Back to School: Annuities 101

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Back to SchoolAnnuities 101

• A Basic Guide to Understanding Annuities

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Class Overview

• Conference Calls
• Every Friday at 11.30 am Eastern
• Beginning March 28
• Ending June 27
• Calls and slides will be taped and posted on our
  webiste under the Training Tab.
• Fixed Index Annuity Education Forum
• May 5 and 6 in Atlanta
• Register now by contacting Jill Blitch at
  800-659-4942 or jblitch_at_tarkentonfinancial.com

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Schedule of Calls

• March 28 - Why Safe Money Do you believe in
  what you do?
• April 4 - Annuity Overview Types and What Makes
  FIAs unique?
• April 11 - How Annuities Work Crediting Methods
• April 18 -  How Annuities Work Calculating
  Account Value, Surrender Value and Income Account
  Value
• April 25 - How Annuities Work Other Features
  (MVAs, Riders, Death Benefits and Surrender
  Charges)
• May 2 - How Annuities Work Pay Out Options
  (Annuitization, Life Time Pay and Full
  Withdrawal)
• May 9 - Income Rider Overview Avivas LifeTime
  Pay and LSWs Lifetime Income Benefit Rider
• May 16 Product Overview Aviva
• May 23 Product Overview Life of the Southwest
• May 30 Compass Financial Snapshot
• June 6 Compass Annuity Quote Engine
• June 13 Compass Calculators
• June 20 Compass Tax Wizard
• June 27 Strategies for Selling Index Annuities
  Hear from Top Agents

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Todays Topic Why Safe Money

• The Rule of 100 and How it Applies to Seniors
• Upside Down Retirement and a Tale of Two
  Retirements
• Safe Money Options Pros and Cons
• References Articles for Client Use

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What is Safe Money?
100 65 35

• Rule of 100

Market Based Products Growth with Risk
Insured Products
Growth with Safety
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Why We Believe In It

• Peace of Mind and Sleep Insurance
• Safe money eliminates the risk of the volatility
  of the market.

Market Based Products Growth With Risk
Insured Products Growth With Safety
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(No Transcript)
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A Tale of Two Retirements
Both Lived 30 Years Into Retirement
Barney died broke after a 30 year retirement
having run out of money 8 years before his death
Fred died after a 30 year comfortable retirement
and left a substantial estate to his heirs
Both had the same amount of money when they
retired
Both withdrew the same percentage each year for
income
The Difference Fred retired in 1962, Barney
retired in 1965
Hypothetical example to illustrate a concept. Not
intended as tax, investment or legal advice.
Source for example Investment News, January 10,
2005.
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Safe Money Options Pros Cons
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References Resources for Client Use

• Wharton Study Investing Your Lump Sum at
  Retirement (Resource Center Frans Favorites)
• Wall Street Journal A Guide to Annuities
  (Resource Center Client Material)
• The Real Truth About Annuities
• IndexAnnuity.org an Index Annuity Resource (see
  for consumers only tab)

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Todays Topic Annuity Overview

• Different Types of Annuities 
• Variable versus Fixed
• SPIA, MYGA, Traditional Fixed and FIA
• Fixed Index Annuity Overview
• What makes them unique?
• Where they fit?
• Can I lose money with FIAs?
• The Power Of Zero?

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Next Weeks Topic How Annuities Work?
Interest Rate Calculations and Crediting Methods

• Interest Rate Calculation
• Crediting Strategies
• Explain Caps, Participation Rates, Spreads/Fees
• Annual Point-to-Point
• Monthly Point-to-Point
• Monthly Average
• Multiple Index
• Which strategies work best in certain market
  conditions?
• Agent Profile Top Agent Carl Scroggins will
  explain how he simplifies and chooses which
  crediting method to use.

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What Is An Annuity Using Todays Definition?

• An annuity is a contract in which an insurance
  company makes a series of income payments at
  regular intervals in return for a premium or
  premiums you have paid.
• "I'm more concerned about the return of my money
  than with the return on my money." The American
  humorist Will Rogers (1879 - 1935)

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Types of Annuities

• Variable
• A variable annuity is a contract issued by an
  insurance company offering separate accounts
  invested in a wide variety of stocks and/or
  bonds. The investment risk is borne by the
  annuity owner. Variable annuities are considered
  securities and require appropriate securities
  registration.
• Fixed
• Single Premium Immediate Annuities (SPIA)
  Immediate annuity income payments start no later
  than one year after you pay the premium.
• Multi-Year Guaranteed Annuities (MYGA)
  Multi-Year Guaranteed Annuities are designed with
  an interest rate that is guaranteed for a period
  of two, three or as many as ten years
• Traditional Fixed Annuities Traditional Fixed
  Annuities are designed with an interest rate that
  is guaranteed for one year at a time, declaring a
  new interest rate on each policy anniversary
• Fixed Indexed Annuities (FIA) A fixed-index
  annuity is a deferred annuity with interest based
  on a portion of the gains in the index to which
  it is linked

