Kestler Financial Bloghttp://www.kestlerfinancial.com/®2010 Kestler Financial Group.http://www.rssboard.org/rss-specificationIngen.NukePress (www.nukepress.net)en-USBREAKING NEWS!!! - Earthquake Rocks Kestler Financial Grouphttp://www.kestlerfinancial.com/Blog/PostID/103Kestler Financial Group103Tue, 23 Aug 2011 00:00:00 GMTAnnuitiesSales/ProspectingLEESBURG, VA - This afternoon there was a Magnitude 5.9 earthquake on the east coast. Contrary to news reports, the epicenter was in Leesburg, Virginia directly under the offices of Kestler Financial Group.

According to anonymous sources at the U. S. Geological Survey, the quake was triggered by the delivery of a UPS package filled with annuity applications. "Today was a one of the largest submitted premium days in recent history," said Nikki Toledo, Case Manager at KFG.

According to Jason Kestler, the recent tsunami of business is likely to continue. "We believe there are three things driving the current influx:

  1. Market volatility is off the charts driving consumers to safe-money havens,
  2. The recent increase (from 4% to 5%) on the guaranteed minimum death benefit (GMDB) rider, and
  3. The prospect of lower rates in the near future as a result of continued low bond rates and high volatility."
If you would like to download an executable version of our new RMD Solution presentation-including the new 5% rider-click here. We also have an executable brochure that actually teaches you how to make the sale. (These are large files so please be patient while they download).

Good selling - And watch out for aftershocks!]]>Annuities Appeal to the Middle Classhttp://www.kestlerfinancial.com/Blog/PostID/46Kestler Financial Group46Thu, 24 Mar 2011 00:00:00 GMTAnnuities
Thus, it was interesting to read an article in their October 2009 issue entitled “Annuities for the Middle Class?” The popularity of annuities with the middle class seemed to surprise the author of the article, Senior Editor Eric Rasmussen.

Here are some excerpts. The highlighting was added by us:

   Since the market collapse last year, more investors have been turning to annuities – the ultimate chastity belt at a time when wild volatility in the stock market has reined in more promiscuous behavior and risk. Given the widespread fear in the Great Recession, it’s no surprise annuity sales have skyrocketed over the last year.

Amid the lofty new numbers, there is also new survey data from insurance companies that suggests the nonqualified annuity marketplace is not only booming but also has a remarkably pure ownership: middle-class retirees. A survey of 1,003 U.S. annuity owners recently conducted by the Gallup Organization for the Committee of Annuity Insurers, a coalition of life insurance companies, has revealed that eight in ten annuity owners have household incomes of less than $100,000. Meanwhile, only 4% earn more than $200,000.

Go down further in the income band, and you find that 42% of these annuity owners have household incomes of less than $50,000, says Gallup. Most of those owners, 69% of them, are already retired.

According to the Gallup survey, 35% of the annuity owners surveyed never had access to a qualified plan when they were working.

“If you were in the distribution phase and 2008 scared you,” says financial planner Rick Fingerman, the president and CEO of Financial Planning Solutions in Newton, Mass., “and you were frightened out of the market, it might make sense for you to put that in an annuity. So you can at least say I’ve got $1,000 a month guaranteed for the rest of my life.”

As you can see, annuities are remarkably popular with the middle class, particularly in the absence of other products that offer their appealing combination of safety, tax deferral, and attractive interest rates.

What this magazine did not publish, but which nonetheless was found by the survey, was that over 90% of annuity owners believe they have done a very good job of saving for retirement, and they think their annuities contribute to a great extent to this preparedness. Also, 79% think that annuities are an important source of retirement security and make them feel more comfortable in times of financial uncertainty.

More on this and other topics at http://fixedannuityfacts.com/]]>Understanding Annuity Liquidity Featureshttp://www.kestlerfinancial.com/Blog/PostID/45Kestler Financial Group45Tue, 22 Mar 2011 00:00:00 GMTAnnuities
Consider your checking and savings accounts. Your money is safe and accessible in these accounts, but what interest rate are you receiving. Zero, or something extremely low, right? If you wanted to get a higher rate of interest on your money, what product would your bank offer to you? The answer is a certificate of deposit, which provides a higher interest rate, but it requires that you accept a penalty for early withdrawal.

Thus, you can see from your bank that if you want safety and an attractive interest rate, you need to sacrifice some access to your money, at least for a period of time. There is no financial product that will give you bulletproof safety, the potential for a high rate of interest, and full access to you money all the time – it can’t be done!

So, if safety and the potential to earn a high rate of interest are important to you, it makes sense for you to compromise a bit on liquidity for a portion of your retirement savings.

Now, let’s consider an annuity with a ten-year surrender charge period. Does that mean that you can’t touch any of your annuity money for ten years? Fortunately, almost all fixed annuities offer some access to your money, even during the surrender charge period. It is common for annuities to provide an annual penalty-free withdrawal amount equal to perhaps 10% of your contract value or your accumulated interest. There are also often provisions for the surrender charge to be waived in the event of certain hardships, such as nursing home confinement, diagnosis of terminal illness, or death.

