Annuities are hard to understand for most retirees, this easy to read booklet explains the new types of annuities and the amazing features they have. Whether you’re looking to purchase an annuity or want information on your current annuities, this booklet provides all the answers you may be looking for.

1. 1-800-254-9567
©American Tax & Annuity Advisors 2014©
PRESENTED BY:
Annuities

3. WHO WE ARE
We are the top tax & annuity experts with over 100 years of combined experience and 400 representatives nationwide.
3

4. If you need income an annuity is a good idea.
If you don’tneed income you don’tneed an annuity.
4

5. There is one purpose of an annuity..
INCOME
5

6. WE WANT YOU TO HIRE US
•Recognized as one of the leading experts on annuities and tax-free wealth transfer strategies.
•Graduated with a B.A. degree in Economics from Kalamazoo College and a law degree from Stetson University College of Law.
•Phil has lectured and taught thousands of agents and brokers powerful strategies to help their clients.
•Founder of Snowflakes dog rescue.
Author of Outlasting The Storm, A Guide To Annuities and Safe Retirement Strategies.
Phil Wasserman, JD
6

7. Kenneth Rossman, CPA
•Graduated from Florida State University with degrees in accounting, finance, and political science.
•Became a Certified Public Accountant in 1983.
•Kenneth was the Senior Tax Specialist at Coopers and Lybrand CPA’s.
•Currently, Kenneth is the Tax and Income Manager at American Tax & Annuity Advisors.
•Kenneth has been successful in IRS litigation cases for various high profile clientele.
7

8. Thereareoveronemillionpeoplelicensedtosell annuitiesnationwide. Unfortunately,mostofthese well- intentionedpeopleare ill-prepared andpoorlytrainedtosell a productthatcanbea powerfulretirement incomeplanningtool.Ioncedida trainingseminarforaboutone hundredagentsinAtlanta,Georgia.Iaskedhowmanyoftheagents represented a well-knowncompanyandaboutninetypercentraised theirhands. Ithenoffered$100tothefirstagentwhocouldexplainhowthatcompany’smostpopularproductworked–onewitha two-tier strategy(explainedlaterinthebook)–totherestofthegroup. Nota singleagentcameforward.Sowhenseveralclassactionsuitswerefiledagainst that company,Iwasn’tsurprised.
Introduction
8

9. Annuity Basics
9

11. Why an a Annuity?
Some Offer
Guaranteed
Lifetime Income
Some Offer
No Risk Growth!
Some Offer
No Fees!
11

12. Four types of Annuities
Fixed
Immediate
(also Known as a SPIA)
Index
(also known as equity index, or EIA)
Variable
12

13. • Acontractbetweenyouandaninsurancecompany
• Fourtypes:Variable,Fixed,Immediate,andIndex
• Purchasedthrough:
–Aone-time,lump-sumpayment,or
–Aseriesofon-goingpaymentsovertime
• Canprovideregular,periodicpaymentsforincome
• Amountinvesteddependson:
–Shortandlong-termfinancialgoals
–Compositionofcurrentportfolio
–Taxsituation
• Investmentgrowstax-deferred
• Nolimitsontheamountyoucaninvest
• Avoidsprobate
• Creditorproof
What is an Annuity?
13

14. Accelerated Benefits
Today it is common for annuities to allow for accelerated benefits to pay for:
•Terminal illness
•Long term nursing care and home
•Critical illness (such as cancer, stroke or heart attack)
These powerful benefits are usually included at no cost, although not all annuities have them.
14

15. Annuity-Aguaranteedinvestmentcontractwith
company
Owner-Theownerofannuitycontract(canbea ora thirdparty)
Beneficiary-Towhomthemoneygoesuponthe
betheowner)
aninsurance
trustortheannuitant
annuitant’sdeath (can
Annuitant-Persononwhomtheannuityisbased(doesnothaveto
owner).Allannuitieshaveannuitants(someannuitiesallowjoint
annuitants)
be
Annuity Terms
15

16. “AnnuitiesarenotgoodforIRA’sorotherqualifiedplans”
-Nottrue!Fixed,immediate,andindexannuitiesmaybevery
goodinIRA’s.
“Allannuitieshavefees”
-Nottrue!Fixedandimmediateannuitieshavenofees.Many indexannuitieshavenofees.
“Annuitiesarenotmeantforseniors”
-Nottrue!Annuitiesarespecificallydesignedforseniorsand retirees.
“I cant get my money out of my annuity”
-Annuities today can be very liquid.
Common myths about Annuities
16

17. • AnAnnuitycanprotectyouagainst:
-Outlivingyoursavings
-Riskingyourprincipal
-Inflation
-Taxes
• Bonus-Manyannuitiesofferup-frontbonusesthat addeven more
toyoursavings
• Annuitiescanoffer:
-Benefitstoensureoptimumqualityoflife
-Greaterbenefitsthanotherinvestmentoptions
-Securesavingsfortherestofyourlife
Features
17

19. Is An Annuity Right For Me?
19

21. • Seeking
-Guaranteed,steadyincomefortherestof yourlife
-Principleprotection
-Inflationprotection
• Older,conservativeinvestors
-Variousinvestmentoptionstomatchinvestmentandrisktolerance
levels
• Concernedaboutoutlivingyourmoney
-Protectionagainstoutlivingyourassets
-Benefitstoyourheirs
• Seeinginvestmentreturnsbeingdiminishedbyvolatilityandfees
-Abilitytosavemoneyona taxefficientbasis
Annuities are a wise investment if you are:
21