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Fixed Indexed Annuity

• A fixed-index annuity (FIA) is a deferred annuity
  which credits interest based on one or more
  crediting methods, which are tied to performance
  of an index.
• The Index Annuity credits a portion but not all
  of the gains in the index
• Interest credited to FIA will be limited by a
  Rate Cap, a Participation Rate or a Margin
• Interest Credits for the credit period will be
  based on gains in the index, but not losses.

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What Makes Them Unique?

• The uniqueness associated with a fixed-indexed
  annuity is found in how the interest rate is
  determined. There are many strategies offered
  and annuity owners can typically move from one
  strategy to another on each policy anniversary
  date. The strategies can be broadly grouped as
  follows
• Declared Rate Strategy is one where the company
  announces the interest rate in advance, and it is
  credited daily throughout the term
• Indexed Strategy is one where the interest
  crediting rate is determined according to a
  formula and is applied on the last day of the
  term

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Realistic Expectations
Fixed Index Annuities are not equity products and
are therefore not designed to compete with the
market. Your interest is linked to a percentage
of an index (not including dividends). You will
not receive all of the gains of the index in the
good years but you will not receive any of the
losses of the index in the bad years. There is no
such thing as a free lunch you give up some
upside potential in return for the protections
that the annuity provides. No homeruns, but no
strikeouts either.
Babe Ruth, the all time leader in homeruns and
strike outs!
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Where They Fit

• Are they right for me?
• A fixed-indexed annuity isnt the right solution
  for everyone. However, there are many conditions
  that might make a fixed-indexed annuity
  appropriate for you.
• The potential to earn rates higher than those
  traditionally available from fixed annuities
• Receiving interest at a rate determined, in part,
  by the growth of an index
• Long-term financial vehicle
• Receiving income that can be guaranteed to
  continue as long as you live
• Tip Annuities may not be right for you if you
  plan on bailing out early due to the high
  surrender charges, taxes, and other penalties.

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Can I Lose Money With a FIA?

• The value of your fixed-index annuity will never
  fall below your total purchase payments
  regardless of market conditions, unless you take
  withdrawals from or surrender your contract. The
  security of fixed-indexed annuities is made
  possible due to the financial strength of the
  insurance company issuing the annuity contract.

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The Power of Zero
Hypothetical Illustration
Hare
IA (8 Cap)
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FIAs Good or Bad idea?
Might Be A Good Idea?
Would Be A Dumb Idea!
Your objective for the money is primarily safety.
Fixed Index Annuities are fixed financial
products with simply a unique way of crediting
interest. They are not equity products.
Your objective for the money is to have
market-like returns. Fixed Index Annuities are
not equity products and if your goal for the
money is to have market-like returns you will be
disappointed.
Your objective for the money is long term. These
are long term products and you should keep
sufficient funds in other more liquid accounts to
deal with any liquidity needs beyond the penalty
free withdrawal provisions of the annuity. The
old wisdom holds truenever put all of your eggs
in one basket.
Your objective for the money is short term. Fixed
Index Annuities are long term contracts and
should only be purchased with the long term in
mind. Withdrawals in excess of penalty free
annual withdrawals or a total surrender will
result in surrender charges. Consult the product
disclosure very carefully regarding this for any
annuity that you might consider.
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Next Weeks Topic How Annuities Work?
Interest Rate Calculations and Crediting Methods

• Interest Rate Calculation
• Crediting Strategies
• Explain Caps, Participation Rates, Spreads/Fees
• Annual Point-to-Point
• Monthly Point-to-Point
• Monthly Average
• Multiple Index
• Which strategies work best in certain market
  conditions?
• Agent Profile Top Agent Carl Scroggins will
  explain how he simplifies and chooses which
  crediting method to use.

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Tarkenton Partners

• Aviva 1-800-950-7372
• Life Insurance Company of
  the Southwest 800-906-3310
• OMFN 1-800-445-6758
• American Equity 1-888-221-1234
• Call Product Support for more information

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ContactsProduct Support

• Brandi Pyles
• bpyles_at_tarkentonfinancial.com
• 404-504-3111
• Brad Mersereau
• bmersereau_at_tarkentonfinancial.com
• 404-504-3107
• Jennifer Sikes
• jsikes_at_tarkentonfinancial.com
• 404-504-3109
• Gene Baldwin
• gbaldwin_at_tarkentonfinancial.com
• 404-364-2596