Background Information on This Month’s Articles
Note that you will see topics in previous newsletters often repeated. This is done on purpose for two reasons: a) you are always adding new people to your database b) existing prospects often need to be told about an idea several times before taking action. It’s for these reasons that Coke advertises the same message every day. If needed, we have supplied a reference on the Internet for you to learn more. In you want to learn more or there is no reference sited, please search Google.
- End the Confusion About Annuities
- Fixed Annuities Tailored for Seniors
There is a little extra space which you can just leave blank, use up by expanding the font size or space between lines (contact Microsoft for use on these features (425) 462-9673) or use for announcements or notices.
If you like one article over the others, you can always cut and paste it into a letter and mail to prospects and clients, instead of mailing the whole newsletter. Make sure to enclose some type of response coupon if you send a letter.
Replacement articles
Each month, on the 26th of the month, you receive an e--mail from Advisor Newsletter with the website location and password for that month’s newsletter. On the same page you can download the current newsletter and also access the newsletter article archive.
Remember that it IS NOT critical what you send to people when they respond to the newsletter. You may want to call the respondent before sending anything (to ascertain their concern or specific questions) and possibly schedule an appointment, rather than sending an item first and then closing an appointment.
Also remember that the purpose of the newsletter is to get you appointments. Do not stress over the fact that you are not an expert in some of the areas reviewed in the newsletter. Get the appointment, fact--find, and then see how you can serve people. The prospect may not even mention the newsletter article by the end of your meeting.
Note that the reply coupon offers booklets. This is optional, of course. It is also optional to charge, but I find that the “prospects” that spend the dollar are more serious, as some people will ask for anything free. The $1 charge weeds out “suspects” who are not serious. Find information on the booklets at www.advisor-newsletter.com/booklets.
Have suggestions for future newsletters? Please forward them to . Remember that the topics should be of general interest to mature investors
Important: insert your information in the box at the top of page one in the newsletter and in the top of the reply coupon.
End the Confusion About Annuities
People are confused about annuities because the same word is applied to many different types of financial instruments. This tutorial will hopefully end the confusion.
Deferred Annuities are term deposits with insurance companies. They are similar to certificates of deposits at the bank. (Note: Bank deposits are FDIC-insured while annuities are guaranteed by the issuing insurance company). There are two types of deferred annuities: fixed and variable. Fixed annuities have these features:
§ Your principal is guaranteed. It will never decline. It could however be eroded by surrender charges which could also be called early withdrawal penalties and, of course, withdrawals you make.
§ The insurance company adds interest to your deposit each year (depending on the formula, the interest added could be zero).
§ The annuity is for a specific term that you select—generally, the longer the term, the higher the interest
§ All interest is tax-deferred. You do not report it on your tax return until withdrawn.
§ You may withdraw 10% of your balance annually without a surrender charge. This is a common feature and the withdrawal privilege will vary from company to company.
Most deferred fixed annuities offer an initial one-year rate with the rate changing each year. A few companies offer a locked-in rate for the entire period.
Another type of annuity is called a variable annuity. With this type of annuity, rather than receiving interest from the insurance company, your money is invested into stock or bond accounts. You may earn more than with a fixed annuity, or you could lose principal, depending on the accounts you select; and if the stock and bond markets rise or fall. Variable annuities are therefore riskier than fixed annuities.
There has been significant growth in purchases of index annuities, a type of deferred fixed annuity. In this type of annuity, your principal is guaranteed like the fixed annuity, but your interest each year is based on increases in a financial index (for example, the S&P 500 index). So, your interest is tied to performance in the index, but you can never lose principal because of the index performance. (You can lose principal due to surrender charges incurred if you make withdrawals prior to the end of the term). Index annuities are generally subject to a lengthy surrender charge period. In addition, purchasers of an equity index annuity do not get the full rate of return from the corresponding index, as there may be a cap or limited participation for each annuity regarding the index-linked rate of return. Further, such annuities generally guarantee that an investor will receive 90% of the premiums paid, plus at least a specified interest rate; thus, if interest is not earned, it is possible to lose money.
Everything discussed up until this point describes the growth phase (called the accumulation phase) of the annuity. The accumulation phase typically interests people saving for retirement or putting money away for the future. During the accumulation phase, your interest grows tax-deferred in the annuity. Withdrawals are taxable.
When and how do you get your money out? At the end of the term, you have a few options:
§ You can leave the annuity alone and continue to let it grow. Many companies may force you to take withdrawals or annuitize at a specific age.
