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What are they? How do they work? Here you will find some answers to your questions...
Corbin Lindsey
CONTACT INFORMATION
LINDSEY FINANCIAL SERVICES
2712 179th PL NE
Marysville, WA 98271
PHONE
(425) 280-9169
EMAIL
corbin@lindseyadvisors.com
WEBSITE
www.lindseyadvisors.com
PERSONAL PROFILE
2712 179th PL NE
Marysville, WA 98271
PHONE
(425) 280-9169
corbin@lindseyadvisors.com
WEBSITE
www.lindseyadvisors.com
PERSONAL PROFILE
ANNUITY LINKS
Annuity Product Offerings
(CLICK HERE)
Equity Index Annuity Analyzer
*** Not all data is updated ***
(CLICK HERE)
__________________________
INDEX ANNUITY
WRITTEN PRESENTATION
(CLICK HERE)
VIDEO PRESENTATION
(CLICK HERE)
(CLICK HERE)
Equity Index Annuity Analyzer
*** Not all data is updated ***
(CLICK HERE)
__________________________
INDEX ANNUITY
WRITTEN PRESENTATION
(CLICK HERE)
VIDEO PRESENTATION
(CLICK HERE)
Avg Investment Performance
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Index Annuity vs Market Index
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Index Annuity (VIDEO)
PLEASE WATCH THESE VIDEO's
about Index Annuities
CLICK HERE for Equity Indexed (Safe Money) Video
CLICK HERE for CNBC Indexed Annuites Discussions
For more detailed information to review before making any decision, please contact me at:
Corbin Lindsey
425-280-9169
corbin@lindseyadvisors.com
about Index Annuities
CLICK HERE for Equity Indexed (Safe Money) Video
CLICK HERE for CNBC Indexed Annuites Discussions
For more detailed information to review before making any decision, please contact me at:
Corbin Lindsey
425-280-9169
corbin@lindseyadvisors.com
INDEX ANNUITY DISCLOSURE
What Is An Equity-Indexed Annuity
Equity-Indexed Annuities (also known as fixed indexed annuities) are long-term savings alternatives with appeal to Americans who understand the benefits of investing in stocks but are uncomfortable with the short-term losses and volatility that are an inevitable part of investing.
A Savings Vehicle, Not An Investment
Indexed annuities should not be viewed as taking the place of investments, and purchasing one cannot be thought of as comparable to investing. The reason is that indexed annuities are long-term savings vehicles. Please view the multimedia presentation for a more complete description of indexed annuities features, costs and interest accumulation potential.
DETAILS ABOUT ANNUITIES...
Annuities
An annuity is a contract in which the policyowner pays a single premium or a series of premiums to an insurer.
The insurer then promises to provide a series of periodic payments at the time when the owner makes such an election, provide a death benefit , or return the cash surrender value to the owner upon request. Some policyowners elect an anuitization option once they retire and need to supplement their income with additional monies. Many annuity policyowners use their annuity as a tax-deferred savings vehicle.
Single Premium Deferred Annuity (SPDA)
An SPDA is a tax-deferred annuity that will only accept a single payment. This payment may be from writing a check directly to the company or through a transfer or rollover.
Single Premium Deferred Annuities may be purchased with qualified or non-qualified monies. (See Plan Types below)
Flexible Premium Deferred Annuity (FPDA)
An FPDA is a tax-deferred annuity that will accept multiple premium payments while the annuity is in an accumulation period. FPDA annuities may accept salary reduction payments, bank draft or pre-authorized check plan payments, transfers, rollovers, and single sum direct payments. Some Flexible Premium Deferred Annuities require ongoing payments while others do not.
