Index Annuity “Concerns”

For Agent or Broker Use ONLY. Not for use with the general public.

Index Annuity “Concerns”

Long/High Surrender Charges

Products Favor Agent, Not Client

Limited Growth

No Liquidity


INVESTMENTS SAVINGS

Mutual FundsBonds

Variable Annuities

Stocks

CDsMoney MarketsFixed Annuities

T-Bills

INDEXANNUITY


INVESTMENTS SAVINGS

Mutual FundsBonds

Variable Annuities

Stocks

INDEXANNUITY


Bonds

Costs

Call Options

• Fixed Annuity • Indexed Annuity

BondsCosts


How Does Interest Get Credited?What to look for:

Simple Crediting Method(How clients earn interest)

Annual Reset Design(The reason to buy index annuities)


Understanding Index Annuity Crediting Methods

Annual Reset – Point to Point with Cap

Allows 100% Participation of Index Increase Up to a 6% Annual Cap.


Utilizing Index Annuities in Today’s Portfolio’s

Correction Protection

Fixed Income Alternative


3 Year Hypothetical

Start End 6.00% CapAccount Value



1000 1100 = 10.00% Increase 6.00% Growth $106,000

1100 1000 = 9.10% Loss 0% Growth $106,000

1000 1040 = 4.00% Increase 4.00% Growth $110,240

S&P500 returns were taken from www.yahoo.com. Cap rates are subject to change. Values are subject to the claims paying ability of the issuing insurance carrier. All information current as of 8/15/2013. Assumed market returns are hypothetical and are not indications of future performance

http://www.yahoo.com/


Where Would You Be?

2006200720082009201020112012

Year S&P500* Interest Credited(6.00% Cap)

Index AccountValue

+12.8+3.8%-38.5%+27.1%+12.6%+2.1%

+13.29%

6.00%3.8%

0.00%6.00%6.00%2.10%6.00%

$106,000$110,028$110,028$116,629$123,627$126,223$133,579

If the market declines all 7 years, you walk away with your original deposit of $100,000

S&P500 returns were taken from www.yahoo.com. Cap rates are subject to change. Values are subject to the claims paying ability of the issuing insurance carrier. All information current as of 8/15/2013



Now may be a great time to position an index annuity in

your clients' portfolio.

Why?



Consider a $500,000 client portfolio fully invested in the market in 2003

2003: $500,000

2013: $850,000

$500,000 $350,000

S&P500 returns were taken from www.yahoo.com. Cap rates are subject to change. Values are subject to the claims paying ability of the issuing insurance carrier. All information current as of 8/15/2013. “Fully invested in the market refers to the S&P500 index.




1/3/19

95

9/3/19

95

5/3/19

96

1/3/19

97

9/3/19

97

5/3/19

98

1/3/19

99

9/3/19

99

5/3/20

00

1/3/20

01

9/3/20

01

5/3/20

02

1/3/20

03

9/3/20

03

5/3/20

04

1/3/20

05

9/3/20

05

5/3/20

06

1/3/20

07

9/3/20

07

5/3/20

08

1/3/20

09

9/3/20

09

5/3/20

10

1/3/20

11

9/3/20

11

5/3/20

12

1/3/20

130

200

400

600

800

1000

1200

1400

1600

1800

S&P 500 6.00%

2014

6.00%

2015

6.00%

2016

6.00%

2017

Assuming a 7.00% per year bull market




Correction Protection2013: Assuming a 7.00% per year increasing market

Correction Protection 2013: $850,000

$500,000 $350,000

$655,398 $441,866

$1,097,264

Fully Invested: $1,114,176Correction Protection: $1,097,264

($16,912)

Fully Invested 2013: $850,000

$1,114,176S&P500 returns were taken from www.yahoo.com. Cap rates are subject to change. Values are subject to the claims paying ability of the issuing insurance carrier. All information current as of 8/15/2013. Assumed market returns are hypothetical and are not indications of future performance




1/3/19

95

9/3/19

95

5/3/19

96

1/3/19

97

9/3/19

97

5/3/19

98

1/3/19

99

9/3/19

99

5/3/20

00

1/3/20

01

9/3/20

01

5/3/20

02

1/3/20

03

9/3/20

03

5/3/20

04

1/3/20

05

9/3/20

05

5/3/20

06

1/3/20

07

9/3/20

07

5/3/20

08

1/3/20

09

9/3/20

09

5/3/20

10

1/3/20

11

9/3/20

11

5/3/20

12

1/3/20

130

200

400

600

800

1000

1200

1400

1600

1800

S&P 500

0.00%

2014

6.00%

2015

6.00%

2016

6.00%

2017

Assuming a 25% correction followed by 10.00% rebound years





2013: $850,000

$500,000 $350,000

Assuming a 25% correction followed by 10.00% rebound years

Year Fully Invested Correction Protection

Difference

2014 $637,500 $725,000 $87,5002015 $701,250 $783,500 $82,2502016 $771,375 $847,010 $75,6352017 $848,512 $915,980 $67,468

