Annuity Benefits


Annuity BenefitsWhen writing and speaking about annuities, I sometimes get caught up in products and contract specifics and need to zoom out to the big picture now and again.

Lets take a moment to look at the highest level view of annuities, where you really have just two types of benefits.  These are either Lifetime Income, or Fixed Term, solutions.

Fixed Term Options

Fixed term annuities, like Secondary Market Annuities,  Fixed Annuities, and Indexed Annuities, offer a known length of  term.  SMA’s and FA’s will also have a fixed appreciation rate.

Payouts from any of these products can either be lump sum, or income.  You can find fixed appreciation, fixed term lump sum payout annuities (SMA Lump Sums are highest yield), or you can find fixed appreciation, fixed term income streams that payout for a defined period of time.  These are SMA immediate and deferred income.

Fixed annuities and Indexed annuities also offer these defined lengths of time, and they offer additional benefits of some liquidity and surrender value, which SMA’s do not have.

With a fixed appreciation rate you have the ultimate in guarantees.  Put in X today, and you know your will get Y out in the future. Period.  This can be hugely rewarding and there are excellent yield opportunities in this avenue.

Lifetime Options:

Immediate Annuities simply trade assets for income- a one way ‘annuitization’ path.  This can be very lucrative, but is a hard mental leap to give up control of assets.

If you’re seeking to maintain some level of control over your assets, or want the potential to leave an inheritance, you will need to consider annuities that offer an investment account as well as a potential income account.

The best lifetime income with account value offering today is the Hybrid Annuity.  This is an index annuity with a lifetime income rider that can be turned on in the future.  This provides you with the potential for appreciation in the markets, no risk of loss or downside, and lifetime income protection, all in one product.

Give us a call today if any of these types of annuities and benefits suit your situation.  800-438-5121

Appreciation Rate:

In the fixed term section, you saw that many fixed term lump sum and fixed term income cases have a fixed appreciation rate. But what about the appreciation rate in other kinds of annuities?

If you are leaning towards lifetime income annuities that offer both the investment account and the income payout, the next big division to consider is the appreciation method that suits you.

Variable Annuities With Lifetime Income grow and decline with the markets.  These are NOT a great option for safety, and furthermore, many carriers have scaled back on variable annuity offerings in recent years.

By contrast, Fixed Index Annuities with Lifetime Income Riders grow based on a market index, such as the S+P 500, with no risk of loss.  These are sometimes known also as Hybrid Annuities.

It’s important to keep in mind here, however, that the primary benefit you are buying is the lifetime income.  The investment should have performance, but they are an added benefit above and beyond the primary benefit of the lifetime income insurance.


It’s critical to know the benefits you seek when considering annuities.  It’s easy to move from seminar to free lunch to product marketing flyer and get quite confused by specific product terms and riders and conditions.

Save yourself the confusion by letting us help you focus on your goals first.  Once we identify the types of annuities that accomplish your goals, you can buy with confidence.  We can help- give us a call.


Are Pension Forecasts Too Optimistic?


Pensions- in generations gone by- were a staple of the workplace.  Work for the company for your careeer, and get rewarded with a retirement pension.

As you paid in with time and money, the company matched and paid in with money and hired people to manage those funds and dole it out.  We know the theory… but what about the people behind the scenes running the money?

This distressing WS Journal article indicates some overly optimistic managers at the helm.

If you were a better stock picker than Warren Buffett, would you be punching the clock every day as the faceless manager of a corporate pension plan?

Judging by many companies’ recent financial statements, they must believe their pension plans are run by such unheralded baby Buffetts.

These expectations for future stock returns at major companies remain stubbornly high—often between 12% and 16%, or nearly twice what Mr. Buffett himself seems to believe the pension plan he oversees can earn on stocks. Such rosy hopes may not survive the collision with reality.

While the article concerns itself with future profits, if I  was a retiree depending on a pension, I’d be more concerned with liquidity and solvency than profits.  Making up for decades of over optimistic assumptions, compounded, can be impossible.

Of course, it’s just another good reason to put your own private pension in place to safeguard.

The article concludes:

With the S&P 500’s dividend yield at 2% and the long-term growth rate of dividends and earnings at 4.5% (including inflation), a sensible expectation for long-term annual stock returns is roughly 6.5%, says William Bernstein, an investment manager at Efficient Frontier Advisors in Eastford, Conn.

You should leave the fantasies of higher returns to the professionals—who probably won’t achieve them anyway.

