Annuities

IRS

(Internal Revenue Service) Governmental agency responsible for collecting federal taxes, issuing regulations, and enforcing tax laws

Uses of Annuities

- life income. - tax favored savings. - funding individual retirement accounts (IRA). - education funds.

Joint life

A payout arrangement where two or more annuitants receive payments until the first death among the annuitants, and then payments stop.

Pure Life vs Life with Guaranteed Minimum

A pure life or lifetime annuity pays a benefit to the annuitant until death. The Guaranteed Lifetime Income Annuity is an immediate annuity that guarantees income payments for as long as you live. ... He will continue to receive this income for the rest of his retirement—no matter how long he lives.

Qualified Plan

A retirement plan that meets the IRS guidelines for receiving favorable tax treatment.

It is the producer's responsibility to evaluate the consumers sustainibility information

Age, Income, Financial situation information, Needs and objectives, Tax status, Risk tolerance

Accumulation Period

Also known as the pay-in period. The period of time over which the owner makes payments (premiums) into an annuity. The payments earn interest on a tax-deferred basis.

Joint and Survivor Annuity

An annuity that makes payments to two or more annuitants throughout their lifetimes. Payments normally reduce at the death of each annuitant and stop altogether upon the death of the last annuitant.

Education Funds

Annuities can provide funds for educational purposes on a tax-deferred basis.

Life contingency

Dependent upon whether or not the insured is alive

Fixed Annuity features

Guaranteed minimum rate of interest to be credited to the purchase payments Income payments that do not vary from one payment to the next The insurance company guarantees the specified dollar amount for each payment and the length of the period of payments as determined by the settlement option chosen by the annuitant.

Single Premium Immediatly Annuity

Is one that is purchased with a single lump sum payment and provides income payments that start 1 year from the date of purchase.

Minimum vs guaranteed Intrest rates

Minimum 3%, should intrest rates drop below the guarantted rate the insurer is obligated to pay the guaranteed rate amount

During the accumulation period, funds are

Paid into the annunity. During the annunity period, funds are paid OUT to the annunianty.

Refund Life Annuity

Provides annuity payments for the annuitant's lifetime with the guarantee that in no event will total income be less than the purchase price of the contract. If the annuitant dies before receiving this amount, the difference is paid to a named beneficiary either as a cash refund or in installments.

Retirement fund annunities

Retirement annuities promise lifetime guaranteed monthly or annual income for a retiree until their death. These annuities are often funded years in advance, either in a lump sum or through a series of regular payments, and they may return fixed or variable cash flows later on.

Single Life vs. Multiple Life

Single life covers one life, annunity payments are made with reference to only one life only. Contributions can be made with a single premium or on a perodic premium basis with subsequent values accumiliating until the contract is annunitized Multiple life covers 2 or more. Most common multiple life annunities are joint life and survior

The annunity icome amount is based on

The amount of premium paid The frequency of the payment Intrest rate The annuiants age and gender

fixed amount installments

The annuitant selects how much each payment will be, and the insurer determines how long the benefits will be paid by analyzing the value of the account and future earnings.

fixed period installments

The annuitant selects the time period for the benefits, and the insurer determines how much each payment will be, based on the value of the account and future earnings projections. This option pays for a specified amount of time only, whether or not the annuitant is living.

Flexible Premium Deferred Annuity

The annuity purchased with multiple payments, whose benefit is paid more than one year after the purchase is known as which type of annuity.

In fixed annunities the premiums are deposited in

The companys general account

Owner of Annuity

The purchaser of the contract, but not necessarily the reciever of all benefits. Owner of all rights such as naming the beneficary, and surendering all rights.

Annunity

a contract with an insurance company that provides regular income for a set period of time, usually for life Protects people against outliving their money, compared to a simple process of liquidating all assets.

Equity Indexed Annuity

a fixed, deferred annuity that allows the owner to participate in the growth of the stock market and provides downside protection against the loss of principal and prior interest earnings if the annuity is held to term

suitability

a requirement to determine if an insurance product is appropriate for a customer

Deferred Annuity

an annuity that either is purchased with a single lump sum or is can be purchased though perodic payments.

Liquidation of an estate

converting a person's net worth into a cash flow

Surrender Charge

helps compensate the company for the loss of the investment value due to an early surrender of a deferred annuity 7% the first year, 6% second year, etc

non-forfeiture clause

law stipulates that a deferred annunity must have a guaranteed surrender value that is available if the owner decides to surrender annunity prior to annunization 10% penalty will be charged for for early withdraws prior to age 59 1/2

Pure life annunity provides the highest

monthly benefit, but there is no quarantee that the entire principal will be paid out.

single premium deferred annuity

purchased with a single payment, but payment of benefits is delayed until a later date selected by the annuitant

Annuitant

receives the benefits or payments from the annunity, whose life expectancy is taken into consideration and for whom the annuitant is written.

The fixed period onption pays for

specific time only, Whether or not annuiant is living

Deferred

withheld or postponed until a specified time or event in the future