Because of the surrender charge aspect, annuities are appropriate for a portion of your retirement savings, not typically for your entire retirement savings. Keep in mind that the existence of the surrender charge enables the carrier to give you want you want – safety and higher interest crediting potential – thus surrender charge ultimately benefits you.

More on this and other topics at http://fixedannuityfacts.com/ ]]>The Role of Annuities in Estate Planninghttp://www.kestlerfinancial.com/Blog/PostID/44Kestler Financial Group44Thu, 17 Mar 2011 00:00:00 GMTAnnuities
When you die, your annuity proceeds are quickly paid to your beneficiaries, usually without the delays and expenses associated with probate. Thus, if it is important to you to quickly pass money to your beneficiaries, an annuity can accomplish that for you.

Also, because the proceeds are passed to the beneficiaries, they bypass your will. If there are certain assets that you want to privately pass to certain beneficiaries rather than have them pass through the relatively public process of probating a will, an annuity can accomplish that for you, too.

So, you can see that naming beneficiaries is usually better than having an annuity payable to your estate and passing through your will.

There is an additional consideration if the annuity is an IRA. If it is payable to the estate, your heirs will be required to liquidate the annuity and pay the associated income taxes within five years of your death. If the annuity is instead payable to individual beneficiaries, those beneficiaries have the option to keep money in their inherited IRAs for many years, even up to their life expectancy, and thus delay the payment of taxes on the annuity.

If your beneficiaries are minor children, you may want to consider a trust to provide asset management until the children would be old enough to be financial responsible. Also, if one or more of your beneficiaries may lack the financial sophistication to preserve and manage a large windfall, many annuity carriers will allow your client to specify that one, some, or all of the beneficiaries must receive their share of the annuity proceeds in the form of a series of periodic payments over a specified period of time.

Last but not least, remember that annuities are subject to income taxes at death, and, if your assets are considerable, they may be subject to estate taxes as well. If you want to maximize what your beneficiaries will receive, consider using some of your annuity money to purchase life insurance. Life insurance can provide an immediate boost what the beneficiaries would receive, plus life insurance death benefits are paid free of income taxes. There are also ways, such as ownership by an Irrevocable Life Insurance Trust, to minimize or eliminate estate taxes on the life insurance death benefit.

More on this and other topics at http://fixedannuityfacts.com/]]>Why Fixed Indexed Annuities Have Capshttp://www.kestlerfinancial.com/Blog/PostID/43Kestler Financial Group43Tue, 15 Mar 2011 00:00:00 GMTAnnuities
The answer is simple: In a negative stock market year, fixed indexed annuities eliminate the effect of the loss and provide immediate, total protection of your account value. That’s incredibly valuable protection, and that means it is expensive for the carrier to provide. It is the cost of the protection provided in a down year that prevents the carrier from being able to pass through all of the index increase in an up year.

The next question consumers often ask is, “Why does the carrier reserve the right to change the cap every year?” The answer comes down to how carriers invest the money that has been entrusted to them by their customers. Carriers invest the money in a combination of bonds and option contracts. These option contracts can only be affordably purchased for one-year durations, and their prices can change dramatically from year to year. So, carriers sometimes need to change the caps in future years as the prices of the options they purchase change.

Keep in mind that fixed indexed annuities are not designed nor are they intended to replicate stock market returns. They are more comparable to other safer vehicles, such as bonds, CDs, and money market instruments. They are designed to offer consumers guarantees of principal yet also the possibility of higher potential interest credits than these traditional fixed interest rate products. Compared to that group of products, fixed indexed annuities offer very attractive potential returns.

More on this and other topics at http://fixedannuityfacts.com/]]>Study Finds Fixed Indexed Annuity Returns Attractive and Consistenthttp://www.kestlerfinancial.com/Blog/PostID/42Kestler Financial Group42Thu, 10 Mar 2011 00:00:00 GMTAnnuities
The study examines five-year annualized returns from 1997 to 2009, calculating industry average annuity returns based on actual returns credited by insurance carriers that offer fixed indexed annuities.

S&P 500 index returns, including dividends, are regarded as the premier measure of U.S. stock market performance. All periods studied ran from September 30 of the beginning year to September 30 of the fifth year, except for the 1997-2002 period which used a January 2 date.

The industry average annuity return exceeded 4% in all eight of the five-year periods examined. In contrast, only three of the annualized S&P 500 returns exceeded 4%, while in four of the periods, the S&P 500 index had a negative return.



Perhaps not surprisingly, the study noted that sales of fixed indexed annuities have climbed steadily since their introduction in the mid-1990’s. Recent sales levels have consistently exceeded $25 billion per year annually.


Click here to access the study.

