Help! I'm Clueless to Fixed Annuities

Delta76 · 06-01-2009, 07:02 PM

Never written a fixed annuity in my life. Ten minutes ago, got a referral asking if I could help move her $35,000 fixed annuity to another option. I said sure, she wants to meet tomorrow morning to get it taken care of. I'm going to call an FMO in the morning, but looking for some quick advice on the board. Any suggestions for a 5 to 7 year surrender FPDA annuity?

insuranceexec · 06-01-2009, 07:05 PM

Originally Posted by Delta76

Never written a fixed annuity in my life. Ten minutes ago, got a referral asking if I could help move her $35,000 fixed annuity to another option. I said sure, she wants to meet tomorrow morning to get it taken care of. I'm going to call an FMO in the morning, but looking for some quick advice on the board. Any suggestions for a 5 to 7 year surrender FPDA annuity?

There are so many options. Give me a call in the morning and I will walk you through it. Just ask for insuranceexec.....LOL

Norwayguy · 06-01-2009, 07:15 PM

Originally Posted by Delta76

Never written a fixed annuity in my life. Ten minutes ago, got a referral asking if I could help move her $35,000 fixed annuity to another option. I said sure, she wants to meet tomorrow morning to get it taken care of. I'm going to call an FMO in the morning, but looking for some quick advice on the board. Any suggestions for a 5 to 7 year surrender FPDA annuity?

A couple of things to keep in mind. You did not mention wether this is Qualified or Non-qualified money and you did not mention what state you are in. In Some States like Maine non-qualified annuities has a 2% premium tax...sometimes it is covered by a carrier sometimes it is not...Does the existing annuity have a remaining surrender charges? What is the existing annuities Guaranteed Minimum interest rate....If the client has an old product with a 4% guarantee you might not be doing them a favor if you move them to a new produt with a 3%,2% and yes I've seen as low as 1% Guarantee these days...Some carriers will ignore transfer forms if not accompanied by the existing carriers own surrender forms. Just some things to be aware of you mentioned 35K but asked about flexible premium annuities is the client going to be adding to the account and if so how...automatic monthly draft? Some policies will accept as little as $50 more others are called flexible premium but require as much as an additional 2K per deposit. I know I haven't answered your question because I assume you will recommend an annuity through a carrier you are already appointed with if your meeting with the client tomorrw. But those are some of the items to be aware of. Also if you are going to ask the existing carrier questions about the product call the home office and do not call the existing agent have, you be on the line first explaining you are there with there policyholder and then hand the phone to the client to only verify they want to authorize you to ask questions. If you need forms ask if they can be emailed faxed etc, ASK IF THE CARRIER REQUIRES THE ORIGINAL FORM...I ran into a carrier that faxed me there form but called it not in good order because it didn't have 2 words in Red print (they new all along when the faxed the form they would not accept it)

Delta76 · 06-01-2009, 07:22 PM

This was a referral from a banker friend. The prospect has had the same annuity for 25 years with Hartford and now Hartford told her she needs to move it into a new contract (don't know the specifics). She has until June 10th to avoid the gains (only a $10,000 basis) from being taxed. It's non-qualified, doesn't need to touch the money, and no further contributions are going in.

Norwayguy · 06-01-2009, 07:27 PM

Originally Posted by Delta76

This was a referral from a banker friend. The prospect has had the same annuity for 25 years with Hartford and now Hartford told her she needs to move it into a new contract (don't know the specifics). She has until June 10th to avoid the gains (only a $10,000 basis) from being taxed. It's non-qualified, doesn't need to touch the money, and no further contributions are going in.

Well I guess if you live long enough you see everything...I have never seen a company throw out a policy holder...I will bet the policy has a guaranteed minimum above what they are able to profit on...Wish I can The Hartford throwing clients away like that over here. If she only has till June 10th I would be on the phone with the hartford and make sure I have all the forms they need ask if they need signature guarantee or notorized signatures and if they will accept a fax copy and get everything faxed to your carrier tomorrow...9 days isn't a lot of time.

Delta76 · 06-01-2009, 07:39 PM

Thanks for the help. I appreciate it. I know the health and life business well, just not the annuity business.

insuranceexec · 06-01-2009, 07:40 PM

Originally Posted by Norwayguy

Well I guess if you live long enough you see everything...I have never seen a company throw out a policy holder...I will bet the policy has a guaranteed minimum above what they are able to profit on...Wish I can The Hartford throwing clients away like that over here. If she only has till June 10th I would be on the phone with the hartford and make sure I have all the forms they need ask if they need signature guarantee or notorized signatures and if they will accept a fax copy and get everything faxed to your carrier tomorrow...9 days isn't a lot of time.

