing expected claims is same as adding an extra 2-3% to interest return but doesn't show,
but on immediate annuities the interest paid is long term rates
just be sure person is in good health.
PS: am writing on indexed Universal Life
be careful they sell on interest returns but cheat on the anticipated claims. At older ages reducing expected claims is same as adding an extra 2-3% to interest return but doesn't show,
When to sell an annuity
When a person is age 70 and in good health a straight life no refund is a great buy.
The combination of life expectancies increasing and the mortality table used to determine % taxed before your money is returned creates a net rate of return far superior to CD's.
Because the insurance carrier assumes 50% will die before life expectancy they can assume cash saved will fund those who live beyond L E thus they can invest most of the $$$ long term. They are earning a lot more than C D's
Erik Brown
When a person is age 70 and in good health a straight life no refund is a great buy.
The combination of life expectancies increasing and the mortality table used to determine % taxed before your money is returned creates a net rate of return far superior to CD's.
Because the insurance carrier assumes 50% will die before life expectancy they can assume cash saved will fund those who live beyond L E thus they can invest most of the $$$ long term. They are earning a lot more than C D's
Erik Brown
- 2,038
Immediate annuities don't pay an interest rate.
- 438
I think he is referring to how the spia calculates the income, using longer term interest rates
