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Steve Walther 208-870-7688 An Alliance for Life Maximizing the EQUITY INDEX. A Comparison between Equity Indexed Annuities.

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Presentation on theme: "Steve Walther 208-870-7688 An Alliance for Life Maximizing the EQUITY INDEX. A Comparison between Equity Indexed Annuities."— Presentation transcript:

1 Steve Walther An Alliance for Life Maximizing the EQUITY INDEX. A Comparison between Equity Indexed Annuities & Equity Indexed Life Insurance

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? T The 3 “ T ’s”… TTT T ICKING T AX T IMEBOMB! Taxes

5 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. Concerns

6 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) Concerns

7 ANNUITY FACTOID Deferred Annuities 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 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. ANNUITY REALITY CHECK

9 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. Cap Rates All Equity Indexed Products Are NOT Equal.

10 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!!! Cap Rates

11 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!). Life Insurance Fact Check:

12 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). Advantages of Life Insurance:

13 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. Death Benefit Leverages Living Benefit Riders:

14 Equity Indexed Annuity Equity Indexed Universal Life Assumes 4.0% Cap; Assumes hitting cap "ALL YEARS." Assumes 7.0% Level (Actual Cap 13%, 0% Floor) $100,000 Deposit $100,000 Deposit MEC NON-MEC Prem Deposit Fund Year Account Value Amount to Heirs Year Account Value Death Benefit Year Account Value Death Benefit 1$104,000$102,880 1$98,861$289,375 1$18,324$379,505 5$121,665$115,599 5$121,358$311,780 5$104,328$379,505 10$148,024$134,577 10$157,443$346,753 10$153,965$379,505 15$180,094$157,668 15$217,073$414,218 15$211,609$403,792 20$219,112$185,761 20$297,119$498,328 20$289,630$485,767 25$266,584$219,940 25$403,686$601,856 25$393,500$586,669 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 Equity Indexed Bonus Annuity Equity Indexed Universal Life Assumes 3.50% Cap; 8% Bonus Yr 1 Assumes hitting cap "ALL YEARS." Assumes 7.0% Level (Actual Cap 13%, 0% Floor) $100,000 Deposit Year Account Value Amount to Heirs Year Account Value Death Benefit Year Account Value Death Benefit 1$111,780$108,482 1$91,293$180,3431$91,669$203,015 5$128,270$120,354 5$107,070$186,5025$110,117$213,701 10$152,345$137,688 10$132,033$198,01310$140,427$232,358 15$180,938$158,275 15$180,294$242,65815$193,330$283,770 20$214,897$182,726 20$240,034$297,33020$260,579$332,433 25$255,230$211,766 25$314,840$366,15925$346,555$424,010 Male A65 StandardFemale A65 Preferred For Agent Use Only; Not for Use With The Public

16 Equity Indexed Bonus Annuity Equity Indexed Universal Life (Survivorship) Assumes 4% Cap; 8% Bonus Yr 1 Matches last 25 years crediting with 4% cap, 0% floor. Assumes 7.0% Level (Actual Cap 13%, 0% Floor) $100,000 Deposit Year Account ValueAmount to Heirs YearAccount ValueDeath Benefit 1$112,320$109,363 1$86,385$291,488 5$129,011$122,048 5$104,307$291,488 10$156,961$143,290 10$151,375$291,488 15$157,194$143,467 15$218,932$291,488 20$242,741$208,483 20$310,686$326,220 25$283,973$239,819 25$440,543$462,570 Male & Female, A65, Elite 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 Ask, “WHY DO YOU OWN AN ANNUITY? 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 EIA vs. EIUL Recap:

19 Steve Walther An Alliance for Life Maximizing the EQUITY INDEX. A Comparison between Equity Indexed Annuities & Equity Indexed Life Insurance Thank You


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