1. Practical Case Studies in Annuity Planning
Featured Speaker:
John L. Olsen, CLU, ChFC, AEP
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2. Featured Speaker
John L. Olsen, CLU, ChFC, AEP Olsen Financial Group 131 Hollywood Lane Kirkwood, Missouri
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3. Case #1: When Income is Needed, Starting Immediately
John, a single 52 year old, wants more income, starting immediately. What questions must we ask before making a recommendation?
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4. The 12 Concerns We MUST Ask About
Age
Annual Income
Financial situation and needs, including the financial resources used for the funding of the annuity
Financial experience
Financial objectives
Intended use of the annuity
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5. The 12 Concerns We MUST Ask About (Cont’d)
Financial time horizon
Existing assets, including investment and life insurance holdings
Liquidity needs
Liquid net worth
Risk tolerance
Tax status
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6. The Job is: More Income, Starting Now
What are the appropriate tools?
Single Premium Immediate Annuity (SPIA)
Single Premium Deferred Annuity with withdrawal benefits (SPDA)
Non-annuity tools
Sustainable Withdrawal Program
Bonds
Certificates of Deposit
High Dividend Stocks
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7. The Job is: More Income, Starting Now
The Single Premium Immediate Annuity (SPIA)
When might a SPIA be appropriate?
When income must persist for life
When income is for a definite number of years
When might a SPIA be inappropriate?
When John needs liquidity
When John needs flexibility
When John needs “this money” to produce a legacy
What about current interest rates?
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8. The Job is: More Income, Starting Now
Single Premium Deferred Annuity (SPDA) & Withdrawals
Many contracts don’t allow withdrawals in 1st year
Guaranteed Lifetime Withdrawal Benefit (GLWB) might work, but –
“Rollup rate” on benefit base usually stops at 1st withdrawal
The longer John waits before taking 1st withdrawal, the greater the guaranteed withdrawal percentage
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9. A Deferred Annuity with a Guaranteed Minimum Withdrawal Benefit
Annual “Step Up” and 6% “Rollup”
The Account Value is available in a lump sum. The “Max Value” is NOT!
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10. What about a Combination?
Example 1: A 10 Year SPIA plus a Deferred Annuity with a GLWB
SPIA pays for 10 years and stops
DA+GLWB “benefit base” increases for 10 years
In 11th year, John takes Guaranteed Withdrawal Percentage from benefit base, for life
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11. What about a Combination?
Example 2: A 20 Year SPIA plus a Deferred Income Annuity commencing in 21st year
SPIA pays for 20 years and stops
In 21th year, DIA provides income for life
The amount of both income streams is guaranteed today
But..
DIA might not provide death benefit if John dies before 21st year
Liquidity issues
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12. Case #2: When Need Is To Accumulate Capital
What questions do we need to consider here?
Risk tolerance
Is a guarantee of principal important?
Is a guarantee of annual return important?
Liquidity
Surrender charges
Exceptions to withdrawal penalty
Tax considerations
Legacy considerations
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13. Case #2: When Need Is To Ensure a Future Income
The “Longevity Annuity” / Deferred Income Annuity
Adds a “defined benefit” component to the plan
The 2 “Unknowables” in retirement income planning
Removes or reduces the second Unknowable
Implications for asset allocating the rest of client’s money
Behavioral considerations
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14. Q&A
Q&A

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17. Webinar Attendees: Save 10%
The Advisor's Guide to Annuities, Third Edition
By John L. Olsen and Michael E. Kitces
Published May 2012 / ISBN: / 338 pages
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18. TECHNICAL ISSUES For technical issues, contact: Richard Niles, J.D.
Senior Tax Editor
National Underwriter