FPDAs may be purchased with qualified or non-qualified monies. (See Plan Types below)
Equity Indexed Annuity (EIA)
An Equity Indexed Annuity is usually a fixed (i.e., not a variable) annuity with alternate methods of determining and crediting interest. While traditional fixed annuities typically declare interest in advance for premium payments based on the performance of the company's underlying investments for those premiums, an EIA's interest is determined, at least in part, by the performance of a specified index of marketplace performance (frequently the S&P 500 Index® or Russell 2000®) † over a stated period. For instance, the interest credit for an EIA might be defined as 70% of the rate of increase in the S&P 500 Index® over each one-year period.
Different EIAs present different methods of determining the interest credits.
Unlike traditional fixed annuities, the policyowner may receive zero interest for a single period on a specific premium payment if the index performs poorly *.
However, with most EIA designs, the premiums are protected and guaranteed to grow over time **.
This is a feature unavailable with any form of direct participation in the marketplace, such as through a mutual fund or a variable annuity. Moreover, in better market conditions, the owner of an EIA may experience interest credits that outperform traditional fixed annuities. Because it is an annuity rather than a mutual fund, the EIA offers important insurance features including tax deferral, a death benefit that may be paid outside probate, and annuitization.
Plan Types
Non-Qualified
Non-Qualified annuities are annuities that are applied for with after-tax monies. The premium that is placed in the annuity policy would have already been taxed to the policyholder prior to placing the monies in the annuity. The interest that is earned in the annuity is tax-deferred until withdrawn. Under current tax law, all withdrawals from an annuity purchased with non-qualified monies are taxable only to the extent there is a gain in the policy. Except under certain conditions, the IRS will impose a penalty tax on withdrawals made prior to age 59½.
Qualified
Qualified annuities are annuities that are applied for with pre-tax monies. The premiums that are placed in the annuity have not yet had income tax paid on them by the policyholder. Dependent upon the type of qualified plan, the taxpayer may receive a tax-deduction when opening the plan. Other types of qualified plans allow an employer to direct the monies on the employee's behalf to the insurance company. These monies are deducted pre-tax from the employee's paycheck. Except under certain conditions, the IRS will impose a penalty tax on withdrawals made prior to age 59½. All withdrawals made from annuities with pre-tax contributions are taxed as ordinary income.
Please Note: We do not give legal, tax, or accounting advice. The information provided here is a summary of our understanding of the current tax laws and regulations as they relate to annuities. All prospective purchasers should consult with their own attorneys, accountants, and tax advisors.
Footnotes:
* Fixed EIAs have guarantees of minimum performance. Because of this, the value of an EIA may increase even when the formula calls for a zero interest credit.
** Most annuities incorporate a withdrawal charge if amounts are withdrawn before a specified time in excess of a stated "penalty-free" amount.
† "Standard & Poor's®", "S&P®", "S&P 500®", "Standard & Poor's 500", and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Life Insurance Company of the Southwest. The Products are not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of purchasing the Products.The Russell 2000 Index is a trademark of Russell Investment Group and has been licensed for use by Life Insurance Company of the Southwest . The Products are not sponsored, endorsed, sold or promoted by Russell Investment Group and Russell Investment Group makes no representation regarding the advisability of purchasing the Products.
Two-tiered annuities
An annuity may be taken, or annuitized, by the annuitant in periodic payments or as cash in a lump sum amount. If taken in this latter form, the total payout amount will be different than if the annuity had been paid out in installments under one or another of the usual annuity settlement options. Therefore, a two-tiered annuity is one that has different values available for distribution at maturity depending upon whether the benefit is taken by the annuitant as a lump sum or left with the issuer to make periodic payments.
Two-tiered annuities offer relatively high rates, but only if the owner holds the contract for a certain number of years before annuitizing it. If the annuity is surrendered at any point, interest credited to the contract is recalculated from the contract's inception using a lower tier of rates. While the higher tier of rates is designed to reward annuitization and make the product more appealing than competing annuities, the lower tier generally makes the contract somewhat unattractive compared to other alternatives. Further, some contracts apply this interest penalty even if the annuity is surrendered due to the death of the owner.