2013: $850,000

$850,000





1/3/19

95

9/3/19

95

5/3/19

96

1/3/19

97

9/3/19

97

5/3/19

98

1/3/19

99

9/3/19

99

5/3/20

00

1/3/20

01

9/3/20

01

5/3/20

02

1/3/20

03

9/3/20

03

5/3/20

04

1/3/20

05

9/3/20

05

5/3/20

06

1/3/20

07

9/3/20

07

5/3/20

08

1/3/20

09

9/3/20

09

5/3/20

10

1/3/20

11

9/3/20

11

5/3/20

12

1/3/20

130

200

400

600

800

1000

1200

1400

1600

1800

S&P 5006.00%

2014

0.00%

2015

6.00%

2016

6.00%

2017

Assuming we grow another 10%, correct by 30%, rebound 10% per year following





2013: $850,000

$500,000 $350,000

Assuming we grow another 10%, correct by 30%, rebound 10% per year following

Year Fully Invested Correction Protection

Difference

2014 $935,000 $921,000 ($14,000)

2015 $654,500 $756,000 $101,500

2016 $719,950 $816,760 $96,810

2017 $791,945 $882,705 $90,760

2013: $850,000

2013: $850,000

Assumed market returns are hypothetical and are not indications of future performance. Cap rates are subject to change. Values are subject to the claims paying ability of the issuing insurance carrier. All information current as of 8/15/2013. “Fully invested in the market refers to the hypothetical assumptions.



Chart derived from www.Morningstar.com on DWS GNMA A Load Waived, Intermediate Government, and Barclays US Agg Bond TR. Quote as of 08/14/2013

http://www.morningstar.com/



Solution?

Utilize systematic withdrawals from an index annuity as a fixed

income alternative


Where Would You Be?

Year Interest Credited(5.50% Cap)

Index AccountValue

Year Beginning Value S&P500 Interest

CreditedValue Before Withdrawal

Withdrawal Ending Value

2006 $100,000 12.8% 6.00% $106,000 $3,500 $102,500

2007 $102,250 3.8% 3.8% $105,370 $3,500 $101,870

2008 $104,629 -38.5% 0.00% $101,870 $3,500 $98,370

2009 $101,129 27.1% 6.00% $104,272 $3,500 $100,772

2010 $103,443 12.6% 6.00% $106,818 $3,500 $103,318

2011 $105,891 2.10% 2.10% $105,488 $3,500 $101,988

2012 $104,615 13.29% 6.00% $108,107 $3,500 $104,607

We are taking a 3.50% withdrawal(Coupon) each year

YTM based on this time period: 4.39%S&P500 returns were taken from www.yahoo.com. Cap rates are subject to change. Values are subject to the claims paying ability of the issuing insurance carrier. All information current as of 8/15/2013. “Fully invested in the market refers to the S&P500 index.



Where Would You Be?

Year Interest Credited(5.50% Cap)

Index AccountValue

Current 7 Year A

Rated Bond7 Years of Coupon

Paym

ents

Purchase Price$108,468

$4,875

$4,875

$4,875

$4,875

$4,875

$4,875

$4,875

Par Value $100,000

ING FIA with Systematic

Withdrawal 6.00% Cap, 2006-2012

Purchase Price$108,468

$4,875

$4,875

$4,875

$4,875

$4,875

$4,875

$4,875

Account Value $109,151

7 Years of Withdraw

als

S&P500 returns were taken from www.yahoo.com. Cap rates are subject to change. Values are subject to the claims paying ability of the issuing insurance carrier. All information current as of 8/15/2013. “Fully invested in the market refers to the S&P500 index. A Rated corporate Bond quoted as of 8/14/2013 with a 7 year maturity non-callable HSBC bond from www.scottrade.com


http://www.scottrade.com/


Producers Choice Contact Information

Phone: 855.223.6500 602.544-1234

Email: [email protected]

Index Annuity “Concerns”

Documents

Transcript of Index Annuity “Concerns”