Annuity Advantage by BHIFS Washington

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The Annuity Advantage

• By
• Blue Horizon Insurance Financial Services
• Washington
• https//bhifs.com/annuity-retirement-planning/

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What is an annuity?

• An annuity is a contract with a life insurance
  company that provides certain benefits in
  exchange for a deposit of money, known as a
  premium. Annuities are not life insurance
  policies.
• https//bhifs.com/annuity-retirement-planning/

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Types of Annuities

• Traditional Fixed Annuities
• Earnings are generally based on a stated rate,
  guaranteed for a period of one year.

• Multiple-Year Guarantee Annuities
• Earnings are generally based on a stated rate,
  guaranteed for a set number of years.

• Fixed Indexed Annuities
• Earnings are generally linked to the performance
  of external index, like the Nasdaq-100 or SP
  500 index, while providing a minimum guarantee.

• Variable Annuities
• Earnings are generally based on investment
  options, such as stock or equity markets.
• May lose value when the investment option suffers
  market losses.

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Investment Pyramid
Stocks and Derivatives
Variable Annuities and Mutual Funds
CDs, Savings, Fixed Annuities, Fixed Indexed
Annuities
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Why an annuity?

• Safety.
• Flexibility.
• Earnings potential.
• Protection.
• https//bhifs.com/annuity-retirement-planning/

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From Feature to Benefit
Feature Benefit
Tax deferral Triple compounding of interest
Minimum guarantees Safety and security
Beneficiary designation Avoidance of probate
Annuitization Guaranteed income
Control Choice and flexibility
Death benefit Leave a legacy
Withdrawal provisions Income flexibility
Premium bonuses Offset investment losses
Optional riders Protective solutions
Crediting methods Choice, ability to change based on needs
Taxes are deferred until withdrawals are
taken, and tax deferral is available only to
individuals or to entities that benefit
individuals, such as certain trusts. Under
current law, tax deferral is a basic feature of
tax-qualified plans. Placing qualified funds into
an annuity does not provide any additional tax
benefit. The beneficiary must be living at
the time the benefit is payable, subject to the
terms of the annuity contract. Avoidance of
probate can also be a benefit of some non-annuity
financial products, such as a paid-on-death
account, where a beneficiary is named.
Requires election of settlement option. See
annuity contract for details and restrictions.
Withdrawals may be subject to income tax and
IRS penalty tax if made before age 59½.
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Tax Deferral

• FeatureTax Deferral
• Exists as a function of current law and has no
  explicit cost.
• Allows you to control when you pay taxes on
  contract gains.
• BenefitTriple Compounding
• Interest on principal.
• Interest on interest.
• Interest on dollars that otherwise would have
  been paid in taxes.

Placing qualified money in an annuity does not
provide any additional tax deferral benefit.
  Taxes are deferred until withdrawals are
taken, and tax deferral is available only to
individuals or to entities that benefit
individuals, such as certain trusts. Under
current law, tax deferral is a basic feature of
tax-qualified plans.
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Minimum Guarantees

• FeatureMinimum Guarantees
• Contractual minimum guarantee
• A minimum interest rate guarantee that applies
  over the life of the contract.
• Represents the worst case scenario.
• Current interest rate guarantee
• May be a stated interest rate or multiple-year
  guaranteed interest rate.

Fixed annuities guarantee a minimum interest rate
on all or a percentage of each contribution over
the life of your contract, less any withdrawals
and/or deductions and early surrender charges.
Guarantees are based on the claims-paying ability
of the insurer.
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Minimum Guarantees (contd)

• BenefitSafety and Security
• No market loss.
• Insurance company financials.
• Comparison of FDIC to insurance company safety.
• Guaranty association.
• Protection from market fluctuation.
• Insurance companies invest long term and hold
  conservative investment portfolios.

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Beneficiary Designation

• FeatureAnnuities pass to the beneficiary at
  death
• Spouse listed as sole primary beneficiary
• Can assume the contract and continue the tax
  deferral (spousal continuance).
• Can take over the death proceeds as his or her
  own IRA (spousal IRA).
• Living beneficiaries of IRA
• Can stretch the IRA over their lifetime and
  potentially multiple generations to reduce tax
  implications.
• BenefitAssets can avoid the public, costly, and
  time-consuming process of probate.

Refer to the annuity contract for details
regarding qualifying death. Not available
with all companies.
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Annuitization

• FeatureA contract provision that allows you to
  convert your annuity into a guaranteed income
  stream
• Can be elected, but does not have to be.
• Can provide a variety of settlement options,
  including
• Income for life or a joint life.
• Period certain (5-20 years).
• Combination of the above .
• BenefitCan help protect you from outliving your
  income and provide tax-advantaged income on
  nonqualified monies.

Refer to specific contract for options available.

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Control

• FeatureYou can control
• Distribution of death benefit.
• When to pay taxes on annuity gains.
• Which crediting strategies to choose.
• If and when to take income.
• Annuity duration.
• Premium bonus type and amount.
• Which riders to elect.
• Benefita great deal of choice and flexibility.

May not be available with all products. Please
check with specific insurance companies.
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Death Benefit

• FeatureDeath Benefit
• Many annuities offer a full-value-at-death
  provision.
• Some annuities offer a death benefit rider that
  can offset the beneficiaries federal income tax
  burden when they inherit the annuity.
• Settlement options are also available to
  beneficiaries.
• The surviving spouse may continue the contract or
  assume the decedents IRA.
• BenefitHelps you leave a legacy and optimize
  flexibility for your beneficiaries.

