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 What is an annuity

This is a more complicated question than one might realize. So what is an annuity?  The standard definition from the dictionary is listed below but it does not really help to answer the question.

Annuity Income Rider:  Payouts Can Differ

When purchasing an annuity with an annuity income rider, it is important to understand that payout amounts can differ based on the issuing company’s policy. Because payouts can differ between companies, it is important to choose the right company before you invest your money. Below are payout overviews from both Nationwide and Genworth so you can compare the two.  This way you can make a more informed decision. An informed consumer is a smart consumer.  We want to give you any and all the information you need to help you feel comfortable with your choices.

Nationwide’s  annuity growth is based on interest earned.  However, once income starts that income amount remains in effect for life.  Therefore, a 55 year old making a $100,000 deposit, taking income in 10 years would receive $9,905 annually.  This income would start from age 65  and continue through age 75. These payments would add up to a total payout of $108,955.

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Life Annuity Connecticut

In this post, we will explain some things about; Life Annuity Connecticut.

The term “Life Annuity” is rather generic and can have multiple meanings but it is almost always used when describing lifetime income from an annuity product.   This post provides detail on the most common uses of the term and provide detail on how a lifetime income annuity works.

First meaning of the term “Life Annuity:

Annuity with a lifetime income rider: There are a number of companies that offer income riders that can be added to their annuity products.  The income rider is a way to guarantee a lifetime income stream off of you investment for life.  The riders usually provide for a substantial bonus on your money up front (approx. 2% to 10% depending on product)  and will increase every year at a set compound interest rate (Going rate is 4% to 8% per year).  Money in the product is guaranteed to increase at the specified rate for up to a specific number of years.  Many companies cap the growth and 10, 15 or 20 years.

The point of the income rider is that it allows the investor to calculate exactly how much income they will be able to draw in future years.

Once they decide to turn income on, it will pay out for the rest of their lives or if they have a spouse, it will pay out until both pass away.  Income riders have become hugely popular in the last 10 years due to the perceived unpredictability of the stock market.   Income riders can usually be added to fixed, fixed indexed or Variable annuities.   The purchaser should know that the income rider guarantees the income only.  It does not guarantee growth of the actual lump sum investment.

The second meaning of the term “Life Annuity”:

is usually associated with a Deferred Annuity or sometimes called “Longevity Insurance”.  This is also an annuity but it functions in a different manner.  The Deferred Annuity takes a lump sum payment and pays out a guaranteed future in come at a predetermined future date.   The insured will usually not have access to the money prior to the payout starting which makes the Deferred Annuity less flexible than an income rider product.

The bottom line with lifetime income products:

Find the companies that will pay out the most guaranteed future income.  It is very easy to compare these products if you compare them fairly.  For example.  A 55 year old female wants to use $250,000 to create future lifetime income when she turns 65.  She needs to find the company that will pay out the most to her per month in 10 years.  Companies will try to say add “bells and whistles” to products to keep people from making this most simple of comparisons but if income is true need, there is no reason to look at anything else.

How Crowe and Associates can help you pick the correct annuity:

Crowe and Associates is based in Brookfield, Connecticut. The agency is independent and able to work with any annuity company as a result. We are A rated with the BBB and help clients find the right annuity type and company to meet their needs. Once we determine the type of annuity needed, we will then shop to see which company is providing the best rates and terms. Feel free to request a quote through this site or call our office at 203-567-6235. You will be contact by someone from Crowe and Associates only. We DO NOT sell your information to other brokers or companies.

WOULD YOU LIKE TO LEARN MORE?

Variable Annuity Connecticut

Here is some information about Variable Annuity Connecticut:

A variable annuity (VA’s) is an insurance contract that relies on investment accounts (Mutual Funds) to determine performance of the money in the annuity. Depending on the product, there can be a number of different mutual funds within the annuity for the investor to choose from. There are usually more than enough accounts to choose from in order to have a diversified investment allocation. The VA’s have a number of riders that can also be added. I have provided a quick summary on VA products and some of the riders that may be added to them. Read more

A number of companies offer a variety of fixed annuities in Connecticut which often offer higher interest payouts than a standard bank CD.  The term “fixed annuity” is very generic so I will describe the different types in this post.  The type of fixed annuity that will work best for you depends entirely on your situation and what you are trying to accomplish.  Lets move on to a description of each type.