More on this and other topics at http://fixedannuityfacts.com/]]>Understanding How Annuities are Treated Under the Tax Codehttp://www.kestlerfinancial.com/Blog/PostID/41Kestler Financial Group41Tue, 08 Mar 2011 00:00:00 GMTAnnuities
For tax purposes, your annuity can be treated one of three ways: as a traditional IRA, as a Roth IRA, or as a non-qualified annuity.

What makes an annuity a traditional IRA? Perhaps you have money in a corporate retirement plan like a 401(k), 403(b), or 457 plan, or in an existing IRA. That money can be transferred or rolled over from the existing account into an annuity. As long as the annuity is designated on the application as a traditional IRA, then the entire amount that goes into the annuity is a tax-free exchange. As interest is credited to the annuity, it can stay in the annuity, and no taxable income is reported to you. However, as with all traditional IRA’s – and as with all corporate retirement plans, for that matter – when you ultimately take withdrawals, the entire amount of each withdrawal is taxed as ordinary income. Keep in mind that the Internal Revenue Code provides tax deferral to IRA’s, so there is no additional tax benefit gained by funding an IRA with an annuity. Consider the other benefits provided by an annuity to determine if an annuity is the right choice for your IRA.

What kind of money is considered non-qualified? Your general savings or investments are considered non-qualified. It simply means money that never went into a tax-qualified corporate retirement plan or any type of IRA. You can put your general savings into an annuity, and it gets a tax advantage, too. The tax advantage is that as interest is credited to the annuity, it does not get taxed until it is withdrawn.

So whether the money that went into the annuity is traditional IRA, Roth IRA, or non-qualified money, you benefit from tax deferral. That means that as interest is credited to the annuity, it does not get taxed until it is withdrawn.

Now we all know that when Congress gives us preferential tax treatment, there are also rules around it. One of the most significant rules affecting annuities – whether the annuity is treated as a traditional IRA, a Roth IRA, or non-qualified – is if you take a taxable withdrawal prior to age 59½, that withdrawal will be subject to a 10% tax penalty. This penalty is not assessed by the annuity carrier – rather, it is an amount that is computed and paid on your federal income tax return. So, before putting money into an annuity, be sure you do not plan to take that money out prior to age 59½.

The rationale for this is that Congress gave annuities preferential tax treatment to encourage people to use them to save for retirement. So, Congress wants to make sure that’s how they are actually used.

This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

More on this and other topics at http://fixedannuityfacts.com/]]>How a Fixed Indexed Annuity Works and Why Your Money is Safehttp://www.kestlerfinancial.com/Blog/PostID/40Kestler Financial Group40Thu, 03 Mar 2011 00:00:00 GMTAnnuities
To ensure the safety of your money from market volatility, the first thing you have to do is look at the type of annuity you are considering purchasing. The type of annuity that we are discussing is a fixed indexed annuity, and money is protected from market losses in a fixed indexed annuity. The carrier that issues the annuity guarantees that your contract value never falls due to the associated index falling.

Contract Value


The money you put in the annuity becomes the initial contract value. The only way that the contract value can go down is if you withdraw money from the annuity, so let’s assume you make no withdrawals. Even if every financial market in the country plummets, your contract value stays exactly the same. It doesn’t decline.

Also, depending on the time commitment you are willing to make, some carriers offer products with a premium bonus that can be credited to your contract value as well. Currently, available premium bonuses can range from 5% to 11% of the amount that you put into your annuity.

Then, the annuity credits interest, typically annually on contract anniversaries. There is an index upon which interest crediting is based, and if that index goes up, interest is credited, and once it is credited, it becomes a protected part of the contract value as well.

So as anything is added to the contract value, whether it is the initial premium, any subsequent premiums, any premium bonus, or any subsequent interest credits, they are all contractually protected from loss due to fluctuations in the associated index by the issuing carrier. That’s what makes fixed indexed annuities so attractive and so safe.

Fixed Indexed Annuity versus Variable Annuity


Don’t confuse a fixed indexed annuity with another type of annuity called a variable annuity. If you know anyone who has lost money in an annuity, chances are it was in a variable annuity. Variable annuities are only sold by securities representatives, and unlike a fixed indexed annuity, a variable annuity is actually invested in the stock and bond markets where the principal is at risk to loss.

So picking the right kind of annuity is a key part of making sure your money is safe from market losses and productive without excessive fees.

Annuity Carrier


The other element of safety is the annuity carrier. You need to keep in mind that a promise of safety is only as strong as the carrier making the promise. Thus, you want to do some research to make sure that your annuity carrier is financially strong. Fortunately, there are independent companies, such as A.M. Best, Standards & Poor’s, Moody’s, and Fitch that analyze the strength of annuity carriers and publish their findings. Guaranteed provided by annuities are subject to the financial strength of the issuing insurance company. Annuities are not guaranteed by any bank or the FDIC.

With a fixed indexed annuity, you are getting contractual guarantees, and such guarantees from a strong annuity carrier mean that your money is safe in a fixed indexed annuity.

