Annuity Investing for Retirement, Part 1
Table of Contents
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Chapter 1: Retirement’s Surprise |
1 |
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Finding Retirement Income |
1 |
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Everyone is Living Longer These Days |
5 |
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Retirement Risks |
6 |
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Baby-Boom Generation Reaches Retirement |
8 |
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Putting Off Retirement |
10 |
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Gender Issues in Retirement |
10 |
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Interest, Dividends and Rental Income |
14 |
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Supplementing SS with Lifetime Annuities |
14 |
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Retirement is Expensive |
17 |
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How Much Money is Needed to Fund Retirement? |
21 |
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Limiting Credit Card Use in Retirement |
23 |
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Mortgage Debt |
25 |
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Paying Loans for Others |
25 |
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Social Security’s Development |
27 |
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Changing the Age of Retirement |
37 |
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Choosing a Financial Path |
38 |
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Taxation Affects Retirement |
38 |
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Tax Efficiency |
40 |
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After Longevity, Health is a Major Retirement Concern |
40 |
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The Disappearing Three-legged Stool |
41 |
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Diversification |
42 |
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Rule of 100 |
47 |
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Managing the Retirement Money |
47 |
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Supplementing Other Retirement Income |
50 |
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Annuity Purchase Advantages |
50 |
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Annuity Purchase is not Right for Everyone |
51 |
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Investing Dedication is a Rare Quality |
52 |
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Chapter 2: Annuity Types |
54 |
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An Ancient Instrument |
54 |
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The Annuity’s Investment Role |
55 |
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Capital Reserve Requirements of Insurers |
56 |
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Structured Settlements |
57 |
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Annuity Extras |
59 |
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Options |
59 |
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Principal Protection |
59 |
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Annuity Cost-of-Living Protection Option |
59 |
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Premium Methods |
60 |
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Annuity Choices / Joint and Survivorship |
60 |
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Guaranteed and Life-Time-Certain Annuities |
61 |
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Level Annuities |
61 |
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Capital-Back Guaranteed Annuities / Escalating & Inflation Annuities |
62 |
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Enhanced Annuities |
63 |
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The Roth and Education IRA |
65 |
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Roth IRA / the Coverdell IRA |
65 |
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Tax-Deferred Accumulation / Flexibility |
67 |
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Annuity History |
67 |
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Annuity Basics |
71 |
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Choosing Between Fixed and Variable Annuities |
71 |
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Choosing Between a Lifetime Annuity and Term Annuity |
72 |
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Determining Investment Type |
73 |
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Annuity Participants / “Measuring Life” |
74 |
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Annuity Terminology |
75 |
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Annuity Contracts are “Driven” |
79 |
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Meeting Investment Goals |
80 |
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How to Sue an Annuity for Losses by Kay Miranda |
82 |
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Annuity Investment Advantages |
83 |
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Safety of Principal |
84 |
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Reserve Pools |
87 |
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Tax-Deferred Growth |
91 |
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Tax-Deferred Defined |
92 |
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Tax-Deferred Status |
93 |
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Tax-Deferral Exception / Annuity Gifts |
94 |
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Annuities are (Sometimes) Protected Assets |
95 |
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Probate / Sometimes an Annuity is a Bad Idea |
97 |
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Surrender Penalties |
98 |
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Other Tax Issues |
98 |
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Death of the Annuitant |
99 |
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1035 Exchanges |
100 |
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Making the Right Annuity Choices |
100 |
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So Many Choices |
101 |
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Immediate Annuities |
103 |
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Split Annuities / Single Premium Annuities |
104 |
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Flexible Premium Annuities / Policy owner Risk |
105 |
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Variable Annuities |
106 |
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Fixed Annuities |
110 |
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Declared Rate Fixed Annuities / Indexed Fixed Annuities |
110 |
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Two-Tiered Annuities: Tier 1 and Tier 2 |
111 |
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Investment Risk |
112 |
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Old Money-New Money |
113 |
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Interest Rates |
115 |
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Price Inflation |
120 |
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Measures of Inflation |
122 |
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Time Value of Money (TVM) / Issue Age Guidelines |
122 |
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Annuity Date |
123 |
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Withdrawal and Surrender Charges and Waivers |
124 |
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Chart / “policy term” |
125 |
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Premium Payments |
126 |
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Contract Administration Charges and Fees |
127 |
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ERISA and Tax-Favored Retirement Plans |
128 |
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Using Annuities in Tax-Favored Retirement Plans |
128 |
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Group and Individual Annuity Contracts |
129 |
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IRS Requirements for Annuity Funding |
129 |