Single Premium Immediate Annuity (SPIA)- SPIA’s are the oldest type of annuity and the way they work is very simple.  You give the company a lump sum of money and they pay an income stream to you for a set amount of time. (5 years, 10 years, lifetime, etc…)  The lifetime option can not be outlived but you are also giving up the lump sum of money in order to have the income stream.  There are now Return of Premium SPIA’s which pay a bit lower income but insure that the any remaining principal will be paid out in the event of premature death.

Fixed or MYGA Annuity-  This is the traditional fixed annuity.  The MYGA stands for “Multiple Year Guaranteed Annuity”.  This product is also refereed to as a “CD Like Annuity” at times.   The plan offers a fixed interest rate at determined number of years.  The rate can not change during the fixed years listed.   So if you had a 5 year MYGA guaranteed at 3.4%, it means you will get 3.4% for 5 years.   The rate is compounded every year.   At the end of the 5 years, you are then free to take your money and go.   If you take the money out prior to the 5 year term, you will pay surrender penalties on the product.  (You are allowed to take 10% a year without penalty during the 5 year term.

Overall- MYGA’s really are a better way to a better fixed interest rate than that being offered by a bank CD.   The consumer needs to be careful of a few things however.  The first is to find out how long the surrender charges last on the product.  You should match them up with the fixed interest rate period.   If the interest rate on the fixed annuity is guaranteed for 7 years, make sure that the product has a 7 year surrender charge.  You would not want to have a surrender charge that is longer than the rate guarantee.  The second important point is to make sure that the rate you see is not just a first year bonus rate.  If you see something like “5 year annuity with 4.5% first year rate”  you need to inquire as this is probably really a 3.5% or 2.5% product with a bonus on the first year only.

Fixed or MYGA Annuity with Income rider-  This is the same product listed above but some companies will allow you to add an income rider to the policy.  The rider is a way that income can be elected on a lifetime basis in any future year. This allows the client to know exactly how much income can be taken for life.  Income riders can be very useful but you need to know all the details.  You will also want to know if the rider carries an annual fee.

Fixed Indexed Annuity- (FIA) Unlike the MYGA, the Fixed Indexed Annuity uses market based crediting methods to determine interest.   The crediting accounts follow the S & P and various other market indexes to determine how much interest will be credited.   Since it is a fixed product there can not be a negative year.  The worse the product can credit is 0% gain in a down market.  To make up for this protection, the insurance company will cap the upside gain allowed.  There are a huge number of fixed indexed products that credit interest in a number of different ways.  Income riders, accelerated nursing home riders and death benefit riders can be added to a number of the products offered.  It is not uncommon for a bonus to be credited to the initial investment.  They range from 2% to 12% depending on the product.

Overall- Fixed Indexed Annuities have many uses but it is important to pick the right FIA for its intended purpose.    There are also products that have very long surrender periods so it is important to know how long you may be locking your money up for.

How Crowe and Associates can help you pick the correct annuity:  Crowe and Associates is based in Brookfield, Connecticut.  The agency is independent and able to work with any annuity company as a result.  We are A rated with the BBB and help clients find the right annuity type and company to meet their needs.  Once we determine the type of annuity needed, we will then shop to see which company is providing the best rates and terms.  Feel free to request a quote through this site or call our office at 203-567-6235.  You will be contact by someone from Crowe and Associates only.  We DO NOT sell your information to other brokers or companies.

WOULD YOU LIKE TO LEARN MORE?   ATTEND ONE OF OUR ANNUITY WEBINARS: CLICK TO REGISTER

A number of companies offer a variety of fixed annuities in Connecticut which often offer higher interest payouts than a standard bank CD.  The term “fixed annuity” is very generic so I will describe the different types in this post.  The type of fixed annuity that will work best for you depends entirely on your situation and what you are trying to accomplish.  Lets move on to a description of each type.