Typically the "deadline" is the timeframe in which you need to have paperwork in house.

I have seen this numerous times with companies; and as you say the companies are not profiting anymore.

I actually had one company that told the customer they would be implementing a 5% spread to offset the guaranteed 9% interest the client was getting........LOL.

This was 14 years after the surrender charges had expired, and they were giving her the boot..............

Norwayguy · 06-01-2009, 07:44 PM

Originally Posted by insuranceexec

Typically the "deadline" is the timeframe in which you need to have paperwork in house.

I have seen this numerous times with companies; and as you say the companies are not profiting anymore.

I actually had one company that told the customer they would be implementing a 5% spread to offset the guaranteed 9% interest the client was getting........LOL.

This was 14 years after the surrender charges had expired, and they were giving her the boot..............

I know but 9 days still is not a lot of time if they require original paperwork or if there surrender request form requires the accepting company to sign off..Like Equitable does...

insuranceexec · 06-01-2009, 08:08 PM

Originally Posted by Norwayguy

I know but 9 days still is not a lot of time if they require original paperwork or if there surrender request form requires the accepting company to sign off..Like Equitable does...

With a 1035 exchange the accepting company will issue a LOA (letter of Acceptance) within 48 hours of receiving the paperwork. All this is saying is that they (The accepting company) agree to hold harmless the releasing company, and that they acknowledge the tax treatment of the annuity.

The 1035 is necessary to carry forward the cost-basis. I have read many of your posts, and find you to be very intelligent with respect to annuities.

With that being said why would you mention a surrender request? I am sure I must be reading it wrong.........

This is of course unless you are dealing with Aviva; which I have had cash-in-hand annuities that have not been issued since March.........LOL

padthaiforlunch · 06-01-2009, 09:54 PM

Delta, A couple points to consider if client does not want an indexed annuity: Do not use an annuity that only guarantees first year, unless they have a bail-out provision. Some mutli-year guarantees have catches.
- - - - - - - - - - - - - - - - - -
A number of rates reset today, but a quick look has ING with a true 7-year guarantee/surrender. 3.75% That's about as good as you'll get with an AA- or better company.
- - - - - - - - - - - - - - - - - -
***ARGGHH**** Lost much of last post. Seems the forum is killing my formatting. Won't let me break up text into paragraphs.

Charpress · 06-01-2009, 10:03 PM

I think the key here is finding out why she was in this annuity in the first place. I mean, jeez, she got it and just sat on it all those years.I would first want to know whether she might want to start taking income. There are plenty of good income producing annuties out there. I would be talking to her about maybe starting to have a bit of fun in her life and bump up her income to make the fun possible.

padthaiforlunch · 06-01-2009, 10:04 PM

Things to watch out for: Multi-year guarantee for, say 7 years, but surrender charge lasts 10 years.
- - - - - - - - - - - - - - - - - -
Other things to be wary of: AG has myga 7 year guarentee, 9 year surrender. Years 8 and 9 are 0%, so no surrender charges, but MVA still applies and that may hurt client if they try to move money in last two years.
- - - - - - - - - - - - - - - - - -
These things change constantly. My fave for the week is Sagicor: Six year product. 5.15% first year. Bail-out provision if rate drops more than 1% from first year, so 4.15% years 2-6. This product is being pulled from market on Friday, so this is the last week to get it in.

insuranceexec · 06-01-2009, 11:05 PM

Pad, Norway, and Charpress are absolutely right. I would complete a FNA and find out what the client is wanting to do with the money, and suggest accordingly.

MYG annuities are funny little creatures that warrant due diligence. As mentioned earlier you have to be very careful as the rates, surrender charges, MVA's, and interest rates can change unless you purchase the right annuity.

All very good points!

SportsNut · 06-02-2009, 09:00 AM

As has been stated earlier in the post, Why is she in the annuity? It seems that maybe she doesn't know, as many ppl don't, and are in the annuity because someone suggested it. Now years later she has an accumulated and untaxed 25K of gain. Both good and bad.