More on this and other topics at http://fixedannuityfacts.com/]]>Where Annuities Fit in Your Portfoliohttp://www.kestlerfinancial.com/Blog/PostID/39Kestler Financial Group39Tue, 01 Mar 2011 00:00:00 GMTAnnuities
One common way to compare investment alternatives is to look at a spectrum of risk and reward, that is, a spectrum of risk and expected return. Financial vehicles that provide substantial protections against risk are able to attract money at relatively low returns, whereas risky financial vehicles must provide much higher potential and expected returns in order to attract money from investors.

Now, let’s look at the financial vehicles we are considering. We’ll travel from safest to riskiest on the risk/return spectrum.

Bank certificates of deposit: These are clearly very safe, as the principal is guaranteed first by the issuing bank and second, up to a limit, by the FDIC. The interest rate you will earn is also guaranteed for the duration you select. If you choose to take your money out early, the penalty is typically very modest, equal to only a few months of interest. As a result of their safety and predictability, interest rates on bank certificates of deposit are usually fairly low.

Fixed annuities: These are also very safe, as the principal is guaranteed first by the issuing insurance company and second, up to a limit, by state insurance guaranty funds. Fixed annuities are available in a range of surrender charge durations, many with interest rates that are fully guaranteed for the duration selected. Surrender charges are higher and perhaps longer than on bank certificates of deposit, which allows issuing insurance carriers to typically provide higher interest rates than bank certificates of deposit.

Fixed indexed annuities: These are a type of fixed annuity, and thus they are very safe. The principal is guaranteed first by the issuing insurance company and second, up to a limit, by a state insurance guaranty fund. Where they differ from other fixed annuities is that the interest rate is not guaranteed at as high a level as most fixed annuities, but the interest rate fluctuates from year to year depending upon movement of the referenced market index and the formula applied to that movement. Fixed indexed annuities can provide even better rates of interest under certain conditions.

Mutual funds: These are securities, and that gives you a clue that we are now entering much riskier territory. The principal is not guaranteed by anyone. The return in any one given year can be sharply positive or negative. For example, a common proxy for stock fund returns is the S&P 500 index, which rose 26% in 2003 and dropped 38% in 2008. Thus, for mutual funds to attract money, they must offer the prospect of a higher likely return than indexed annuities. Over the last century, they have done so, although over the last decade, they have fallen woefully short.

Thus, the fundamental spectrum of risk and expected return is filled in the appropriate places by fixed and indexed annuities. They offer a higher likely return than bank CD’s, but a lower likely return than mutual funds, which are much more risky. As long as you properly understand where annuities fit and make decisions on that basis, you will find that annuities are valuable financial products, and retirement savers are better off that they exist.

This article is intended as general information only and should not be construed to be investment advice. For investment advice, please seek a qualified advisor.

More on this and other topics at http://fixedannuityfacts.com/]]>Why Annuity Sales are Booming During the Recessionhttp://www.kestlerfinancial.com/Blog/PostID/38Kestler Financial Group38Thu, 24 Feb 2011 00:00:00 GMTAnnuities
Keep in mind that annuities are merely a place where consumers can store their money and hopefully have it grow, so annuities compete against other places they can store their money, like in products from banks and mutual fund companies.

If you look at products that don’t contractually guarantee your principal, such as mutual funds that invest in the stock market, most consumers have taken a pretty big hit to their value over the past few years. That has caused a lot of consumers to pull their money out of those sorts of places, and those consumers have been looking for a safer place to put their retirement savings. The challenge, however, is that interest rates on traditional safe savings products are at historical lows.

What consumers want is a place where they know their money is safe – that is, protected by contractual guarantees – but they also want a place where they can receive a decent rate of interest over time. That’s exactly what they have been finding when they come to fixed and fixed indexed annuities, and so that’s why sales of these annuities have been booming since the recession began.

Annuities are one of the few places where you can find safety plus a decent rate of interest. Perhaps it is time for you to check them out.

More on this and other topics at http://fixedannuityfacts.com/]]>The Increasing Popularity of Fixed Indexed Annuitieshttp://www.kestlerfinancial.com/Blog/PostID/37Kestler Financial Group37Tue, 22 Feb 2011 00:00:00 GMTAnnuities
 
 Source: “Real World Index Annuity Returns,” published by the Wharton Financial Institutions Center, available here.

Why have fixed indexed annuities become so popular? It has everything to do with how you, as a consumer, are feeling and the choices you have to make with your money.

A fixed indexed annuity is merely an insurance product where you can store your money and have it grow at a guaranteed, fixed interest rate or at a potentially higher rate based upon a portion of the performance of an outside index, such as the S&P 500âindex. So, annuities can be an additional option, a complement to the places where you store your money, just like products offered by banks, securities brokerages, and mutual fund companies.

However, annuities offer features and benefits that many other financial vehicles do not offer. In the past, if you have chosen products that don’t contractually guarantee the safety of your principal, chances are you may have taken a pretty big hit to your value in recent years. That has caused a lot of people to look for a safer place to put their money today as well as plan for and position themselves to be better prepared for the next market correction.