Some states do not permit sales of two-tiered annuities because of the potential for misunderstanding on the part of consumers or a lack of adequate disclosure on the part of agents regarding the conditions that must be met in order for the owner to earn the higher tier of interest rates. Therefore, agents who sell two-tiered annuities must make sure that their purchasers know how the product works and are prepared to commit themselves and their beneficiaries to the annuity for the long term.
Tax-sheltered annuities
Public school systems and tax-exempt charitable, educational, and religious organizations are often encouraged to set aside funds for their employees' retirements by the use of tax-sheltered annuity plans (or TSAs). Once the program is set up, employee contributions to the plan are excluded from their current taxable income. The plan must be established by the employer and contributions must be used to purchase annuity contracts or mutual fund shares.
Payments received from TSAs at retirement are generally fully taxable to the recipient as ordinary income. However, because taxable income at retirement is usually less and the fact that the TSA payments may be spread over a long period of time, the recipient's overall tax bracket can be expected to be lower.
Retirement income annuities
A retirement income annuity is an ordinary deferred annuity that includes an additional feature – a decreasing term life insurance rider that provides term life insurance with a face amount that decreases each year the policy is in force. The effect is that if the annuitant reaches retirement age (say 65, for example), the decreasing term insurance death benefit expires and annuity payments begin providing retirement income. If, on the other hand, the annuitant dies before retirement, the decreasing term insurance death benefit is combined with the current value of the annuity and paid to the annuitant's beneficiary in any settlement option chosen.
Equity-indexed annuities
Equity-indexed annuities are generally considered to be fixed annuities because they offer both a guaranteed minimum interest rate and a guarantee against loss of principal if held to term (as with other fixed annuities, surrender charges may reduce the principal amount if the policy is surrendered early). However, with an equity-indexed annuity, any interest credited that is in excess of the minimum guaranteed rate is linked to the upward movement of a designated equity index, such as the Standard and Poor's 500 Stock Index, for example. If the index moves upward, the interest rate is based on some portion of the increase. If the index moves downward, the contract guarantee provides for at least the guaranteed minimum rate.
As an example, let's assume that Mr. Jones has an equity-indexed annuity with a guaranteed minimum interest rate of 6% and is linked to the Standard and Poor's 500 index. If the index should go up, Mr. Jones can expect his annuity interest rate to correspondingly go up as well. But if the index should go down, the lowest annuity interest rate that Mr. Jones can expect to receive would be 6%, the contract's guaranteed minimum.
Market-value adjusted annuities
Like the equity-indexed annuity, the market-value adjusted (MVA) annuity is also a fixed annuity product with a market-driven feature. However, instead of having the annuity's interest rate linked to an index, the MVA annuity's interest rate remains fixed. The market-value adjustment feature only applies if the contract is surrendered before the contract period expires. As such, an MVA annuity must disclose on the first page of the document that the non-forfeiture values may increase or decrease based on the market value formula specified in the contract. Otherwise, the annuity functions in the same manner that a fixed annuity does.
If an MVA annuity owner decides to surrender his or her contract early, a surrender charge and a market value adjustment will apply. If interest rates decreased during the contract period, the market value adjustment will be positive and may add to the surrender value of the contract. However, if interest rates increased during the time the contract was owned, the market value adjustment will be negative, which would increase the contract's surrender charge.
Let's take a look at this example. Suppose Ms. Smith owns a 10-year MVA annuity contract but decides to cash it in after the sixth year. By cashing it in early, she would be automatically subject to a surrender charge, and because interest rates rose by 2% since she the time that she purchased the contract, her market-value adjustment would be negative, forcing her to pay an even higher surrender charge.
Depending on whether the MVA annuity is registered, the market value adjustment may only apply to interest earned under the contract. However, if the MVA annuity is registered, both principal and interest will be susceptible to a market value adjustment. Since MVA annuities expose consumers to investment risk, they're classified as securities and the agents who sell them must be registered with the Financial Industry Regulatory Authority (FINRA), formerly known as the National Association of Securities Dealers (NASD).