Single Premium Immediate Annuity (SPIA)- SPIA’s are the oldest type of annuity and the way they work is very simple.  You give the company a lump sum of money and they pay an income stream to you for a set amount of time. (5 years, 10 years, lifetime, etc…)  The lifetime option can not be outlived but you are also giving up the lump sum of money in order to have the income stream.  There are now Return of Premium SPIA’s which pay a bit lower income but insure that the any remaining principal will be paid out in the event of premature death.

Fixed or MYGA Annuity-  This is the traditional fixed annuity.  The MYGA stands for “Multiple Year Guaranteed Annuity”.  This product is also refereed to as a “CD Like Annuity” at times.   The plan offers a fixed interest rate at determined number of years.  The rate can not change during the fixed years listed.   So if you had a 5 year MYGA guaranteed at 3.4%, it means you will get 3.4% for 5 years.   The rate is compounded every year.   At the end of the 5 years, you are then free to take your money and go.   If you take the money out prior to the 5 year term, you will pay surrender penalties on the product.  (You are allowed to take 10% a year without penalty during the 5 year term.

Overall- MYGA’s really are a better way to a better fixed interest rate than that being offered by a bank CD.   The consumer needs to be careful of a few things however.  The first is to find out how long the surrender charges last on the product.  You should match them up with the fixed interest rate period.   If the interest rate on the fixed annuity is guaranteed for 7 years, make sure that the product has a 7 year surrender charge.  You would not want to have a surrender charge that is longer than the rate guarantee.  The second important point is to make sure that the rate you see is not just a first year bonus rate.  If you see something like “5 year annuity with 4.5% first year rate”  you need to inquire as this is probably really a 3.5% or 2.5% product with a bonus on the first year only.

Fixed or MYGA Annuity with Income rider-  This is the same product listed above but some companies will allow you to add an income rider to the policy.  The rider is a way that income can be elected on a lifetime basis in any future year. This allows the client to know exactly how much income can be taken for life.  Income riders can be very useful but you need to know all the details.  You will also want to know if the rider carries an annual fee.

Fixed Indexed Annuity- (FIA) Unlike the MYGA, the Fixed Indexed Annuity uses market based crediting methods to determine interest.   The crediting accounts follow the S & P and various other market indexes to determine how much interest will be credited.   Since it is a fixed product there can not be a negative year.  The worse the product can credit is 0% gain in a down market.  To make up for this protection, the insurance company will cap the upside gain allowed.  There are a huge number of fixed indexed products that credit interest in a number of different ways.  Income riders, accelerated nursing home riders and death benefit riders can be added to a number of the products offered.  It is not uncommon for a bonus to be credited to the initial investment.  They range from 2% to 12% depending on the product.

Overall- Fixed Indexed Annuities have many uses but it is important to pick the right FIA for its intended purpose.    There are also products that have very long surrender periods so it is important to know how long you may be locking your money up for.

How Crowe and Associates can help you pick the correct annuity:  Crowe and Associates is based in Brookfield, Connecticut.  The agency is independent and able to work with any annuity company as a result.  We are A rated with the BBB and help clients find the right annuity type and company to meet their needs.  Once we determine the type of annuity needed, we will then shop to see which company is providing the best rates and terms.  Feel free to request a quote through this site or call our office at 203-567-6235.  You will be contact by someone from Crowe and Associates only.  We DO NOT sell your information to other brokers or companies.

WOULD YOU LIKE TO LEARN MORE?  ATTEND ONE OF OUR WEBINARS – CLICK TO REGISTER

Annuity Contracting For Brokers

Annuity contracting for brokers is available for: National Western, F & G, American Equity, Equitrust and Allianz.

The Allianz contracting  is for the various 360 Annuity and the 222 Annuity. These products can not be accessed with the normal Allianz contract.   Please be sure to send in your contracting with a copy of your Insurance License and E and O policy certificate.  Everything can be faxed to Crowe and Associates at 203-567-6235 or emailed to Edward@Croweandassociates.com  All pages of the contract must be submitted.