Unfortunately, if you look to traditional guaranteed interest rate products, you may find unattractively low interest rates.

So what you want is a place where you know your money is safe, and by safe, that means you want it protected by contractual guarantees from market losses, not just a hope and a prayer. But you also want a place where you can receive a decent rate of interest over time. In addition, if retirement income planning is one of your primary goals, you want to know in advance what your minimum predictable stream of income will be.

That’s exactly what you will find when you look at fixed indexed annuities. And that’s why sales of these annuities have been increasing year after year.

If you want to move your money to a place where there is safety from market losses, plus the prospect of decent growth potential, and the assurance of a guaranteed income stream, a fixed indexed annuity is where you will find that combination of features and benefits. In a fixed indexed annuity, you will not lose any principal when the next market correction occurs.

More on this and other topics at http://fixedannuityfacts.com/
]]>The Reasons to Consider a Fixed Indexed Annuityhttp://www.kestlerfinancial.com/Blog/PostID/36Kestler Financial Group36Thu, 17 Feb 2011 00:00:00 GMTAnnuities

Possible reasons to consider a fixed indexed annuity

  • Safety from market losses
  • Growth potential
  • Tax advantages
  • Income guarantees
  • Beneficiary planning advantages

The foundation upon which these advantages are provided

  • A time commitment during which you will have limited liquidity

Possible Additional Benefits

  • Up-front premium bonus
  • Return of premium features
  • Bailout features

Safety from Market Losses

If you are like many people, your top priority when you are saving your money is safety. No one puts their money in a place where they expect to lose it. We put our money in a place where we expect to get it back one day, hopefully with some nice growth.

The great thing about fixed indexed annuities is that they offer multiple levels of protection, which makes them the gold standard of safety.

  1. First, when you decide to place your money with an insurance company, they must set aside a percentage of that money in “reserves,” that is, in very safe assets.
  2. Second, by contract, a fixed indexed annuity guarantees that your principal is protected and that you can get it back again. There can be a penalty for early withdrawals above a certain amount, but as the annuity owner, you can control your withdrawals. So, as long as you are not withdrawing more than the penalty-free withdrawal amounts allowed by the annuity you have chosen, you cannot lose any of your principal.
  3. Third, if you have a problem with the carrier that issued your annuity and you want to get a regulator involved, no matter where that annuity carrier is located, the regulator of that carrier is located in your home state. Here, annuities even beat money in the bank. Since most banks are regulated at the federal level, your bank’s regulator may be in Washington, DC. Your annuity carrier’s regulator is much more local. You can learn more about the role your state regulator plays in ensuring that your carrier remains able to meet it obligations at the website of your state insurance department.
With these three levels of protection, there is excellent safety in a fixed indexed annuity.

Growth Potential

Once you are satisfied that your money is protected from market drops, your next objective may be to have your money grow. The annuity industry invented fixed index annuities precisely so that they could offer the potential for better growth potential by having the credited interest rate based on the movement of an outside market index.

Fixed indexed annuities do this:

  • In a year that the index increases in value, they credit an amount of interest that is based on the market index increase. Features such as caps, participation rates, and spreads dictate what portion of the market index increase will translate into credited interest. Thus, the interest credit is typically less than the amount of the index increase, but in general, the more the index goes up, the bigger the interest credit.
  • In a year that the index decreases in value, they hold their value. Neither your principal nor any of the previously credited interest is lost in a year that the index decreases.
This combination of upside potential and downside protection is very powerful.

The illustration below shows how this combination works on a typical fixed indexed annuity. Years that the index increases in value are shaded in green, and notice that in these years, the annuity credits interest based on the increase in the index. Years that the index decreases in value are shaded in yellow, and notice that in these years, the annuity does not lose any value.



Tax Advantages

You want your money to grow as fast as possible, and besides having high growth potential, some sort of tax advantage helps to accomplish that goal. It often makes little financial sense to pay income taxes on money that you are not using for current income. A tax advantage can be one of the easiest ways to make your money more productive without taking on risk.

Annuities have a tax advantage, and that advantage is tax deferral. As long as you don’t touch the money in your annuity, you pay no taxes on the interest as it is being credited to your annuity. The recognition of taxable income is delayed – that is, deferred – until you withdraw money from the annuity.

Also, you can use an annuity as the funding vehicle for IRA or Roth IRA money, although keep in mind that the Internal Revenue Code provides tax deferral to IRA’s, so there is no additional tax benefit gained by funding an IRA with an annuity. Consider the other benefits provided by an annuity to determine if an annuity is the right choice for your IRA.

Income Guarantees

A key retirement planning advantage with fixed indexed annuities is that the carrier provides a guaranteed minimum level of retirement income. Over time, as interest is credited to the annuity, and as long as you are not taking withdrawals from the annuity, the amount of that guaranteed income level can only grow, not shrink.

That guaranteed income can be provided in one of two ways.

