Annuity Case with Special Circumstances

gradyinsurance · 06-17-2008, 06:08 PM

Hello, everyone. I've got an annuity case that has came up, that I need input on. 78 y/o Female, in good health, has from 15-45k to invest, depending on what kind of return I can come up with. The longest term she's interested in is 5 years. However, she wants to turn the money into a monthly income. Basically, she wants a check every month, made up of principal and interest, until the principal is exhausted. The money came from a property she sold, which generated a monthly income for her. She's afraid that if she puts the money in a checking or savings/money market account, she will spend it within the year. So, she want's it structured where it will pay her a guaranteed amount on a monthly basis.

Does anyone know of a product that works like this? I don't really sell many annuities, so I'm not up to speed on the latest products. Also, what is a competitive interest rate for this kind of policy?

Thanks, Dave.

xrac · 06-17-2008, 06:38 PM

Originally Posted by gradyinsurance

Hello, everyone. I've got an annuity case that has came up, that I need input on. 78 y/o Female, in good health, has from 15-45k to invest, depending on what kind of return I can come up with. The longest term she's interested in is 5 years. However, she wants to turn the money into a monthly income. Basically, she wants a check every month, made up of principal and interest, until the principal is exhausted. The money came from a property she sold, which generated a monthly income for her. She's afraid that if she puts the money in a checking or savings/money market account, she will spend it within the year. So, she want's it structured where it will pay her a guaranteed amount on a monthly basis.

Does anyone know of a product that works like this? I don't really sell many annuities, so I'm not up to speed on the latest products. Also, what is a competitive interest rate for this kind of policy? Thanks, Dave.

How much income does she want per month and for how long. You can do a single premium immediate fixed annuity with a period certain of X years depending upon these two factors. The longer the period the lower the monthly payment amount. They will send her a check every month just like clock work. She would also get a potentially higher payout without the period certain option.

bluemarlin08 · 06-17-2008, 06:54 PM

Xrac is right on the money. Get several different rates from different companies and obtain a clear understanding of the different options. Make sure if she chooses a lifetime benefit without a period certain she clearly understands that when she dies ballgame over. I recently came across a case where a 80 year old bought a lifetime benefit, died after 5 payments, had deposited 250,000, the children went apesh-t, threatening to suit the agent. Make sure everything is documented, trust me you can get in hot water quick with greedy heirs suspecting agents were preying on the elderly. Buy, an IA is a great way to receive income in these low rate environments.

Mr. Bill · 06-17-2008, 07:27 PM

And they wonder how insurance companies make so much money!

Here's a fun site to get started checking into it:

Immediate Annuities - Instant Annuity Quote Calculator.

Winter · 06-17-2008, 08:10 PM

Originally Posted by xrac

How much income does she want per month and for how long.

I read the question to mean that she wants it all back in 5 years. So lifetime, and period certain etc do not necessarily apply. If that is not the case, perhaps the question could be clarified.

Winter

xrac · 06-17-2008, 08:52 PM

Originally Posted by gradyinsurance

.....The longest term she's interested in is 5 years.....

Does these mean she only wants income for 5 years or that she only plans on living until age 83?? Does it mean she has other income after she exhaust this source?[/quote]

gradyinsurance · 06-18-2008, 09:14 AM

It means that she only wants income for 5 years. She's receiving 150k, in a lump sum, somewhere between 3-5 years from now. She just wants to guarantee herself around 600/mo for the meantime. It looks like SPIA is the way to go, but, at least according to the calculator posted by Mr. Bill, getting the money to be "period certain" significantly reduces the monthly payout. So, just to recap, to make sure I got it, with a SPIA, if there is no period certain payout, then if the policyholder dies, the money reverts to the insurance company?

Dave

Mr. Bill · 06-18-2008, 09:24 AM

Yes, absolutely correct. You will get sued if you don't have a guaranteed payout (because suing people has overtaken baseball as the national pasttime of Americans!)

What does she think will happen after the five years? MIght be easier to solve for the $600 per month.

Cwilcoxson · 06-18-2008, 12:12 PM

Dave,

I am hearing what you are talking about and I have a much better alternative for you and for your potential client. A Spia is old news with no compensation and no flexibility for the clients. Let me know if you are interested.

Thanks,

Carter Wilcoxson
800.440.1088

Mr. Bill · 06-18-2008, 12:17 PM

Why don't you just go ahead and post your product???

senior-advisor-indiana · 06-18-2008, 04:00 PM

I do not see how you can find a better product than a SPIA for this situation. That is probably why Mr. Cox did not post the info.

golfnut · 06-18-2008, 06:05 PM

Well I assume he is touting an EIA with an attached income rider. A lot of agents are being seduced by these as substitutes for SPIA's. I do a lot of income planning using annuities and SPIA's play a vital role in that, true, not a lot of commish,but they are the right product for the customer in this conversation.

Mr. Bill · 06-18-2008, 07:20 PM

What are you talking about? If Carter wants us to use our secret decoder rings, then he needs to let us know. As far as an EIA/FIA being "the right product" yes we would need reasons.

First of all, let's say it's $45k to invest. The client wants $600 per month. If my math is correct (and it is), that would be $7200/year. Most EIAs require a 12-month hold on the funds before a 10% maximum annual withdrawal is allowed. So what am I missing?

golfnut · 06-18-2008, 08:29 PM

SPIA"S are the right product, is what i s was trying to say,late in the day not typing clearly I suppose

Mr. Bill · 06-18-2008, 08:49 PM

Yep gotcha I know how it feels but would still be interested in learning about Carter's Super Secret Program.

Get the shoe phones ready!

senior-advisor-indiana · 06-18-2008, 10:01 PM

Originally Posted by Mr. Bill

What are you talking about? If Carter wants us to use our secret decoder rings, then he needs to let us know. As far as an EIA/FIA being "the right product" yes we would need reasons.

First of all, let's say it's $45k to invest. The client wants $600 per month. If my math is correct (and it is), that would be $7200/year. Most EIAs require a 12-month hold on the funds before a 10% maximum annual withdrawal is allowed. So what am I missing?

Some FIA's have the income rider which you can take a guaranteed percentage of income per year depending on their age when they start. It doesn't matter if you spend all the account value you still get that set percentage. Usually, you have to wait 1 year to take advantage of this rider. It is not a good fit for this situation though. The percentage is usually between 6-7%.