The common feature of all annuities is that they provide income to the contract owner and defer taxation on gains until income begins. The differences between the various types of annuities is based upon when income is needed (now or a future date), and whether the client wants to purchase an annuity with guaranteed return or is willing to accept a lower minimum guaranteed return for potential higher gains (fixed Indexed annuity).
Below are a few examples of the various annuity contracts we can offer you and your clients. The information we provide on this page is very basic and you should call our office for further training if you have limited experience with annuities. In addition, most states have adopted the NAIC Annuity Training Model Act. If you resides in one of these states that adopted this regulation, you are required to complete this training prior to solicitation. We can help you identify if your state requires this special training as well as other product specific training required by the carrier.
SPIAs provide guaranteed lifetime income that begins soon after the purchase of the product. Life only, cash refund, and guaranteed certain periods can be selected to provide your client with the guarantee he or she requires. Some SPIAs provide for a cost of living adjustments, early single withdrawal of funds at a higher amount than the stated benefit amount, and liquidity feature should your client's financials change since the time the contract was purchased.
FDAs provide a guaranteed interest rate return. The longer the surrender period, the higher the interest rate will be offered by the insurer. Some FDAs allow for additional or ongoing deposits into the contract. Most FDAs provide a penalty free 10% yearly withdraw and/or "interest only" free withdraws. If the time horizon is 3 or more years, FDAs could be a better option than CDs as credited interest will be higher and taxation on gains will be deferred.
FIAs provide a capped return based upon market performance (typically the S&P 500), with a floor or minimum return so the contract owner does not participate in losses within the market. Many FIAs provide a lifetime income rider, which continues to pay income even after the annuity value has been exhausted. FIAs offer a lower guaranteed credited interest rate as compared to FDAs, but provide greater upside potential based upon an annual point to point or monthly average return of the market the FIA is tied to.
Lifetime Income Riders are a popular feature of FIAs. These riders guarantee a minimum annual income for the life of the annuitant, without requiring annuitization (loss of remaining annuity value). Income riders should be carefully examined when considering the purchase of a FIA.
QLACs are deferred annuities purchased with qualified funds (typically from Individual Retirement Accounts or IRAs). Qualified funds within an IRA general require that payments begin at age 70 1/2, with respects to a portion of their retirement savings. In July 2014, the US Treasury Department removed significant impediments related to required payment from IRA accounts, by allowing deferment of payments from QLAC past age 70 1/2 and up to age 85. For an individual who has no need to draw income from their IRA, a QLAC could provide further deferment.
© 2023. The Tavenner Agency. All rights reserved.