If she continues to hold the annuity until death, as many ppl do that have no real direction and purpose for the product, the gain at the time of death will be taxed to the beneficiary as ord income. So lets say that it is a wage earner, (adult children of decedant), what the annuity will do is end up paying way more in taxes than it has saved her, over the years. Dump an extra 30-40-50K of taxable income on top of someone earning a decent wage already, and you have a tax nightmare for the beneficiary.

You may wish to do some other advanced planning before rolling over the annuity into anything other than short-term, or an immediate annuity, which could fund other products, if the clients goal is to leave an estate. Just one of many ideas.

Norwayguy · 06-02-2009, 09:42 AM

Originally Posted by insuranceexec

With a 1035 exchange the accepting company will issue a LOA (letter of Acceptance) within 48 hours of receiving the paperwork. All this is saying is that they (The accepting company) agree to hold harmless the releasing company, and that they acknowledge the tax treatment of the annuity.

The 1035 is necessary to carry forward the cost-basis. I have read many of your posts, and find you to be very intelligent with respect to annuities.

With that being said why would you mention a surrender request? I am sure I must be reading it wrong.........

This is of course unless you are dealing with Aviva; which I have had cash-in-hand annuities that have not been issued since March.........LOL

no you were not reading my post wrong off the top of my head I can think of a couple companies that even after recieving a 1035 exchange request from another company will do nothing without there own surrender request completed..Great American Financial Resources is like this and I've even run into equitable that not only require there form but require the accepting company to sign a section on there form. I think in the long run this exchange is no big deal and can be accomplished in the short run I always am concerned about home office people screwing something up. Short time limits are things I deal with and can hate....that being said my quickest exchange where I have verified the money has gone out the door of the other company...not recieved mind you but was in the mail is 3 days from sitting with the client but I find this unusual when dealing with an insurance company....I love moving money from Fund families as long as paperwork is in good order check goes out the next day...with an insurance company they could still take a month to process a surrender...Once again on the Great American paperwork is an automatic 30 day consideration period that needs to be waived if you don't want it sitting there for 30 days doing nothing.

insuranceexec · 06-02-2009, 09:47 AM

Originally Posted by Norwayguy

no you were not reading my post wrong off the top of my head I can think of a couple companies that even after recieving a 1035 exchange request from another company will do nothing without there own surrender request completed..Great American Financial Resources is like this and I've even run into equitable that not only require there form but require the accepting company to sign a section on there form. I think in the long run this exchange is no big deal and can be accomplished in the short run I always am concerned about home office people screwing something up. Short time limits are things I deal with and can hate....that being said my quickest exchange where I have verified the money has gone out the door of the other company...not recieved mind you but was in the mail is 3 days from sitting with the client but I find this unusual when dealing with an insurance company....I love moving money from Fund families as long as paperwork is in good order check goes out the next day...with an insurance company they could still take a month to process a surrender...Once again on the Great American paperwork is an automatic 30 day consideration period that needs to be waived if you don't want it sitting there for 30 days doing nothing.

I could not agree more. I think the word you meant to use is proprietary transfer paperwork.

There are several companies that do have their own transfer paperwork, and will not process the transfer until they have their paperwork in house. Very good point!

Norwayguy · 06-02-2009, 09:50 AM

Originally Posted by insuranceexec

I could not agree more. I think the word you meant to use is proprietary transfer paperwork.

There are several companies that do have their own transfer paperwork, and will not process the transfer until they have their paperwork in house. Very good point!

You are right proprietary vs own is a better term....Isuranceexec do you still have a securities registration? I'd like to talk to you sometime if you do...Right now I am very frustrated and want to give it up but maybe I need to look elsewhere first.

insuranceexec · 06-02-2009, 11:12 AM

Originally Posted by Norwayguy

You are right proprietary vs own is a better term....Isuranceexec do you still have a securities registration? I'd like to talk to you sometime if you do...Right now I am very frustrated and want to give it up but maybe I need to look elsewhere first.

I do; and am considering the same thing. Give me a call; my direct line is in my signature. I look forward to speaking with you.

InsureGuy5 · 06-02-2009, 02:03 PM

Your client simply reached her annuity date and Hartford is enforcing it which is somewhat rare. Most times annuity companies will ignore it. She would otherwise be forced into an annuitization. I would simply write a 5 year fixed account. You might need to be licensed with the company first before taking an app depending on your state.