§ You can exchange the annuity to another company that may pay you a higher rate, or offer you a preferable structure. Note that a 1035 exchange into another insurance product may result in new or increased surrender charges or higher charges, such as annual fees associated with the new product. Features and benefits of the new product, may have higher costs associated with them and may not be necessary.
§ You can make withdrawals.
§ You can annuitize the annuity--trade in your accumulated balance for periodic payments for a specified term of years or life.
The withdrawal phase is called the distribution phase. This phase is of interest to retirees.
What is an immediate annuity?
An immediate annuity has no accumulation phase. You make a deposit with the insurance company and immediately begin receiving payments. These annuities are generally suited for senior investors (age 70 plus) who desire to increase their monthly income.
Has this helped? Annuities have significant flexibility because of the many types of available, and the various ways that they can be used. If you would like further clarification or greater details, check the coupon or call us.
Withdrawals from annuities prior to age 59½ are subject to a 10% penalty. Withdrawals are taxed as ordinary income. Guarantees are subject to the claims-paying ability of the insurance company. The owning of annuities can incur fees, expenses, and surrender charges. Immediate annuities cannot be surrendered for value. Annuities should be considered long-term commitments.
Fixed Annuities Tailored for Seniors
Retirees want to secure their future financial status. Annuities can play a big part. Let’s consider how annuities can help individuals and families who are entering their retirement phase.
While annuities provide several benefits in the form of increased rate of growth in savings through tax-deferred growth, competitive returns, and security (through various guarantees) they also offer another important benefit-- insurance against financial instability. You can invest as much as you want in an annuity, leave it there to grow as per the rate of interest promised to you, and withdraw money when you need it. Lastly, you have several choices about how and when to withdraw your money.
Here are several benefits that contribute to stability:
1. A fixed annuity is often an appropriate choice for seniors because it offers the promise of a steady income when annuitized. Buy ‘term certain’ fixed annuities if you want to collect income over a particular time period only. Or buy a life annuity if you want to receive income for your entire life.
2. Several fixed annuities offer special features that can be useful for seniors. You can receive systematic or flexible withdrawals. This gives you the freedom and pleasure of creating your own “pension.”
3. Every fixed annuity provides a principal guarantee, so you can be assured of receiving at least the initial premium you paid (less potential surrender charges or other costs).
4. You may choose a nursing home waiver feature. This would relieve you of paying surrender charges if you fall sick at any time during the annuity period where you are required to cash in your annuity to pay for your nursing home bills.
Give us a call or fill out the reply coupon so we can show you annuities suitable for you situation and how they may contribute to retirement financial stability.
The amount of payback for fixed annuities depends on the amount you have invested, as well as on your life expectancy. But be vigilant about all the details of the annuity contract before you sign. Note that annuities once annuitized cannot be surrendered for value. Income from deferred annuities is taxed as ordinary income and withdrawals prior to age 59½ are subject to a 10% penalty. Income from annuitization is taxed part as ordinary income and part as return of capital. Any guarantees are based on the claims-paying ability of the insurance company. Annuities should be considered long-term investments. Riders such as nursing home waivers may have additional costs.
¿ These articles were written by Advisor Newsletter and distributed by the publisher to educate members of his community. They are not intended to provide tax or legal advice and should not be relied upon for such. They are summaries of our understanding and interpretation of some of the current laws and regulations and are not exhaustive. Investors should consult their legal or tax advisor for advice and information concerning their particular circumstances..
Rep name, address, phone
BD Name
Get this Valuable Free Information
Client name merged here
Client address merged here
Client city, state zip merged here
Please send me information on these items mentioned in your newsletter:
q I have some questions about annuities.
q I am interested if annuities can help increase my current income or make my money last longer.
I would like to have a copy of these booklets (enclose $1 for each):
q Avoid Mistakes in Buying Long-Term Care Insurance
q Annuity Owner Opportunities: Tips and Ideas That Could Save You Thousands
q Understanding Mutual Funds
q Six Strategies to Help Retirees Reduce and Preserve Their Assets
q Helping You Avoid IRA Distribution Mistakes (And Reduce Your Taxes on IRA Withdrawals)
q CD Shoppers’ Guide
I think these people would like to receive your newsletter and an invitation to your next public presentation:
Name ______
Address
Name ______
Address ______
Name
Address ______
(Please provide names and addresses with zip codes.)