Demystifying Annuities

Thomas PotterIndependent Life Insurance Professional

Plans4Retirement480 221-4206

www.plans4retirement.com

THE DIFFERENT USES OF LIFE INSURANCEAND AN ANNUITY

THE DIFFERENT USES OF LIFE INSURANCEAND AN ANNUITY

LIFE INSURANCE PROTECTS YOUR FAMILY IF YOU DIE

TOO SOON

THE DIFFERENT USES OF LIFE INSURANCEAND AN ANNUITY

LIFE INSURANCE PROTECTS YOUR FAMILY IF YOU DIE

TOO SOON

AN ANNUITY PROTECTS YOU FROM OUTLIVING YOURINCOME IF YOU

LIVE TOO LONG

Annuity Seminar Goals

•Provide you with sound and unbiased

information

Annuity Seminar Goals

•Provide you with sound and unbiased

information

•Acquaint you with annuity:

Types

Annuity Seminar Goals

•Provide you with sound and unbiased

information

•Acquaint you with annuity:

Types

Benefits

Annuity Seminar Goals

•Provide you with sound and unbiased

information

•Acquaint you with annuity:

Types

Benefits

Characteristics

Annuity Seminar Goals

•Provide you with sound and unbiased

information

•Acquaint you with annuity:

Types

Benefits

Characteristics

•What to consider if you are shopping for an

annuity

An annuity is:

A multi-year insurance interest - paying contract that has the insurance company’s guarantees of:

An annuity is:

A multi-year insurance interest - paying contract that has the insurance company’s guarantees of:

•Predictable income you cannot outlive

An annuity is:

A multi-year insurance interest - paying contract that has the insurance company’s guarantees of:

•Predictable income you cannot outlive•The return of your principal and interest earnings

An annuity is:

A multi-year insurance interest - paying contract that has the insurance company’s guarantees of:

•Predictable income you cannot outlive•The return of your principal and interest earnings•Minimum interest earnings in every economic climate

An annuity is:

A multi-year insurance interest - paying contract that has the insurance company’s guarantees of:

•Predictable income you cannot outlive•Protection from market risk•Minimum interest earnings in every economic climate

“Annuities are among the highest rated financial products in consumer satisfaction” (Nat’l Assn of Fixed Annuities)

Three ways to define an annuity

•How interest is credited - fixed rate or equity indexed

Three ways to define an annuity

•How interest is credited - fixed rate or equity indexed

•Methods of investment - single or multiple payments

Three ways to define an annuity

•How interest is credited - fixed rate or equity indexed

•Methods of investment - single or multiple payments

•When or if distributions start - deferred or immediate

Three investment methods

•Fixed rate – contractually stated

Three investment methods

•Fixed rate – contractually stated

•Equity indexed – interest earnings based upon an underlying index e.g. S&P 500

Three investment methods

•Fixed rate – contractually stated

•Equity indexed – interest earnings based upon an underlying index e.g. S&P 500

•Variable – a securities productNo guarantees – principal or earnings – total risk

Three investment methods

•Fixed rate – contractually stated

•Equity indexed – interest earnings based upon an underlying index e.g. S&P 500

•Variable – a securities productNo guarantees – principal or earnings – total riskSeller must have a securities license

Three investment methods

•Fixed rate – contractually stated

•Equity indexed – interest earnings based upon an underlying index e.g. S&P 500

•Variable – a securities productNo guarantees – principal or earnings – total riskSeller must have a securities licenseHigh investment fees

Annuity Benefits•Guaranteed lifetime income

Annuity Benefits•Guaranteed lifetime income

•Annuities avoid probate

Annuity Benefits•Guaranteed lifetime income

•Annuities avoid probate

•Early withdrawals without penalty or surrender charges for:Terminal illnessChronic illnessLong term care

Annuity Benefits•Guaranteed lifetime income

•Annuities avoid probate

•Early withdrawals without penalty or surrender charges for:Terminal illnessChronic illnessLong term care

•Death benefits for survivors

Annuity Benefits•Guaranteed lifetime income

•Annuities avoid probate

•Early withdrawals without penalty or surrender charges for:Terminal illnessChronic illnessLong term care

•Death benefits for survivors

•Numerous payout options

Annuity Benefits•Guaranteed lifetime income

•Annuities avoid probate

•Early withdrawals without penalty or surrender charges for:Terminal illnessChronic illnessLong term care