  • The first, more traditional way is called “annuitization,” where you essentially trade the cash value of your annuity for a guaranteed stream of payments. Because annuitization is a trade, it provides you with a guaranteed stream of payments, but you lose access to and control over your cash value.
  • The other way, a recent innovation in the annuity industry, is through an optional feature called an income rider. With such a rider, the carrier provides you with a minimum guaranteed income that you cannot outlive. Every year that you wait to take the first guaranteed income payment, the amount of the guaranteed income grows by a growth percentage that varies by company and is usually in the range of 4% to 8%. (Keep in mind that this growth percentage only applies to the calculation of guaranteed income, not to the amount available as a lump sum withdrawal.) These riders sometimes have a cost associated with them, usually no more than 0.75% of your annuity’s value annually depending on the individual carrier and growth percentage selected. Even after you start taking the guaranteed income payments, you still have the ability to access to your remaining annuity value in the event that you may need it. But keep in mind that any withdrawal above the guaranteed amount will reduce the future guaranteed level of income that is being generated. For more details and disclosures, consult the product brochure of the specific income rider you are considering.
With either option, you have the peace of mind that comes from having an assured, guaranteed income for the period you have chosen. Notice that with an annuity, you can choose to have the carrier guarantee an income that continues for the rest of your life, or for both your and your spouse’s lives, giving you a potentially excellent level of financial security.

Beneficiary Planning Advantages

You may be at the point in your life where you are motivated to consider what will happen to your money after your death. Annuities have some advantages that could be very helpful to some people as they plan for how to pass their money to their beneficiaries at death.

One advantage is speed. With an annuity, as long as you have a properly designated beneficiary, you can normally avoid the sometimes lengthy and expensive probate process. So an annuity can be one of the quickest ways to get money to a beneficiary after your death.

Another advantage is privacy. With an annuity, you get to name a beneficiary and avoid passing assets through your will. This can allow you, for example, to direct money to a particular child who has been very helpful to you as you have aged, while still having your will provide for an equal division of your other assets between all your children.

The Foundation: A Time Commitment

Most people recognize that liquidity, safety, and growth do not co-exist very well. For example, with a checking account, you get excellent safety and total liquidity, but most checking accounts pay little or no interest. With stock market mutual funds, you get good liquidity and hopefully a good rate of growth over time, but you are sacrificing safety because there is no guarantee that you will even be able to get back what you invested when you actually need the money.

So, with financial products, there are trade-offs. You cannot get all of the most desirable features and benefits in one product. They all have a purpose and can complement each other in a well-designed and diversified plan. Since an annuity is going to give you safety of principal and growth potential, it is reasonable to assume that there has to be a trade-off somewhere, and it is with some sacrifice in liquidity.

Fixed indexed annuities require that you make a time commitment, and they enforce that time commitment by a surrender charge. When you consider buying a fixed indexed annuity, make sure you are comfortable with the length of the surrender charge, because your access to your principal is limited during the surrender charge period.

Your time commitment can typically range from 3 to 16 years, depending upon the features and benefits that appeal to you. The time commitment does not mean that you do not have any access to your funds. Many annuity products allow earned interest to be taken after 30 days and others allow up to 10% of your annuity’s value to be taken each year after the first year without penalty. Of course, if you do not need your funds, leave them in the annuity to accumulate on a tax-deferred basis until you decide to begin taking income payments.

This is contrary to bank certificates of deposit that typically only allow interest to be withdrawn and will impose an early withdrawal penalty for any principal withdrawn. So to be able to enjoy the unique benefits that annuities provide, you have to allow the insurance company to hold your funds just like you would allow a bank to hold your funds.

With annuities, just as it is with certificates of deposit, there is generally a correlation between the time commitment that we allow the institution to hold our money and the productivity of our funds. The longer we commit to letting the bank or insurance carrier hold our funds, the higher the rate of interest or upside potential we can enjoy. A 5-year certificate of deposit will usually pay us a higher rate of interest than a 1-year certificate of deposit. The same principle holds true with a fixed indexed annuity. A 10-year product, for example, will typically offer a higher fixed interest rate and higher indexed-based interest crediting than a 5-year product.

If you take out more than the penalty-free amount (which varies by carrier and product), there can be substantial surrender penalties imposed (perhaps as high as 20% of the annuity’s value for a premature withdrawal), so you want to use an annuity as a part of an overall plan where you also own other accounts that have no surrender penalties for your short-term liquidity needs. Use these other accounts for emergency funds and to pursue financial opportunities that arise. Remember, annuities are designed to provide safe growth prior to retirement and guaranteed income streams during retirement. They are not designed for short-term liquidity. You will want to have sufficient funds for that purpose in other accounts, such as checking, savings, and money market accounts.

Choose fixed indexed annuity products for a specific purpose, such as principal-protected growth and income generation, where 100% liquidity is not needed during the surrender charge period. Once the surrender charge period is over, you can withdraw any and all of your money from the annuity at any time without a surrender penalty. Keep in mind that withdrawing money from an annuity will usually result in reporting of taxable income and, if taken prior to age 59½, may result in a 10% penalty tax on earnings.

