Community Webinars Planning for 2013 and an Overview of Annuities Presented by: George Fraser Director of Annuities Quick Life

 Presents Monthly Webinars Free to Community Members  Community webinars are archived on the Community homepage under the right hand tab titled: Webinar Archive  Community University provides webinars that qualify for CE in several states.

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 George Fraser has over 40 years of Life and Annuity sales experience. In that time, he has acted as an agent, General Agent and Vice President of Retail Sales for leading Insurance providers.  George has served as National President of GAMA International, Chairman of the Board for AMTC as well as committee work for LIMRA. He also serves as a Director for Rainmaker Advisory LLC a leading consulting firm within the retail insurance broking sector.

 What is an annuity?  Different types of annuities  Taxation of annuities  Guaranteed Income Benefit  Things to Consider

 Accumulation Phase: earning income and goal setting  Distribution Phase: ensuring that you do not outlive assets and maintaining an equitable lifestyle

 Most people do not know how to convert Assets to Income  External factors will impact planning more than ever  Most people will have an income gap at retirement

 Demographics  USA Tax Policy  Savings Patterns  Social Security  Decline in Traditional Pension Plans  Unstable Economy

 Company paid pensions are a thing of the past  Most people do not have a Financial Advisor  Other than their home, 401(k) often is an individual’s largest asset  Most people do not understand Tax Law  Most people are not informed regarding Social Security Benefits

 : 80,000,000 babies born  : 37,000,000 babies born  1.8 babies per family post baby boom  2.1 babies per family needed for zero population growth

 3.3 people working for every one retiree  In 2030, one person working for every two retirees

 Over the last decade, Americans have been a nation of spenders…not savers  Over the past five years, American workers have spent more than they have earned

This data includes Social Security benefits.

At Age 65, Your Probability of Living to Various Ages… AgeMaleFemale One Member of Couple 8071%81%94% 8553%65%84% 9034%44%63% 9517%23%36% Source: Society of Actuaries Annuity 2000 Mortality Tables This data includes Social Security benefits

Probability of… Chances Over the Next 20 Years… Worth Insuring Against? House Fire5:1000Yes Car Wreck70:1000Yes 85 th Birthday840:1000Yes Source: Hartford 2006 Countrywide Claim Frequency Report/ NAIC/Society of Actuaries

Source: Wiesenberger 1/07

Attributes:  A contract between and individual and an insurance company to pay out a benefit at a later date.  An accumulation phase and distribution phase  Can pay an income for life; regardless of the amount of principal going in.

Types:  Variable Annuities  Fixed Annuities & Fixed Index Annuities  Deferred Anuities  Single Premium Immediate Annuitites

 Funds grown on a tax deferred basis  LIFO – Last in, first out. Distributions are considered a return of gain first out.  Annuity exclusions table, premiums divided by life expectancy to determine basis excess amount is considered taxable income.

 Charged if funds are taken out before the surrender period has expired  Waived for the 10% withdrawl provision, but charged on excess  Vary in length depending on the product  Typically 4-7 years in length and are declining each year  Apply to both fixed and variable products

 Requires securities licensing  Underlying sub accounts investing in stocks and bonds  Gains or losses depend on the performance of the market  Pays out units at retirement  Tax penalty if funds are taken out in excess of 10% prior to age 59 ½  Has all of the settlement options available  Most companies have guaranteed minimum income benefit and enhanced death benefit riders

 Most commonly used at retirement  Payment made to insurance company for immediate income  All settlement options available  Used when goal is to annuitize contract

 Does not require a securities license, only state life insurance licensing  Is a fixed annuity by definition  Was designed to compete with the equity based products  Participant has choice of picking an index or a fixed interest option, or a combination of both  Has all the other features of fixed and variable annuities

 The insurance company offers an index to participate in or a fixed interest rate option  Premiums are not actually put in the index, S&P 500 as an example  Index is only used to determine the amount of interest credited to the cash value  Each year values have a stepped up basis based on the index. It cannot decline

 There are three indexing methods  Annual reset, index value at the end of the contract year is compared to the index value at the beginning of the contract year. Any gain is credited as interest  High water mark, uses index values during the course of the year to determine gains  Point to Point, compares the change in the index between two distinct times

 CAP, some index annuities have a maximum rate of interest they will credit regardless of index result  PARTICIPATION RATE, some carriers will credit a portion of the index gain, i,e, the index earned 10% but the participation rate is 80% or 8% would be the crediting rate  SPREAD, the difference between the index rate and actual rate credited at a selected point in time

 Same as regular index annuities, except that money is credited to the cash value when annuity is established  Bonuses range from 5-10% depending on the carrier  Typically have longer surrender period charges depending on the amount of the bonus

 Depending on the carrier available for both fixed and variable products  Charged for in the expenses of the contract, typically 25 basis points  The three most common riders are:  Guaranteed minimum income benefit  Enhanced death benefit  Earnings preservation benefit

 For people who do not want to tie up all funds while annuitizing  With some carriers can benefit both spouses  Allows withdrawals at a stated rate while still having availability of cash  If you do not take a withdrawal interest is credited at the rate stated, typically 5-5 ½  In the case of an index annuity if a higher rate is credited the value steps up  You can never loose gains

 Pays amount of money to a named beneficiary either premiums paid or account value which ever is greater  Account increases in value each year either by returns to cash value or a stated rate of return, typically 5%  Can take withdrawals while maintaining death benefit

 Provides additional death benefit based on earnings in the account to offset potential tax costs

 California has CE requirements to sell annuities  If you are selling to seniors in California need to understand specific laws  In the next 20 years more annuities will be sold than in history of product

 Anyone retiring within the next 20 years  People who are risk adverse  People who have no pension other than a 401(k)  People who want to maximize income from assets

Insurance forms and endorsements vary based on insurance company; changes in edition dates; regulations; court decisions; and state jurisdiction. This instructional materials provided by Insight is intended as a general guideline and any interpretations provided by Insight do not modify or revise insurance policy language. The authors of these materials are Quick Life and Insurance Community Center. In providing these materials neither Quick Life nor, Insurance Community Center assumes any liability or responsibility to any person or business with respect to any loss that is alleged to be caused directly or indirectly as a result of the instructional materials provided. Copyright 2010 – 2012 All Rights Reserved

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