Now with professionals, and Warren Buffet himself, braced for a long term yield from equities in the 6.5% range, and with all the volatility and risk that brings, why wouldn’t you seriously consider a stable annuity paying a similar yield?  Of course I’m referring to Secondary Market Annuities in this case, which routinely have yields in the 6.5% range, but the same logic can also apply to Index Annuities as well, with attractive yet no risk market participation.  

Give up a lot of volatility for a little yield, and gain a lot of safety and peace of mind…  That’s the premise of an annuity driven retirement.  Contact Us to get stated building your guaranteed income stream.


Case Study- Is A Fixed Index Annuity The Right Tool For This Job?


This post is one of a series of questions and answers from our readers who are seeking the right annuity for their needs.

This came in via email:  This reader listed the following parameters for their desired annuity;

1. An annuity that keeps 100% of my principle investment for my children.

2. Pays the most income per month

3. Has the lowest fees.

4. Pays on 100% of my investment.

5. Protects my principle investment in a down market but increases my principle in an up market.

Great parameters, and this describes to a T the attractiveness of fixed index annuities, often marketed as a ‘hybrid annuity’.  The easy answer to this inquiry is to find the best Fixed Index Annuity for this individual, however that is not truly the best combination of Safety, Flexibility, and Profitability.  You can’t wrap all these goals into one annuity and expect each goal to be met perfectly.

Our answer to this question is below:


I appreciate the brevity and clarity of your question, unfortunately, the answer is long.  Here’s the summary: you can’t guarantee MAX principal/inheritance amounts AND take out Max income for life from the same annuity contract, and have both goals perform to their full potential.   One or the other of these objectives will suffer and your probability of failure goes up.  If you’re willing to let your future inheritance suffer, a Fixed Index Annuity may be just the ticket.

However, you CAN guarantee that BOTH goals are maximized with two annuity contracts- a deferred lump sum annuity paying your heirs, and an income annuity supporting you.  Separating your goals and using the right tools for each job locks in BOTH objectives, and does so at a lower cost, with lower fees, and with higher degree of certainty.

Here’s the full answer:

We believe that what makes the most sense is for you to use a deferred annuity for the inheritance, and have a separate income focused annuity for income purposes.  Trying to accomplish both goals with one hybrid annuity is likely to be disappointing.

What you asked for is a perfect description of the benefits that are used to market index annuities, however with the important caveat that if you are intent on absolutely preserving your investment base for inheritance, you will not be able to draw income in down years without invading principle.  Did you see our posts on ‘reverse dollar cost averaging”? This would be your plight.  You can’t guarantee principal AND take MAX income without some consequences.

A look at a Fixed Index Annuity with Lifetime Income rider illustration will show impressive growth in the ‘income base’ or ‘benefit base’, much lower projected growth in actual account value, then when income starts, you will see the account value dissipate in 10 years or so.  Income benefits are paid our of YOUR money first before you ride on the Insurance company’s shoulders, therefore, its’ quite likely there will be little or nothing left for inheritance.

Any scenario with a product whose performance may vary (variable annuity or index annuity) where you absolutely must have a certain income every month could box you in to spending principal.  In fact,  if you avail yourself of the guaranteed income benefits riders in index annuities, those income streams WILL erode your account value principal and put your inheritance goals in jeopardy.

There are always tradeoffs, but please consider the following alternative.

By using secondary market annuities, whose returns are fixed, and guaranteed, but which come in a variety of timelines, we could put together a winning solution.

We would use a deferred growth contract so that the future payout of the deferred contract equals or exceeds your total initial investment today.  Then, additionally, we would use an immediate income type contract which offers the highest potential payout for income purposes now.

This income could also be obtained with a plain immediate annuity if you prefer, which offers longevity insurance, or an index annuity with the GLWB type income benefits.  However, I must say our secondary market annuities almost always beat the index annuity assumptions and come with no fees, variables, or assumed future rates of return.

Now, what I’ll describe sets a period certain date when your inheritance dollars will be paid- and regardless of your passing.  If you want it to be contingent on your life, then we should look at life insurance to fill that need.  However I think you’ll see my proposed solution below is superior.


Basically what I’m thinking of is a scenario like this- let’s assume you have $600,000 cash today, and you wish your heirs to receive $600,000.  I’ll assume you are 60 and in great health, so conceivably could enjoy another 30 years, and you want the most income possible in that time period.

By placing roughly $100,000 of your portfolio on a long term, deferred, lump sum contract, you lock up and guarantee that you or your heirs will receive this windfall at a specific date in the future.  I’ll illustrate with this currently available secondary market annuity:
$95,552 investment today, pays $634,090 in one check on September 5th, 2039.  You can set this up today in an LLC, and gift the LLC membership to your heirs over time.  When the income comes in the future, it will pay to the LLC and it won’t matter if you are still living or not.