Refer to specific annuity contract for
details. Subject to limitations and
restrictions by the IRS.
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Income Now or Income Later

• Featureliquidity provisions
• Income now via surrender charge-free
  withdrawals.
• Income later via annuitization.
• May be fully liquid at death.
• Liquidity upon confinement.
• Checkbook access.
• Optional riders
• Income riders.
• Additional benefit riders.
• Death benefit riders.
• Benefitincome flexibility.

Varies by product. Refer to annuity contract
for specific details and limitations. Withdrawa
ls may be subject to income tax and IRS penalty
tax if made before age 59½.
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Premium Bonuses

• Featureoptional bonus available on some
  annuities
• A vested bonus can add additional dollars that
  you own immediately.
• BenefitCan help offset market losses, increase
  annuity value or first-year interest crediting,
  and generate additional income.

Refer to contract for details.
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Optional Riders

• Featureoptional riders
• Living benefit riders
• Optional income-for-life riders.
• Additional benefit riders (to provide additional
  money when certain life events occur).
• Death benefit riders
• Designed to offset beneficiaries tax liability
  on deferred gains.
• Liquidity riders
• Provide additional liquidity.
• Benefitincome for life, protection from health
  costs, and minimized tax liability for
  beneficiaries.

May provide liquidity in exchange for a lower
interest rate. See contract for details.
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Crediting Methods

• Featurescrediting methods
• Current interest rate guarantee
• Rates are guaranteed for one year and can vary
  upon renewal.
• Multi-year guarantee
• Rates are guaranteed for a specific time frame,
  typically 3, 5, 7, or 10 years.
• Index strategy
• Gains are linked to an external index, such as
  SP 500.
• Gains are credited via a variety of calculation
  methods, such as annual reset, point-to-point,
  monthly average, monthly cap, blended index.
• Benefitchoice, earnings potential, guaranteed
  rates, or a combination of all three.

Standard Poors, SP, SP 500,
Standard Poors 500 and 500 are trademarks
of The McGraw-Hill Companies, Inc. and have been
licensed for use by the issuing insurance
carrier. The Product is not sponsored, endorsed,
sold or promoted by Standard Poors and
Standard Poors makes no representation
regarding the advisability of purchasing the
Product.
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CDs Compared With Fixed Annuities

• CDs
• Interest is taxable.
• Historically low rates.
• Often limited liquidity.
• Subject to probate.
• Can be subject to creditors.

• Annuities
• Tax deferred.
• Upside potential.
• 10 surrender charge-free withdrawals with
  checkbook.
• Not subject to probate.
• May not be subject to creditors.
• Additional protective solutions available via
  riders.

Based on general understanding of the basic
features of CDs and fixed annuities current
features and benefits may vary. Taxes are
deferred until withdrawals are taken, and tax
deferral is available only to individuals or to
entities that benefit individuals, such as
certain trusts. Under current law, tax deferral
is a basic feature of tax-qualified plans.
Placing qualified funds into an annuity does not
provide any additional tax benefit.
Withdrawals may be subject to income tax and
IRS penalty tax if made before age 59½. The
beneficiary must be living at the time the
benefit is payable, subject to the terms of the
annuity contract. Avoidance of probate can also
be a benefit of some non-annuity financial
products, such as a paid-on-death account, where
a beneficiary is named. In certain states.
Consult an attorney in the state of resident for
creditor proof protection. Assuming annuitant
qualifies for benefit.
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Power of Tax Deferral Over Time
Assumptions Assumptions
Premium 100,000
Annual Crediting Rate Annual Crediting Rate 4
Federal Tax Bracket Federal Tax Bracket 28
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Equivalent Yield of Taxable Account vs.
Tax-Deferred Annuity
4 tax-deferred effective annual yield? A
taxable account would have to earn 5.56. 5
tax-deferred effective annual yield? A taxable
account would have to earn 6.67 Taxable account
rates based on a 25 state and federal tax
bracket.
Taxes are deferred until withdrawals are taken,
and tax deferral is available only to individuals
or to entities that benefit individuals, such as
certain trusts. Under current law, tax deferral
is a basic feature of tax-qualified plans.
Placing qualified funds into an annuity does not
provide any additional tax benefit.  
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Disclosure

• This presentation is not intended as an
  invitation to purchase any particular insurance
  product or fixed annuity, nor is it intended as
  an endorsement of any particular product or
  company. It is merely intended to provide you
  with general information about fixed annuities,
  to assist you in making an informed choice about
  financial service products currently available to
  you and to help you determine what products may
  be best suited for you.
• Fixed annuities may be useful retirement tools
  for some people. However, fixed annuities may not
  be suitable for all. Please consult a licensed
  insurance agent regarding your age, health,
  financial objectives, short- and long-term
  financial goals, liquidity needs, risk tolerance,
  and overall financial situation to determine if
  one is right for you. You should thoroughly
  review all brochures, specimen contracts, buyers
  guides, and disclosure forms before purchasing
  any fixed annuity or any other financial services
  product.

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Disclosure contd

• Fixed annuity earnings are tax-deferred until
  withdrawn. Use of annuities with qualified-type
  plans 401(k), IRA, 403(v) may not provide any
  additional tax benefits above those you already
  receive in such a plan. Withdrawals may be
  subject to income tax and a 10 federal income
  tax penalty if taken before age 59½. Surrender
  charges may apply if you withdraw more than the
  penalty-free amount in a year. Fixed annuities
  generally guarantee a minimum interest rate on
  all or a percentage of each contribution over the
  life of the contract, less any withdrawals and/or
  deductions and early surrender charges.
  Guarantees are based on the claims-paying ability
  of the insurer.
• Insurance agents do not give legal, investment,
  or tax advice. Please consult your attorney,
  accountant, or other qualified professional
  regarding annuity taxation as it applies to you.
• https//www.bhifs.com/

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Thank You!
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Insurance Financial Services in Washington 12
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