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Taxation of Qualified Annuity Distributions |
129 |
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Chapter 3: Fixed Rate Annuities |
131 |
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Annuity Bailout Options |
133 |
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Example |
134 |
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Guaranteed Rates of Return |
136 |
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1. What is the Guaranteed or Roll-Up Rate? |
139 |
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2. How Long is Roll-Up Rate Guarantee Period? |
140 |
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3. What is the Actuarial Payout? |
140 |
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4. What Fees will be Charged? |
140 |
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5. What are the Insurance Company Ratings? |
141 |
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Fixed & Variable Options |
141 |
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Financial Strength of the Insurer |
142 |
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How Fixed Period Annuities Work |
142 |
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Chapter 4: Equity Indexed Annuities (EIA) |
144 |
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Researching the Products |
145 |
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Defining the Equity Indexed Annuity |
147 |
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EIA Guaranteed Rates of Return |
153 |
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Know the Facts Prior to Buying |
155 |
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Index Crediting |
156 |
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Participation Rates |
157 |
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Averaging |
158 |
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Caps |
159 |
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Spreads, Margins, and Administrative Fees / Returns |
159 |
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Indexing Formulas |
161 |
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Annual Reset Indexing Method |
162 |
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High Water Mark Indexing Method |
162 |
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Point-to-Point Indexing Method |
163 |
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Multiple EIAs with Diversified Indexing Methods |
164 |
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Withdrawing Annuity Funds |
165 |
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Payout Options |
165 |
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Example |
166 |
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EIA Safety |
167 |
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A Comprehensive Financial Plan |
167 |
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Example |
168 |
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Grasping Fundamental Aspects of the Product |
171 |
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Terminology for a Complex Product |
173 |
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General Contract Provisions |
176 |
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Entire Contract |
177 |
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Changes and/or Waivers / Misstatements |
177 |
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Required Reporting / State Law / Claims of Creditors |
178 |
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Other Contract Items |
179 |
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Additional Payments |
179 |
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Surrender Values and Penalties / New Developments in Indexed Products |
180 |
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Chapter 5: Variable Annuities |
182 |
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Variable Annuity Death Benefit |
182 |
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Subaccounts / Immediate or Deferred / Long-Term Investments |
184 |
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Annual Expenses |
185 |
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Variable Annuity Buyback Offers |
186 |
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Funding Variable Annuities |
189 |
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Variable Annuity Fees / Surrender Fees / Early Withdrawal Tax Penalty / Taxation |
190 |
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The Commitment |
191 |
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Asset Allocation |
192 |
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Asset Allocation Importance |
193 |
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Choosing Asset Allocation |
194 |
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Analyzing the Asset Allocation Model / Risk & Return / Defining Risk |
195 |
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Business Risk / Market Risk / Interest-Rate risk / Inflation Risk |
196 |
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Protection Against Inflation |
197 |
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Measuring All the Risks |
198 |
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Lifecycle Beta |
199 |
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Living with Risk and Return |
200 |
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Managing Sub-Account Strategies |
200 |
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Relationship Between Variable Accounts |
201 |
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Sub-Account Options |
201 |
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Performance |
202 |
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Risk Control / Expense Minimization / Investment Options |
203 |
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Family Rating / Management |
204 |
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Aggressive Growth for Capital Appreciation |
204 |
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Aggressive Growth for Maximum Growth |
205 |
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Growth Sub-Accounts Seeking Capital Appreciation |
205 |
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Growth & Income Sub-Accounts Combining Stock and Bonds |
206 |
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International Stocks |
207 |
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Balanced Sub-Accounts Combining Stock & Bonds |
208 |
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Corporate Bond Sub-Accounts Fixed Income |
209 |
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Government Bond Sub-Accounts Fixed Income |
211 |
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High Yield Bond Sub-Accounts Fixed Income |
212 |
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Global & International Bond Sub-Accounts Fixed Income |
213 |
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Specialty Portfolios |
215 |
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Metals Sub-Accounts Specialty Portfolios |
216 |
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Utility Stock Sub-Accounts Specialty Portfolios |
217 |
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1997 Tax Law Hits Variable Annuities / Reallocation of Assets |
218 |
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No Sales Charges / Withdrawals |
219 |
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Avoids Probate |
220 |
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Safety / Reserve Requirements |
221 |
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Liquidity / Inflation Protection |
222 |
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No Investment Ceiling / Major Variable Annuity Features |
223 |
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Moving Money from one Vehicle to Another |
223 |
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Free-Look Period / SS Income Exclusion |
224 |
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Investor Control / Professional Money Managers / Unlimited Contributions |
225 |
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Commission Charges |
225 |
United Insurance Educators, Inc.
PO Box 1030
Eatonville, WA 98328
(253) 846-1155