Strategic Partnerships

When looking to position an accumulation focused Indexed Annuity, always remember the rate at issue can change.

The Fixed, Caps, Par, Spread, and in some cases the buy-up fee rates, on these indexes CAN and WILL change after the issue if it's not a Contractually Locked rate.

The question is: How Much?

If it's a truly good company that has designed to price that rate for the life of the surrender, we have seen the issued rates hold well. But most companies don't so do your homework. 

Choosing to ANNUITIZE your income through your Annuity is NOT the same as electing to start an Income Rider (GLWB).

A rider is an additional benefit added to your policy that comes with a cost. This added benefit essentially says that if you withdrawal X number (that we determine) and your account goes to $0, we will continue to pay you that number until you or you and your spouse die.

This still technically keeps your account value intact and is there as a lump sum death benefit as well. Understand that when income starts, it will drain that value. Most of these types of annuities are meant for the withdrawal to be significantly larger than any average account gains, thus depleting account within around 15 years.

Annuitization forfeits that account value and once you start that income, that's it. The insurance company essentially takes it and pays it back to you based on how long you live. In most cases if you die early, that income is then paid out to a beneficiary for a set period, but not in every contract, so buyer beware. 

There are 2 types of bonuses an annuity will offer:

1. Account Value
2. Benefit Base / Income Base

An account value bonus is exactly that, it's applied to your account, meaning the principal used to fund the account. 

This can "Vest" day 1 OR over a period of time. 

What does that mean?
It means the bonus may not be accessible for a period of time. It shows up in the account and compounds on the interest earned, but if surrendered or using a withdrawal, it's not applied for a period of time (or at least not ALL of it).

In an annuity like a Fixed Indexed with Guaranteed Lifetime Withdrawal Benefit, they have an account that is what they use (in part) to Base the income rider Net Income off of. 

When you want to find the best income, remove all the bologna and find which carrier will take the age, amount, and deferral period, and give them the largest guarantees income to them. 

How they calculate it is irrelevant. 

This is a bit of a trick question because there are a lot of variables, here are a few:

- What type of Annuity?
- Are there riders included?
- What is the primary objective of that product? (Income? Legacy? Growth?)
- What company are you using?
- What Indexes are being used?
- How long is the surrender period?

Remember! Past performance is not indicative of future results.

Fixed Annuity (MYGA) - Whatever that fixed rate offering is, simple (5.50% to 6.30% in today's market).

Fixed Indexed Annuity (FIA) for Guaranteed Income - 2% to 3% Annually

FIA with Principal Bonus and No Income Rider - 4% to 5%

FIA with No Bonus, Straight Accumulation - 6% to 8%  

PENALTIES
Surrender Charge: This comes in the form of a % of the account and correlates with the length of the contract. Let's say someone purchased a 5-year annuity and wanted to move it all at year 3. In this example let's say the charge is 3%, so when they move the money, the insurance company takes 3% of the account value.

Withdrawals Over the Free Amount: This is normally associated with making withdrawals that are higher than the free amount. If the free amount is 10% and you take 15%, that 5% over the free amount will be charged the surrender charge penalty mentioned above. 

FEES

Rider Fee: Essentially this is the same structure as an Account Fee, a % of the account value, but it's specifically for a rider on that policy. You are paying for a specific benefit. The most common one would be an Income Rider (GLWB).