1. Retirement Planning and Annuities Jerry Rhinehart, CIC, CLU, ChFC, RHU
4/20/2017
Retirement Planning and Annuities

Jerry Rhinehart, CIC, CLU, ChFC, RHU
Panama City, FL
JER RetPlan & Annuities - IIA

2. 4/20/2017
Areas to be Covered
1 The “Retirement Dilemma” and normal products / concept that can assist in their retirement
2 Qualified vs. Non-Qualified Plans
3 Social Security; How it works; What about taxes; What about earned income?
4 Annuity overview; What about “risk”?
5 “Waivers” and Surrender Charges as typically found in an Annuity 1
JER RetPlan & Annuities - IIA

3. Please note the DISCLAIMER
4/20/2017
Please note the DISCLAIMER 2
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4. The Retirement Dilemma
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The Retirement Dilemma
 How much money will you need in which to retire comfortably? 3
JER RetPlan & Annuities - IIA

5. How Much Money do You Need?
4/20/2017
How Much Money do You Need?
 Check out the “Retirement Assistant” at CNN Money.
 Just how much money will you need to retire “comfortably”?
- 80%
- inflation
- a longer life expectancy 4
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6. The Retirement Dilemma
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The Retirement Dilemma
 How much money will you need in which to retire comfortably?
 What are the normal retirement funding vehicles? 3
JER RetPlan & Annuities - IIA

7. The Retirement Dilemma
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The Retirement Dilemma
 How much money will you need in which to retire comfortably?
 What are the normal retirement funding vehicles?
 Qualified Plans (Pensions/ 401-k/ IRAs, SIMPLE, SEP, 403b, TSA, etc.)
 Social Security 3
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8. 4

9. The Retirement Dilemma
4/20/2017
The Retirement Dilemma
 How much money will you need in which to retire comfortably?
 What are the normal retirement funding vehicles?
 Qualified Plans (Pensions/ 401-k/ IRAs, SIMPLE, SEP, 403b, TSA, etc.)
 Social Security
 Non-Qualified Plans 3
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10. What are Non-Qualified Plans?
4/20/2017
What are Non-Qualified Plans?
 Personal Savings (CDs, Money Market, Savings Account)
 Investing (Stocks, bonds, mutual funds, real estate, collectibles, etc.)
 Annuities, Life Insurance 3
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11. The Retirement Dilemma
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The Retirement Dilemma
 Pros – Cons of various investment vehicles
 Tax issues
 Qualified Plans (Pensions/ 401-k/ IRAs, SEP, etc.)
1. Tax deductible *
Teste for not page 5
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12. The Retirement Dilemma
4/20/2017
The Retirement Dilemma
 Pros – Cons of various investment vehicles
 Tax issues
 Qualified Plans (Pensions/ 401-k/ IRAs, SEP, etc.)
1. Tax deductible *
ROTH
Teste for not page 5
JER RetPlan & Annuities - IIA