So- future inheritance, locked in and guaranteed today.

Now, for income….


Based on my hypothetical scenario, you still have $500,000 to work with to generate income.  As I said, you could look at an immediate annuity which will ensure against your longevity risk, or you can consider other period certain secondary annuities.  Or, you can consider an index annuity but take advantage of all the income benefits and bonuses and riders and disregard the account value concerns.

Because your took care of the inheritance with your long term deferred contract, you can focus solely on income now.  Depending on your age, a Secondary Annuity or an Immediate will likely pay more than an index or hybrid product.

A secondary annuity or an index annuity will also ensure additional inheritance to your heirs- an immediate annuity will not.

To place this $500,000 in secondary market annuities, you will end up with much higher guaranteed and certain payments, but it will be a variety of contracts and terms.  That’s just the nature of this marketplace.  This contract is illustrative of one we’d use in crafting your portfolio:


An immediate annuity on a 60 yr old male is appx $2900/ month income with a $500,000 premium, and depending on various factors.

The same premium in a fixed index annuity with no deferral period is appx $2200/ month.  Again, there are many varieties and contracts to chose from.

We would most likely get from $3500 to $4500 per month in Secondary market annuity cash flows over a 30 year certain period, from multiple carriers.  This will depend on availability and readiness to take action, however.

Now, as to the fees:


There are no costs or fees on the Secondary Market Annuities- the total cost is the purchase price.   Likewise, with an immediate annuity, there are no ongoing fees- you will simply trade your lump sum for a monthly lifetime check.

Bear in mind, too, we have nearly every annuity available nationally at our disposal- we don’t market one particular company or product, but rather, market our services putting the whole package together.  We’re not captive to one company.

Additionally, we won’t sell certain B rated, Index Annuity products that are marketed as ‘Hybrid Annuities’ with Swiss Army Knife lists of characteristics.  We don’t see the credit risk of the issuer as one worth taking.

As to the income component of your scenario, I need a few pieces of info such as your home state to illustrate further……

Would you like this sort of attention and analysis of your annuity questions and retirement goals? Contact Us today!

Factual Analysis of Index Annuities


Fixed index annuities will eventually find their place in the retirement planning marketplace, although not without a lot of kicking and screaming from the financial press.

Let’s take a close look at some of the misleading information that explodes from seemingly reputable publications and a well-researched rebuttal from an insurance industry analyst.  If you read both with an open mind you should realize any annuity product can be of value to consumers if only placed in a well-designed retirement portfolio.

The negative article comes courtesy of Lisa Gibbs of Money Magazine and highlights a few cases of misappropriated index annuity contracts with the intention of casting a shadow over the entire industry.

It’s amazing to me that stocks and mutual funds weren’t similarly attacked when trillions of dollars in wealth vanished as a result of the market meltdown in 2008.  Of all the people I talk to every day, no one has mentioned they have to delay retirement because of an annuity underperforming.

Well, Sheryl Moore of came to the rescue in a thorough attempt to set the record straight.  Sheryl posted a 52 point counter argument to Lisa’s article that documents the many factual errors published by Money.

Which article do you think required more knowledge, information and insight?

There are two things you need to understand.  Annuities are good products that offer valuable benefits to consumers.  And, no specific product or strategy is right for every person.

Between the two viewpoints expressed in these articles, which level of diligence would you like an advisor to offer?

Every person approaching retirement deserves honest analysis rather than sensational opinions.

Please call or email for a fact-based second opinion of any annuity you are considering.

Bryan J. Anderson

800.438.5121 [email protected]

Fixed Index Annuities- Safety and Growth Amid Uncertainty


Where can one find the best value proposition in the annuity industry these days?  Fixed rates are very low and variable products don’t protect against market volatility and contractual guarantees can be expensive.

Let’s take a look at fixed index annuities for a moment, a product that offers upside growth potential with protection of principle.  John Rafferty of American General Life tackles the subject in a recent Insurance News Net blog.  Here is John’s article.

Since cap rates on fixed index annuities fall with interest rates, John offers some insight on how to choose the proper crediting method in order to maximize growth.

The way I see it, safety is of paramount concern in today’s economic environment.  Few pre-retirees can afford to risk valuable retirement assets and even fewer want to do so.

The value in fixed index contracts is clear… consistent protection and growth potential in addition to the highest levels of guaranteed future income available.

If you don’t have a pension waiting for you, consider fixed index annuities as a way to ensure a reliable income source in your retirement years.

For information on how these products work and availability in your state, contact me at your convenience via phone (800.438.5121).

Visit here for a refresher on fixed index annuities