•Death benefits for survivors

•Numerous payout options

•Creditor proof

Annuity Benefits•Guaranteed lifetime income

•Annuities avoid probate

•Early withdrawals without penalty or surrender charges for:Terminal illnessChronic illnessLong term care

•Death benefits for survivors

•Numerous payout options

•Creditor proof

•Early LIMITED withdrawal of money

Characteristics of annuities

•SAFETY OF PRINCIPAL

Characteristics of annuities

•SAFETY OF PRINCIPAL

•Interest growth is tax deferred

Characteristics of annuities

•SAFETY OF PRINCIPAL

•Interest growth is tax deferred

•Distributions of interest taxed as ordinary income

Characteristics of annuities

•SAFETY OF PRINCIPAL

•Interest growth is tax deferred

•Distributions of interest taxed as ordinary income

•Each contract has an owner, an annuitant, and a beneficiary

Characteristics of annuities

•SAFETY OF PRINCIPAL

•Interest growth is tax deferred

•Distributions of interest taxed as ordinary income

•Each contract has an owner, an annuitant, and a beneficiary

•Annuities are sold by banks, brokerage firms, independent agents and captive agents.

Characteristics of annuities

•SAFETY OF PRINCIPAL

•Interest growth is tax deferred

•Distributions of interest taxed as ordinary income

•Each contract has an owner, an annuitant, and a beneficiary

•Annuities are sold by banks, brokerage firms, independent agents and captive agents.

•Any guarantees are backed by the insurance company

Characteristics of annuities

•SAFETY OF PRINCIPAL

•Interest growth is tax deferred

•Distributions of interest taxed as ordinary income

•Each contract has an owner, an annuitant, and a beneficiary

•Annuities are sold by banks, brokerage firms, independent agents and captive agents.

•Any guarantees are backed by the insurance company

•Upon death, proceeds avoid probate.

Characteristics of annuities

•SAFETY OF PRINCIPAL

•Interest growth is tax deferred

•Distributions of interest taxed as ordinary income

•Each contract has an owner, an annuitant, and a beneficiary

•Annuities are sold by banks, brokerage firms, independent agents and captive agents.

•Any guarantees are backed by the insurance company

•Upon death, proceeds avoid probate.

•Creditor proof

Characteristics of annuities

•SAFETY OF PRINCIPAL

•Interest growth is tax deferred

•Distributions of interest taxed as ordinary income

•Each contract has an owner, an annuitant, and a beneficiary

•Annuities are sold by banks, brokerage firms, independent agents and captive agents.

•Any guarantees are backed by the insurance company

•Upon death, proceeds avoid probate.

•Creditor proof

•Minimum amounts are needed to purchase them

Characteristics of annuities

•SAFETY OF PRINCIPAL

•Interest growth is tax deferred

•Distributions of interest taxed as ordinary income

•Each contract has an owner, an annuitant, and a beneficiary

•Annuities are sold by banks, brokerage firms, independent agents and captive agents.

•Any guarantees are backed by the insurance company

•Upon death, proceeds avoid probate.

•Creditor proof

•Minimum amounts are needed to purchase them

•Penalties will be assessed for early liquidation of the annuity

Costs Associated with Annuities

•No commissions – the insurance company pays the producer

Costs Associated with Annuities

•No commissions – the insurance company pays the producer

•No investment fees

Costs Associated with Annuities

•No commissions – the insurance company pays the producer

•No investment fees

•No producer fees – at least from me

Costs Associated with Annuities

•No commissions – the insurance company pays the producer

•No investment fees

•No producer fees – at least from me

•All annuities have surrender/penalties/liquidation charges for terminating the contract before its maturity date

Costs Associated with Annuities

•No commissions – the insurance company pays the producer

•No investment fees

•No producer fees – at least from me

•All annuities have surrender/penalties/liquidation charges for terminating the contract before its maturity date

•If any, all costs are specified in the contract and explained before the purchase by the producer

What is annuitization?

Annuitization is the conversion of your annuity’s account value to aguaranteed stream of income according to your payout option choice.

What is annuitization?

Annuitization is the conversion of your annuity’s account value to aguaranteed stream of income according to your payout option choice.

•Single Premium Immediate Annuities (SPIAs) are annuities that converta one-time premium into an immediate income stream.

What is annuitization?

Annuitization is the conversion of your annuity’s account value to aguaranteed stream of income according to your payout option choice.