13. The Retirement Dilemma
4/20/2017
The Retirement Dilemma
 Pros – Cons of various investment vehicles
 Tax issues
 Qualified Plans (Pensions/ 401-k/ IRAs, SEP, etc.)
1. Tax deductible *
2. Grows tax-deferred
3. Withdrawals subject to tax *
4. May be subject to estate tax
ROTH
Teste for not page 5
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14. The Retirement Dilemma
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The Retirement Dilemma
 Pros – Cons of various investment vehicles
 Diversification 6
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15. 4/20/2017 6
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16. The Retirement Dilemma
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The Retirement Dilemma
 Pros – Cons of various investment vehicles
 Diversification
 Check out YOUR “Investment Risk Tolerance”
 Why do stock prices go up and down so much? 6
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17. 4/20/2017 8
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18. The Retirement Dilemma
4/20/2017
The Retirement Dilemma
 Pros – Cons of various investment vehicles
 Tax issues
 Qualified Plans (Pensions/ 401-k/ IRAs, 403B, SEP, etc.)
 Social Security
- Is SS $ subject to income tax (federal and state) tax? It depends. The specific answers can be found on the Social Security web-site. 7
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21. The Retirement Dilemma
4/20/2017
The Retirement Dilemma
 Pros – Cons of various investment vehicles
 Tax issues
 Qualified Plans (Pensions/ 401-k/ IRAs, 403B, SEP, etc.)
 Social Security
 Personal savings and investing 7
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22. Taxes on Non-Qualified Money
4/20/2017
Taxes on Non-Qualified Money
 Ordinary Income Tax (Federal and State*)
 Capital Gains (one year holding period – 15% tax {generally}) 7
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23. Taxes on Non-Qualified Money
4/20/2017
Taxes on Non-Qualified Money
 Ordinary Income Tax (Federal and State)
 Capital Gains (one year holding period – 15% tax {generally})
 Federal Estate Tax 7
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24. The Retirement Dilemma
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The Retirement Dilemma
 Personal liability and diversifi-cation issues
 Qualified Plans (Pensions/ 401-k/ IRAs, 403B, SEP, etc.) 9
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25. The Retirement Dilemma
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The Retirement Dilemma
 Personal liability and diversifi-cation issues
 Qualified Plans (Pensions/ 401-k/ IRAs, 403B, SEP, etc.)
- Generally Q-Plan assets are exempt from creditors in a bankruptcy / legal verdict
- New laws in effect to prevent another “Enron-Employee” investment debacle 9
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26. 4/20/2017
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27. The Retirement Dilemma
4/20/2017
The Retirement Dilemma
 Personal liability and diversifi-cation issues
 Qualified Plans (Pensions/ 401-k/ IRAs, 403B, SEP, etc.)
 Social Security 9
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28. Can your Social Security check ever be taken away?
4/20/2017
Can your Social Security check ever be taken away? 9
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29. Can your Social Security check ever be taken away?
4/20/2017
Can your Social Security check ever be taken away?
 Yes
- Should you qualify for a Medicaid Nursing Home stay, your SS check will be kept by the Federal /State government
- The Internet can provide additional information regarding your specific state and its rules (elderlawanswers.com) 9
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30. The Retirement Dilemma
4/20/2017
The Retirement Dilemma
 Personal liability and diversifi-cation issues
 Qualified Plans (Pensions/ 401-k/ IRAs, 403B, SEP, etc.)
 Social Security
 Personal savings and investing 9
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31. Personal Liability concerning your Personal Saving and Investments?
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Personal Liability concerning your Personal Saving and Investments?
 Assets are subject to the claims of creditors
- Certain exceptions (house, cash value in life insurance, annuities, etc.)
- A Living Trust does NOT protect these assets from the claims of creditors
- Certain advantages for a business 9
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32. - Run complicated and potentially risky ventures past your accountant.
4/20/2017
A Suggestion ...
- Run complicated and potentially risky ventures past your accountant.
- A good Financial Planner really makes a lot of sense! (Actually … Dollars and Cents!) 9
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33. Various Qualified Plan
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Various Qualified Plan
 Individual Retirement Arrangement 11
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34. Individual Retirement Arrangement
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Individual Retirement Arrangement
 Contributions
 Earned Income
 Maximum age for contribution and distributions (70½)
 Distributions subject to ordinary tax and possible penalty 11
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35. IRA Contribution Rules and Limits Contributions as the smaller of:
4/20/2017
IRA Contribution Rules and Limits
Contributions as the smaller of:
- Taxable compensation for the tax year, or,
- A limit stated by law (see table below)
Contributions limits have been increased in stages by the Economic Growth & Tax Relief Reconciliation Act of 2001
♦ $5,500 plus $1,000 if 50 years of age or older
♦ $5,500 plus $1,000 if 50 years of age or older
♦ $5,500 plus $1,000 if 50 years of age or older 12
Note: PPA ( ) makes contribution limits permanent
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36. Various Qualified Plan
4/20/2017
Various Qualified Plan
 Individual Retirement Arrangement
 ROTH (same contribution limits as IRA) 11
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37. Roth IRA  Roth IRA rules
4/20/2017
Roth IRA
 Roth IRA rules
 Not tax-deductible when the Contribution is made
 Compensation limits 11
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38. Roth IRA Compensation Rules - 2015
4/20/2017
Roth IRA Compensation Rules
 Filing “Single and Head of Household”
- Income / $116,000 - $131,000
 Married Filing “Joint”
- Income / $183,000 - $193,000
Note: PPA will index income limits after 2006 (nearest $1,000). Check IRS website for specific numbers
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39. Roth IRA  Rules  Not tax-deductible when the Contribution is made
4/20/2017
Roth IRA
 Rules
 Not tax-deductible when the Contribution is made
 Compensation rules
 OK to be “active” in another “qualified plan”
 What about $$ coming out? 11
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40. Roth IRA Distribution Rules
4/20/2017
Roth IRA Distribution Rules
 A “qualified distribution” (TAX FREE) from a Roth IRA is one that:
 meets the 5 year rule, and;
 is after age 59½,
 or disability,
 or death,
 or meets the 1st time home-buyer rule 11
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41. 4/20/2017