Two-tiered annuities offer relatively high rates, but only if the owner holds the contract for a certain number of years before annuitizing it. If the annuity is surrendered at any point, interest credited to the contract is recalculated from the contract's inception using a lower tier of rates. While the higher tier of rates is designed to reward annuitization and make the product more appealing than competing annuities, the lower tier generally makes the contract somewhat unattractive compared to other alternatives. Further, some contracts apply this interest penalty even if the annuity is surrendered due to the death of the owner.
Some states do not permit sales of two-tiered annuities because of the potential for misunderstanding on the part of consumers or a lack of adequate disclosure on the part of agents regarding the conditions that must be met in order for the owner to earn the higher tier of interest rates. Therefore, agents who sell two-tiered annuities must make sure that their purchasers know how the product works and are prepared to commit themselves and their beneficiaries to the annuity for the long term.
Tax-sheltered annuities
Public school systems and tax-exempt charitable, educational, and religious organizations are often encouraged to set aside funds for their employees' retirements by the use of tax-sheltered annuity plans (or TSAs). Once the program is set up, employee contributions to the plan are excluded from their current taxable income. The plan must be established by the employer and contributions must be used to purchase annuity contracts or mutual fund shares.
Payments received from TSAs at retirement are generally fully taxable to the recipient as ordinary income. However, because taxable income at retirement is usually less and the fact that the TSA payments may be spread over a long period of time, the recipient's overall tax bracket can be expected to be lower.
Retirement income annuities
A retirement income annuity is an ordinary deferred annuity that includes an additional feature – a decreasing term life insurance rider that provides term life insurance with a face amount that decreases each year the policy is in force. The effect is that if the annuitant reaches retirement age (say 65, for example), the decreasing term insurance death benefit expires and annuity payments begin providing retirement income. If, on the other hand, the annuitant dies before retirement, the decreasing term insurance death benefit is combined with the current value of the annuity and paid to the annuitant's beneficiary in any settlement option chosen.
Equity-indexed annuities
Equity-indexed annuities are generally considered to be fixed annuities because they offer both a guaranteed minimum interest rate and a guarantee against loss of principal if held to term (as with other fixed annuities, surrender charges may reduce the principal amount if the policy is surrendered early). However, with an equity-indexed annuity, any interest credited that is in excess of the minimum guaranteed rate is linked to the upward movement of a designated equity index, such as the Standard and Poor's 500 Stock Index, for example. If the index moves upward, the interest rate is based on some portion of the increase. If the index moves downward, the contract guarantee provides for at least the guaranteed minimum rate.
As an example, let's assume that Mr. Jones has an equity-indexed annuity with a guaranteed minimum interest rate of 6% and is linked to the Standard and Poor's 500 index. If the index should go up, Mr. Jones can expect his annuity interest rate to correspondingly go up as well. But if the index should go down, the lowest annuity interest rate that Mr. Jones can expect to receive would be 6%, the contract's guaranteed minimum.
Market-value adjusted annuities
Like the equity-indexed annuity, the market-value adjusted (MVA) annuity is also a fixed annuity product with a market-driven feature. However, instead of having the annuity's interest rate linked to an index, the MVA annuity's interest rate remains fixed. The market-value adjustment feature only applies if the contract is surrendered before the contract period expires. As such, an MVA annuity must disclose on the first page of the document that the non-forfeiture values may increase or decrease based on the market value formula specified in the contract. Otherwise, the annuity functions in the same manner that a fixed annuity does.
If an MVA annuity owner decides to surrender his or her contract early, a surrender charge and a market value adjustment will apply. If interest rates decreased during the contract period, the market value adjustment will be positive and may add to the surrender value of the contract. However, if interest rates increased during the time the contract was owned, the market value adjustment will be negative, which would increase the contract's surrender charge.