•Single Premium Immediate Annuities (SPIAs) are annuities that converta one-time premium into an immediate income stream.

•A deferred annuity can be annuitized at the end of its term, during theterm of the contract, or not at all.

What is annuitization?

Annuitization is the conversion of your annuity’s account value to aguaranteed stream of income according to your payout option choice.

•Single Premium Immediate Annuities (SPIAs) are annuities that converta one-time premium into an immediate income stream.

•A deferred annuity can be annuitized at the end of its term, during theterm of the contract, or not at all.

•When you annuitize you are trading control of your money fora fixed stream of income from the insurance company

Considerations before annuitizing

•Once you annuitize an annuity you cannot reverse the process

Considerations before annuitizing

•Once you annuitize an annuity you cannot reverse the process

•Before annuitizing your deferred annuity consider exchanging it for animmediate annuity because:

Better interest rates

Considerations before annuitizing

•Once you annuitize an annuity you cannot reverse the process

•Before annuitizing your deferred annuity consider exchanging it for animmediate annuity because:

Better interest rates

More favorable taxation treatment for distributions

Considerations before annuitizing

•Once you annuitize an annuity you cannot reverse the process

•Before annuitizing your deferred annuity consider exchanging it for animmediate annuity because:

Better interest rates

More favorable taxation treatment for distributions

•Be sure of your payout option selection – this is not able to be changed

Annuity payout options

•Period Certain – you select the number of periods you want to receive income

Annuity payout options

•Period Certain – you select the number of periods you want to receive income

•Life/ Joint Life – payments are received as long as one spouse is alive

Annuity payout options

•Period Certain – you select the number of periods you want to receive income

•Life/Joint Life– payments are received as long as one spouse is alive

•Life with Period Certain or Joint Life with Period Certain – you are guaranteedto receive payments for the period you selected or for as long as you live, whichever is greatest. This is the best of both worlds

When an annuity contract matures

•You can take your money (P&I) as a lump sum and pay taxes on theinterest at your ordinary income tax rate.

When an annuity contract matures

•You can take your money (P&I) as a lump sum and pay taxes on theinterest at your ordinary income tax rate.

•You can roll the contract over with the same or different insurer for a new deferred annuity, likely with different terms

When an annuity contract matures

•You can take your money (P&I) as a lump sum and pay taxes on theinterest at your ordinary income tax rate.

•You can roll the contract over with the same or different insurer for a new deferred annuity, likely with different terms

•You can transfer the contract to an immediate annuity to receive periodic income payments.

Who is a good candidate for an annuity?

•Investors who cannot afford to risk/lose principal.

Who is a good candidate for an annuity?

•Investors who cannot afford to risk/lose principal.

•Those who currently have investments in CDs, T-bills, savings accounts or money market accounts and are willing to trade some liquidity for higher returns.

Who is a good candidate for an annuity?

•Investors who cannot afford to risk/lose principal.

•Those who currently have investments in CDs, T-bills, savings accounts or money market accounts and are willing to trade some liquidity for higher returns.

•People that have 401(k)’s and want to protect their gains or a portion of those gains, from possible market risk.

Who is a good candidate for an annuity?

•Investors who cannot afford to risk/lose principal.

•Those who currently have investments in CDs, T-bills, savings accounts or money market accounts and are willing to trade some liquidity for higher returns.

•People that have 401(k)’s and want to protect their gains or a portion of those gains, from possible market risk.

•Those that want a pension-like income stream for a period of time or the rest of their lives

If you can get life insurance

If you can get life insurance

Annuities are probably not good forlegacy purposes

If you can get life insurance

Annuities are probably not good forlegacy purposes

WHY?

If you can get life insurance

Annuities are probably not good forlegacy purposes

WHY?

The proceeds are taxableto your beneficiaries

DISCLAIMER

THESE PRESENTATION POINTS DO NOT REPRESENT TAX

OR LEGAL ADVICE.

CHECK WITH YOUR TAX OR LEGAL ADVISOR IF YOU HAVE ANYQUESTIONS OR CONCERNS, HOW THESE FINANCIAL PRODUCTSMIGHT AFFECT YOUR FINANCIAL CONDITION.

PLANS4RETIREMENT

THANKS FOR ATTENDING

QUESTIONS?

Presented by: Thomas Potter

480 221-4206

www.plans4retirement.com

info@plans4retirement.com