A Few More Roth Rules
 A Roth can be set on or before April 15, for 2014 tax filing.
 Should a contributor be age 50 or older they can also contribute the “catch-up” amount ($1000 for 2015).
 “Converting” to a Roth IRA must be accomplished by the end of the tax-year.
 There is no age maximum nor minimum and contributions can be made past age 70½. (Must have Compensation)
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42. Various Qualified Plan
4/20/2017
Various Qualified Plan
 Individual Retirement Arrangement
 ROTH (same contribution limits as IRA)
 401-k (Limits = $18,000 / $6,000) 11
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43. 401-k 11  Contributions  Earned Income
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401-k
 Contributions
 Earned Income
 Maximum age for contribution and distributions (no limit if still employed; otherwise 70½)
 Distributions subject to ordinary tax and possible penalty
 Vesting 11
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44. Various Qualified Plan
4/20/2017
Various Qualified Plan
 Individual Retirement Arrangement
 ROTH (same contribution limits as IRA)
 401-k (Limits = $18,000 / $6,000)
 SIMPLE (Limits = $12,500 / $3,000) 11
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45. 4/20/2017
SIMPLE
 Similar to 401-k, but with lower contribution limits. Less initial cost to set- up and minimal annual “maintenance cost”. 11
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46. Various Qualified Plan
4/20/2017
Various Qualified Plan
 Individual Retirement Arrangement
 ROTH (same contribution limits as IRA)
 401-k (Limits = $18,000 / $6,000)
 SIMPLE (Limits = $12,500 / $3,000)
 Simplified Employment Pension (53,000 / 25% of Income) 11
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47. Simplified Employment Pension (SEP)
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Simplified Employment Pension (SEP)
 More suited for self-employed
 High limits of contribution 11
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48.  Benefits to your heirs
Just What is an Annuity?
 Tax Deferral growth
 Creditor protection
 Investment options
 Tax-free transfers
 Lifetime income
 Benefits to your heirs 14
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49. The Parties of an Annuity
 Owner
 Annuitant
 Beneficiary
 Insurance Company 13
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50. Classifications of an Annuity
 Number of Lives Covered
 Single
 Joint Life, or Joint Live and Survivorship 13
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51. Classifications of an Annuity
 Number of Lives Covered
 Single
 Joint Life, or Joint Live and Survivorship
 Time When Benefits Begin
 Immediate
 Deferred 15
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52. Classifications of an Annuity
 Method of Purchase
 Lump Sum
 Installment 15
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53. Classifications of an Annuity
 Method of Purchase
 Lump Sum
 Installment
 Tax Treatment
 Qualified
 Non-Qualified 15
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54. 16
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55. Types of Annuities  Fixed Annuities  Variable Annuities
 Equity Index Annuities 17 19
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56. Interest Rate  Fixed Annuities Key Words/ Phrases:
 Insurance Company assumes risk;
 Guarantees;
 Low Risk - Low Return 17
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57. Interest Rate  Equity Index Annuities Key Words/ Phrases:
 “Mutual Funds” with Guarantees;
 Could be High or Low risk - Return 17
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58. Accumulation Phase and Regulation of Annuities
Index Annuities
 A form of Fixed Annuity
 Values tied to S&P 500 (or similar)
 The Principal is Guaranteed 17
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59. Two Methods of Calculation
1. RATE CAP (of an Index)
 S&P 500 – 16% (sample 52 weeks)
 10% Rate Cap = 10% gain
If you are not sure how a Rate Cap or Participation Rate works, be sure and call one of your annuity writers and request they review it with you. 18
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60. Two Methods of Calculation
1. RATE CAP (of an Index)
 S&P 500 – 16% (sample 52 weeks)
 10% Rate Cap = 10% gain
2. PARTICIPATION RATE
 55% Participation of the Index
 16% X 55% = 8.8% gain
If you are not sure how a Rate Cap or Participation Rate works, be sure and call one of your annuity writers and request they review it with you. 18
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61. An Overview of an Indexed Annuity Hypothetical 5 year total return
$100,000 Initial Deposit
Hypothetical 5 year total return
Year Amount Yield Ending Balance
1 $100, % ,000
2 $107, % ,770
3 $118, % ,770
4 $118, % ,271
5 $128, %
128,271
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62. Interest Rate  Variable Annuities Key Words/ Phrases:
 “Mutual Funds” (you assume some risk);
 No Guarantees;
 Could be High or Low risk - Return 19
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63. Accumulation Phase and Regulation of Annuities
Variable Annuities
 There is NO GUARANTEED investment return
 Think -- “similar to mutual funds”
 The annuitant assumes the investment risk 19
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64. Accumulation Phase and Regulation of Annuities
Variable Annuities
 Single or Flexible Premium
 Classified as “securities” - FINRA
 To sell - Life/Annuity License and FINRA registered (Series 6 or 7)
Be sure and discuss any state regs that might also apply reference the license procedure. 19
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65. 20
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66. Selected Policy Provisions
 “Waivers” 21
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67. Waives the Surrender Charge
Common “Waivers”
Waives the Surrender Charge
 Death Benefit Waiver
 Nursing Home Waiver
 Terminal Illness Waiver
 Disability Waiver 22
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68. Selected Policy Provisions
 “Waivers”
 Settlement Provision (Annuitization) 21
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69.  How Much Monthly Installment for Life?
 $100,000 Payout - 65 year Male
 How Much Monthly Installment for Life?
This is the same chart as found in Life Concepts. Point out that carriers use a similar payout chart for both life and annuity. 21
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70. $697.00 Per Month  $100,000 Payout - 65 year Male
 How Much Monthly Installment for Life?
This is the same chart as found in Life Concepts. Point out that carriers use a similar payout chart for both life and annuity.
$ Per Month 21
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71. Selected Policy Provisions
 “Waivers”
 Cash Accumulations
 Surrender Charge 23
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72. 23 YEAR SURRENDER PENALTY 1 7% 2 6% 3 5% 4 4% 5 3% 6 2% 7 1% 8 -0-
Note: Most annuities are sold as “back-end load” (deferred sales charges). In addition to the surrender penalty, variable annuities will have on-going fees, mortality charges and perhaps asset charges. All annuities must clearly disclose all charges. 23

