Annuity Suggestion??

[pfg1]

I don't do a lot of annuities. Had a prospect ask me the other day what he could put his money in (old 401k) that was safe, but still had a chance to earn a decent return. He said he doesn't want to stay in the market much longer, feels he can't afford to lose any of what he has. A FIA annuity came to mind.

I think he has around $100k, and he is 49. He did say he is interested in retiring at 62 if possible, and would need income from this $ at that point. So a time horizon of 12-13yrs until he needs it.

Any suggestions? I know Am Eq won't issue their income rider until age 50.

 

[FRJ]

An Equity Indexed Annuity w/ Cash Withdrawal Benefits/Income Rider should do the trick. There are a of those to pick from. I like NWL Impact 7, 7s, and 10.

 

[scagnt83]

With that long before needing income the Rider will be worthless. We are at a historical low right now for interest rates. In 10 years Payout Rates will be higher... and it would make no sense to utilize the rider... so it will very likely just be wasted money. Riders should not be used as "safety nets" imo.


AG has a strong looking product with their Power 7 Protector. It uses a "balanced index" from Merrill Lynch and has a 1.5% Spread on an Uncapped 2 year P2P. I think they have a 10 year product too that uses it... but again, with interest rates being so low and about to go up I currently am not recommending 10 year products.

AE has a new product line called the "Choice" series. They have a 6/8/10 year Choice product. They have an index called the S&P 500 Dividend Aristocrats 5% risk control. It is a total return index that is made up only of high quality dividend paying stocks, and the index receives dividends. It is uncapped with a 1.75% spread on a Yearly P2P.


NWL still has half decent Spreads/PRs. But imo the AE or AG products are better right now. Especially since they use P2P and not MA.

 

[EAJoe]

With that long before needing income the Rider will be worthless. We are at a historical low right now for interest rates. In 10 years Payout Rates will be higher... and it would make no sense to utilize the rider... so it will very likely just be wasted money. Riders should not be used as "safety nets" imo.


AG has a strong looking product with their Power 7 Protector. It uses a "balanced index" from Merrill Lynch and has a 1.5% Spread on an Uncapped 2 year P2P. I think they have a 10 year product too that uses it... but again, with interest rates being so low and about to go up I currently am not recommending 10 year products.

AE has a new product line called the "Choice" series. They have a 6/8/10 year Choice product. They have an index called the S&P 500 Dividend Aristocrats 5% risk control. It is a total return index that is made up only of high quality dividend paying stocks, and the index receives dividends. It is uncapped with a 1.75% spread on a Yearly P2P.


NWL still has half decent Spreads/PRs. But imo the AE or AG products are better right now. Especially since they use P2P and not MA.

100% agree with you here. Get him in a nice, short term product without a bonus. I really like the Choice series from American Equity as well; Traditions Gold is also worth looking at.

Products without a bonus tend to have better renewal rates than those that do. If the insurance company is giving you a bonus up front, they're going to make it back somewhere else.

In 6 years or so, when interest rates are likely MUCH higher, roll the money into a product with a nice bonus and income rider. Your client will likely get better income than if he locked in with a rider right now, and you'll get another commission on the same money down the road. I can't think of any reason to lock up his money and pay rider fees if he doesn't plan to take income for 12-13 years.

 

[scagnt83]

Products without a bonus tend to have better renewal rates than those that do. If the insurance company is giving you a bonus up front, they're going to make it back somewhere else.

In 6 years or so, when interest rates are likely MUCH higher, roll the money into a product with a nice bonus and income rider. Your client will likely get better income than if he locked in with a rider right now, and you'll get another commission on the same money down the road. I can't think of any reason to lock up his money and pay rider fees if he doesn't plan to take income for 12-13 years.

Great minds think alike!

It kills me to see agents selling 10y+ policies right now. And so many do it only for the comp or to be able to pitch a "bonus". They dont realize that over those 10 years they would make 70% more by selling what is right for the client...

Whats right for the client will always make you more money over the long haul... if comp on a 6 year product was the same as a 10 year product you would see sales of 6 year products spike big time!!

 

[pfg1]

Thanks guys, appreciate it.

 

[FRJ]

I wouldn't put much weight on COUNTING on interest rates to rise significantly in the next x years. Just look at Japan's interest rate history -that could easily be the USA.

 

[Charpress]

Let me add a bit of a political rant at this point as to why interest rates will not be going up. And Yellen pretty much just confirmed it.

If interest rates were real-world rates at this point in time, say around 6-7% then the U.S. would be bankrupt nearly overnight. Imagine the debt service on $18.5 trillion at 6% as opposed to current rates paid on our huge debt.

Run the numbers. We are already paying a huge percentage of the budget towards debt service. See what happens to the numbers at 6%. It would take up all discretionary spending and a good part of fixed obligations.

No, interest rates are going to stay low "to stimulate the economy" -which is one of the biggest lies of the century.

 

[HoosierLife]

Let me add a bit of a political rant at this point as to why interest rates will not be going up. And Yellen pretty much just confirmed it. If interest rates were real-world rates at this point in time, say around 6-7% then the U.S. would be bankrupt nearly overnight. Imagine the debt service on $18.5 trillion at 6% as opposed to current rates paid on our huge debt. Run the numbers. We are already paying a huge percentage of the budget towards debt service. See what happens to the numbers at 6%. It would take up all discretionary spending and a good part of fixed obligations. No, interest rates are going to stay low "to stimulate the economy" -which is one of the biggest lies of the century.

Not to take this off-topic, but how will this affect the returns on mutual funds in the long run?

 

[Charpress]

Not to take this off-topic, but how will this affect the returns on mutual funds in the long run?

You mean other than the average, baked-in 2.4% fees?

Mutual funds pretty much reflect the market as a whole and the market as a whole is vastly inflated, IMHO.

The market went up in reaction to Yellen's announcement. So, YAY! -interest rates will remain low for now.