Possible Additional Benefits

The annuity marketplace is very competitive, and thus carriers often have attractive additional features designed to differentiate their products from the competition. Some fixed indexed annuities have features such as these noted below:

  • Up-front premium bonus: Some annuity products have a premium bonus that immediately bumps up your contract value. The percentages will vary by carrier. But for example, if you put $100,000 into an annuity that offers a 5% premium bonus, your contract value on day 1 will be $105,000. This premium bonus is available to earn interest right from the inception of the contract. You are not, however, allowed to withdraw the premium bonus right away. The premium bonus is often subject to recapture charges if you take withdrawals above the penalty-free withdrawal amount in the early years of the contract. (In other words, what we said earlier about the time commitment applies to the premium bonus, too.) Keep in mind that premium bonus annuities may include lower cap rates, higher spreads, or other limitations that are not found in annuities that don’t have a premium bonus feature.
  • Return of premium features: All fixed indexed annuity products have surrender charges, and so with most of them, you actually can lose money if you cancel the contract during the period where the surrender charge applies. (Again, if you abide by the time commitment, the surrender charge reduces over time and ultimately disappears, so you receive your principal plus all credited interest with no risk of loss.) But some carriers differentiate their products by providing that even if you choose to terminate your annuity contract early, you are guaranteed to receive back at least what you paid in.
  • Bailout features: Some carriers provide for the surrender charges to be waived in case of certain hardships, such as if you are diagnosed with a terminal illness, or become confined to a nursing home, or even if a renewal rate or “cap” rate falls below a certain level on your annuity.
In summary, you can see that annuities offer a lot of positive features – safety from market losses, growth potential, tax advantages, income guarantees, and beneficiary planning advantages – all built on the foundation of the time commitment that you make to the carrier.

More on this and other topics at http://fixedannuityfacts.com/]]>Why People Buy Immediate Annuitieshttp://www.kestlerfinancial.com/Blog/PostID/35Kestler Financial Group35Tue, 15 Feb 2011 00:00:00 GMTAnnuities
For retirees who are not receiving traditional pension benefits, immediate annuities provide peace of mind by providing steady checks They have been called “paycheck annuities” by prominent national commentators.

A purchase of an immediate annuity is essentially a trade: you give an insurance carrier a lump sum of money, and the carrier agrees to provide you with a guaranteed periodic stream of future payments. Once you purchase the annuity contract, the amount and duration of the payments are fully guaranteed by the issuing insurance carrier. As a result, immediate annuities are very easy to understand.

When you purchase the contract, you and the carrier will agree upon how payments will be made, such as:

  • Will they be made monthly, annually, or some other frequency?
  • Will they continue for a certain number of years?
  • Will they continue for as long as you live?
  • Will they continue for as long as either you or your spouse is still living?
  • Will they increase over time with an inflation adjustment?
  • Will there be a remaining value after your death for your beneficiaries?
Once the contract is made, it is generally irrevocable and binding on both parties. The strength of that for you, as the purchaser, is that you have transferred certain risks on the insurer. For example, no matter what rate of return the insurer achieves or fails to achieve, no matter how interest rates change over time, and no matter how long you live, the insurance carrier is contractually obligated to make the guaranteed payments to you. Thus, you have transferred investment, interest rate, and longevity risk to the insurer.

Because once you own an immediate annuity, you have no options (or very limited options) to cash it in or sell it, you should only allocate a portion of your retirement savings to the purchase of an immediate annuity. You may want to consider choosing a payment option that includes a cost of living inflation adjustment and that provides for your heirs.

While immediate annuities may be new to you, defined benefit pension plans have been using immediate annuities for years. An employer will steadily save money while a worker is working for the employer, and when the worker retires, the employer now owes the worker a monthly income for the rest of his or her life. Many employers will go to an insurance company and give them the sum of money that has been saved in exchange for the insurance company taking over the obligation to pay the worker for life.

Because of their simplicity, immediate annuities from various carriers are easily compared. Once you and your insurance agent decide upon the type of payout you desire and either the funds available to purchase it or the income desired, the decision of which carrier to choose typically rests upon which carrier offers the best price or payout and the financial strength of the carrier. Keep in mind that the payment guarantee is supplied by the issuing carrier, thus the financial strength of the issuing carrier is an important consideration in the purchase of an immediate annuity.

More on this and other topics at http://fixedannuityfacts.com/]]>Apples and Annuitieshttp://www.kestlerfinancial.com/Blog/PostID/30Kestler Financial Group30Tue, 08 Feb 2011 00:00:00 GMTAnnuities
Let’s equate it to the grocery store.  Say you want to buy apples on a weekly basis.  The number of apples you buy is a function of

  1. your apple budget, and
  2. the price of apples that week. 
Index annuities are very similar.  As interest rates on long term bonds rise (see below), the insurance company has more money to spend on the purchase of S & P options (apple budget).