73. 4% of $100,000 = $4,000 * Surrender Charges
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Surrender Charges
Mrs. X invest $100,000 in an annuity that has a Surrender Charge Provision shown on page 23. Four years later the annuity has grown to $126,247 (6% annual return). She then withdraws the entire amount. What is her Surrender Penalty?
4% of $100,000 = $4,000 *
* Note: This assumes the carrier did NOT impose the Surrender Penalty to the entire $126,247 (the Accumulated Value). Review the contract to be certain. Additionally, there could be a federally imposed 10% penalty if she is under age 59½ (exceptions exist). 24
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74. Withdrawal Penalties that May Apply to an Annuity
Surrender Charge – Insurance Company
10% Premature Distribution – IRS
Income Tax - IRS
Example: Mrs. X (previous slide) is under age 59½. Instead of a full withdrawal, she takes $10,000 from her annuity during the 4th contract year. What is the tax and penalty assuming the 4% surrender penalty applies (no “waiver” is applicable) and she is in a 28% federal income tax bracket for the year of distribution.
$ ________
4% Surrender Charge by Ins. Company
10% Premature Surrender Penalty by IRS
28% Federal Income Tax Due
TOTAL 24

75. Withdrawal Penalties that May Apply to an Annuity
Surrender Charge – Insurance Company
10% Premature Distribution – IRS
Income Tax - IRS
Example: Mrs. X (previous slide) is under age 59½. Instead of a full withdrawal, she takes $10,000 from her annuity during the 4th contract year. What is the tax and penalty assuming the 4% surrender penalty applies (no “waiver” is applicable) and she is in a 28% federal income tax bracket for the year of distribution.
$ ________
4% Surrender Charge by Ins. Company
10% Premature Surrender Penalty by IRS
28% Federal Income Tax Due
TOTAL
$400
$1,000
$2,800
$4,200 24

76. Thank You for Your Attendance
4/20/2017
Retirement Planning
and Annuities
Thank You for Your Attendance
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