Let's take a look at this example. Suppose Ms. Smith owns a 10-year MVA annuity contract but decides to cash it in after the sixth year. By cashing it in early, she would be automatically subject to a surrender charge, and because interest rates rose by 2% since she the time that she purchased the contract, her market-value adjustment would be negative, forcing her to pay an even higher surrender charge.
Depending on whether the MVA annuity is registered, the market value adjustment may only apply to interest earned under the contract. However, if the MVA annuity is registered, both principal and interest will be susceptible to a market value adjustment. Since MVA annuities expose consumers to investment risk, they're classified as securities and the agents who sell them must be registered with the Financial Industry Regulatory Authority (FINRA), formerly known as the National Association of Securities Dealers (NASD).
IN THE NEWS...
DATELINE'S STORY
CLICK HERE
BROKERS CHOICE
(Annuity University)
CLICK HERE
NBC Dateline’s “Tricks of the Trade” Program creates opportunity for ethically committed financial professionals.
Although highly controversial, NBC broadcast highlights the need for greater transparency in financial sales practices, says industry ethics group.
In the aftermath of Dateline NBC’s exposé on annuity sales practices, financial professionals have an opportunity to reaffirm their commitment to ethical business practices and to implement those practices with their clients, according to the National Ethics Bureau (NEB).
While many believe that Dateline NBC’s report was journalistically flawed, millions of Americans may take its claims at face value. As a result, NEB, a membership organization of background-checked financial professionals, encourages advisors to consider the program’s underlying lessons and recommit to serving the public with high levels of integrity, especially in the areas of suitability and disclosure.
Specifically, NEB issued the following reminders to all financial professionals:
First, don't just give lip service to full disclosure. Always fully explain interest rates; if, when, and how they might change; and all fees consumers must pay in connection with their financial product.
Second, don't misrepresent any fact in an effort to persuade consumers to buy a financial product or service. For example, do not suggest that the FDIC, which insures bank deposits, is insolvent.
Third, don’t rely on fear as a sales tactic. Rather, provide objective information that helps clients to clarify their goals and to address their actual financial needs and concerns.
Fourth, don't use dubious or unaccredited industry designations. Instead, make sure a designation adds legitimate value to your business and to your clients.
Fifth, don’t claim that you've written an article or book that you haven't actually written or personally collaborated on. It’s acceptable to use third-party content to support your marketing effort as long as it is identified as such.
CLICK HERE
BROKERS CHOICE
(Annuity University)
CLICK HERE
NBC Dateline’s “Tricks of the Trade” Program creates opportunity for ethically committed financial professionals.
Although highly controversial, NBC broadcast highlights the need for greater transparency in financial sales practices, says industry ethics group.
In the aftermath of Dateline NBC’s exposé on annuity sales practices, financial professionals have an opportunity to reaffirm their commitment to ethical business practices and to implement those practices with their clients, according to the National Ethics Bureau (NEB).
While many believe that Dateline NBC’s report was journalistically flawed, millions of Americans may take its claims at face value. As a result, NEB, a membership organization of background-checked financial professionals, encourages advisors to consider the program’s underlying lessons and recommit to serving the public with high levels of integrity, especially in the areas of suitability and disclosure.
Specifically, NEB issued the following reminders to all financial professionals:
First, don't just give lip service to full disclosure. Always fully explain interest rates; if, when, and how they might change; and all fees consumers must pay in connection with their financial product.
Second, don't misrepresent any fact in an effort to persuade consumers to buy a financial product or service. For example, do not suggest that the FDIC, which insures bank deposits, is insolvent.
Third, don’t rely on fear as a sales tactic. Rather, provide objective information that helps clients to clarify their goals and to address their actual financial needs and concerns.
Fourth, don't use dubious or unaccredited industry designations. Instead, make sure a designation adds legitimate value to your business and to your clients.
Fifth, don’t claim that you've written an article or book that you haven't actually written or personally collaborated on. It’s acceptable to use third-party content to support your marketing effort as long as it is identified as such.