Next, since the price of options varies based on the volatility of the underlying index, the lower the volatility, the “cheaper” the options (apples).  As you can see from the two graphs, over the last several months, interest rates have been gradually rising and volatility has been gradually decreasing.  This scenario bodes well for all indexed annuities.



The real story here is how these market changes affect the Annexus portfolio.  Because of its daily pricing and multi-year index strategy, Annexus can purchase twice as much S & P exposure (apples) for the same cost as a traditional annual reset product (consider it a 2 for one sale on apples).  This results in significantly more value for your client!
 
Consider the February Annexus Rate Sheet.  As you can see, we now have a 41/59 allocation at a 0.00% fee.  When we back test this design over the last 30 years and compare it to traditional index designs, the results are impressive.  Where traditional designs back test with average 12-year returns between 2.99% and 3.87%, the BAA 12 back tests between 5.59% and 6.92%.

Ask yourself …If I can provide the same down-side guarantee but generate up to twice the return (apples), which basket should I choose?

   or   ?

If you would like a copy of the back-test, contact your marketing partner at 800-699-0299.]]>February 2011 ANICO Snapshothttp://www.kestlerfinancial.com/Blog/PostID/27Jeff Reed27Sat, 05 Feb 2011 00:00:00 GMTAnnuitiesLife/LTCInside this newsletter:

  • The ANICO Underwriting Process
  • Retirement...Insured and Guaranteed!
  • "Term-Universal Life Blend" on a No Lapse Guarantee UL = Flexibility
  • Revised Suitability in Annuity Transactions Model
  •  ...and more
Read the full newsletter]]>Introducing My Aviva - A new customer service portalhttp://www.kestlerfinancial.com/Blog/PostID/25Jeff Reed25Thu, 03 Feb 2011 00:00:00 GMTAnnuitiesLife/LTC
My Aviva, a personalized policyholder website, will provide customers the ability to access policy information and make simple change requests without calling the Home Office.

Giving customers self-service options should reduce the volume of calls into our Customer Service centers, allowing us to be more responsive to customer needs. It will also allow our valued producers more time to spend on relationships and prospecting.

Read the full Field Update]]>NAFA Response to Investment News Article by Jim Paviahttp://www.kestlerfinancial.com/Blog/PostID/24Kestler Financial Group24Thu, 03 Feb 2011 00:00:00 GMTAnnuities original article on Investment News by Jim Pavia and the NAFA Response.]]>NAFA Response to Motley Fool Article by Dan Caplingerhttp://www.kestlerfinancial.com/Blog/PostID/23Kestler Financial Group23Wed, 02 Feb 2011 00:00:00 GMTAnnuities original article on Motley Fool by Dan Caplinger and the NAFA Response.]]>Positive Annuity Article: Life Long and Don't Prosperhttp://www.kestlerfinancial.com/Blog/PostID/21Kestler Financial Group21Thu, 27 Jan 2011 00:00:00 GMTAnnuities
Read the full article by Ben Steverman of Bloomberg Businessweek here.]]>Aviva offering commission bonus on annuity production!http://www.kestlerfinancial.com/Blog/PostID/19Kestler Financial Group19Mon, 24 Jan 2011 00:00:00 GMTAnnuities
View the Field Updates for Annexus, American Investors, and Amerus.
View the Cabo flyer for more trip details and qualifications.]]>Talking points in response to the MONEY magazine "The Safety Trap" articlehttp://www.kestlerfinancial.com/Blog/PostID/14Kestler Financial Group14Thu, 20 Jan 2011 00:00:00 GMTAnnuities
You can read the original article here. Please also review the Executive Summary Response from NAFA and their recommended talking points that shed light on the many incorrect assertions in the article.

If you have questions or concerns regarding this article, please feel free to contact us for more information.]]>Aviva Field Update: Anti-Money Laundering Traininghttp://www.kestlerfinancial.com/Blog/PostID/16Kestler Financial Group16Thu, 20 Jan 2011 00:00:00 GMTAnnuities
Federal regulations require all life insurance and annuity agents to complete ongoing anti-money laundering training. Aviva has contracted with LIMRA to provide the training at no cost to you. The training site is available 24 hours a day and can be completed in 25 to 35 minutes.

Read the full Field Update here.]]>Aviva Field Update: Income Preferred Bonus Pro & MultiChoice Xtra Pro available in FLhttp://www.kestlerfinancial.com/Blog/PostID/15Kestler Financial Group15Thu, 20 Jan 2011 00:00:00 GMTAnnuitiesIncome Preferred Bonus Pro and the MultiChoiceSM Xtra Pro in Florida for customers 65 and older.

The Bonus Pro combines the features of the Income Preferred Bonus product with a reduced surrender charge schedule to comply with FL S 2176, which went into effect in the state on January 1, 2011.

The Xtra Pro combines the features of the MultiChoice Xtra product with a reduced surrender charge schedule to comply with FL S 2176, which went into effect in the state on January 1, 2011.]]>