Keep the following in mind:

Each annuity company has their own certification that must be done prior to selling their products. You must complete this training prior to submitting applications.  Also, most states require  that a 4 hour state training be completed in order to sell annuities. (Only needs to be done once in your resident state)  If you want to order the “Paycheck for Life” DVD, you will need to be contracted with at least one of these companies to do so.

If you have any questions or would like to contract; reach us either by email lisa@croweandassociates.com or call 203-796-5403.

This is the recording from our Annuity Sales webinar from Friday, March 1 2013 at 11:00 am.  The focus is on selling concept and way to introduce the idea to your current clients and prospects.   Major annuity producers rarely focus on product which is one of the biggest mistakes made in the field.   We have an annuity webinar the first Friday of every month at 11:00 am Est.  The meeting is usually only about 30 – 40 minutes long.

The webinars are by invite only.  If you want to participate the next webinar   Click Here

CLICK HERE FOR THE RECORDING

Questions?  Email Ed Crowe at Edward@Croweandassociates.com

Security Benefit has had the annuity with the highest income payout for the last two years.  Anyone looking for future income from a deferred annuity would be able to get the highest payout using the SIA product.

One of the drawbacks to this product has been that it is not available some states, Connecticut being one of them. This means that a person living in Connecticut could not have access to the product unless they signed all the documents while in a state that the product was approved in.  Security Benefit has now obtained approval for the SIA to be sold to residents of Connecticut.

The products bonus is smaller in CT at 2% but the bonus of a product really does not mean much when it comes to the bottom line.  The SIA product with a 2% bonus will stay pay a larger future income than any other income product and this includes all the big names such as NY life, Allianz, Met Life, Aviva, NorthWestern Mutual, etc…..

Compare the attached income quote to the same quote from any other company to see what I mean.   This is an illustration for a 60 year old male who puts $200000 in the SIA product and takes income in 15 years at age 75.  Security Benefit will payout $36,585.00 a year at age 75. The payout number is guaranteed.  Compare this payout to any other companies guaranteed payout and you will see the difference.

Security Benefit SIA 60 year male 200K example

Companies have been coming to the market with a new type of insurance plan called “Longevity Insurance”.   The plans are being offered by NY Life, Symetra, The Hartford and Met life.   There will surely be a number more coming out with plans over the next 6 to 12 months.

The idea behind longevity insurance is that a person can put away money for a number of years (most plans are for people in their 50’s) with a guarantee that they can have lifetime income at a future date.  Most of the plans currently available require that you wait at least 10 years to start income.  Some of the plans will allow the income stream to pay out for a single persons lifetime while others offer a joint spouse option at a reduced payout.

This concept is not new and has actually been used by insurance companies for over 100 years.  For the past 10 years, companies have been offering annuities with income riders that allow people to do the same thing.  Put money away for a number of years with a guaranteed lifetime income payout at a future date.   There are some variables to consider when comparing longevity insurance to a regular annuity with an income rider but there are two things that are the most important:  How much will they pay at a future date and do they allow you to keep access to your investment.

Access to investment:   Most income riders will pay out lifetime income without annuitizing the contract.  In other words, they do not take the lump sum away once they start paying income.  On the other hand, most of the Longevity plans annuitize the contract which takes the lump sum from the investor in return for income payments for life.

Payout:  Here is the most important point.  How much will the product payout as lifetime income at any future date.  The Longevity products I reviewed payout out substantially less than the most competitive income riders.  For example:  If a 55 year old male put $100,000 in the Symetra longevity plan at age 55 they could get an income stream of $6,050 a year for life at age 60 or $8,483 a year for life at age 65.  Compare that to the Great American income rider using the same person and same investment amount of $100,000.  They would pay out $7,500 a year at age 60 and $11,000 a year at age 65.  Substantially higher payouts.

At the end of the day, Longevity insurance is just a new way for companies to try to crack into the annuity market.  The product looks and feel like an annuity with an income rider with a low payout.   At this point, there is nothing unique or advantageous about “Longevity Insurance”.