22. typeofannuityisit?
isthe length?
arethesurrenderpenalties?
1.
2.
3.
4.
5.
6.
7.
8.
What
What
What
Arethereanyriders?
Whatarethe specificfees?
Ifit isa
Ifit isa
Whatis
variable,whoisresponsible
fixedannuity,istheinterest
the companyrated?
formanagingit?
rateadjustable?
What to ask if purchasing an annuity
22

23. StateGuaranteedFunds
Moststateshaveguaranteefundstohelppaytheclaimsofaninsurancecompanyunabletomeetsitsobligations.Moststatesalsorestrictagentsandcompaniesfromadvertisingthefund’savailability.
ThesefundsoperatesimilartoanFDIC-likeprotectionforannuities, life insurance,long-termcare,andhealthinsurance.Thepurposeof thesefundsis to protect the consumerandinstill trustinthe products.
Iamhighlycriticalofstatesthat donotallowagentstodiscussthis protection.Fixedannuities,includingSPIAA’sandIndex, areamong thesafestproductsavailable.
Certainstates(likeFlorida)arechangingtheirlawstoallowagentsto discusstheexistenceofguaranteedfundswithconsumerswhoinquire.
23

24. TheWhartonReport
ProfessorsDavidF.BabbelandCraigB.MerrillofTheWharton FinancialInstitutionsCenter areleadingacademicsin the areaof retirementincomeplanning.Intheirpaper,“InvestingyourLumpSum atRetirement,”theystate that:“…forcesarecombiningtomake planningforoutlivingyourresourcesmoreimportantthanit hasbeen in thepast.Oldrulesofthumbfor spendingyourassetsinretirement, calleddecumulation,needtobereconsidered.”Whentakinginto accountall thechallengesthatretireesfacetodayinplanningfora long andhappyretirement–longevityrisk,healthcarecosts,inflationand taxes–justtonamea few,theneedforguaranteedincomestreams becomesapparent.
24

25. TheWhartonReport
BabbelandMerrillconcludeintheirpaper:
“Whenindividualsconsiderthelistofpositiveattributesassociatedwithlifeannuities, i.e., guaranteedpaymentsyoucannotoutlive,lowcost,accesstoinvestedcapital,andreasonably pricedfeaturessuchasinflationadjustmentandlegacybenefits,theargumentforthisincome solutioninretirementis compelling.Bycoveringatleastbasicexpenseswithlifetimeincome annuities,retireesareabletofocusondiscretionaryfundsasasourceforenjoyment.Locking inbasicexpensesalsomeansthattheretiree’sdiscretionaryfundscanremain investedin equitiesforalongerperiodoftime,bringingthebenefitsofhistoricallyhigherreturnsthatcan stretchtheusefullifeofthosefundsevenfurther.Incomeannuitiesmayalsobeavehiclethat enablesretireestodelaytakingSocialSecuritybenefitsuntiltheyarefullyvested,bringing substantiallyhigherpaymentsatthatpoint.Thekeyinallofthisis tobeginbycoveringallof thebasiclivingexpenseswithlifetimeincomeannuities.Then,toprovideforadditional desirableconsumptionlevels,youwillwanttoannuitizeagoodlyportionoftheremainderof yourassets,whilemakingprovisionsforextraemergencyexpensesand,ifdesired,abequest. Theselasttwoitemscanbeaccomplishedthroughcombinationsofinsuranceandsavings.
Whenthisis undertaken,youcanenjoyyourretirementwithouttheburdenoffinancialworries
andfocusonmoreproductiveusesofyourtimeandattention!”(2)
2.Babbel,DavidF., andCraigB.Merril.“InvestingYour LumpSumatRetirement.” WhartonFinancialInstitutionsCenter,
August 2007. 25

26. UseAnnuitiestoCovertheBasics
Inotherwords,ifyoucoveryourbasicexpenseswithmoneyreceived fromguaranteedstreamsofincome,them youwouldhave the freedom tousetherestofyourmoneyasyouwish.Youwouldnolongerhaveto worryaboutoutlivingyourmoneyinretirement.Youwouldbeableto enjoyyourdiscretionaryfundsat thetimeinyourretirementwhenyou stillcan.Youwouldalso avoidfluctuationsinthe stock marketorin
anyotherplacewhereyourmoneyisinvestedbecauseyouwouldbe abletomovethoseinvestmentswhenit ismostadvantageousforyouto doso,ratherthanbasedonnecessity.Thiswouldallowyouto
maximizetheuseofyourresourcesanddowhatyouwantwiththerest ofyourmoney.
26

27. SoHowDoIKnowIfAnAnnuityIsRightForMe?
Sohowdoyouknowifanincomeannuityisrightforyou?Areyou retiredornearing retirement?Doyoucurrentlyhave a retirement incomeplaninplace? Doyouhaveguaranteedincomestreamsorare youworkingwithdefinedcontributionplans(401(k),IRA,etc…)?If youdonotcurrentlyhaveguaranteedincomestreamstocoveryour basicexpensesthroughoutyourretirement,youneed to lookat the possibilityofgettinganincomeannuityora seriesofincomeannuities toprovideforyouinretirementoryouwillcontinuetoruntheriskof outlivingyourfinancialassets.
Intheseuncertaintimes,whenevents outsideofourcontrol can change ourworld,financiallyintelligentpeoplewantguaranteedincome streamssothattheycanrespondtowhateverlifethrowsat them.
27

29. Annuity Strategies
29

30. • Similartoa certificateofdeposit
• Incometaxisdeferreduntilyouaccessyourcash
Youearn:
–Interestonyourprincipal
–Interestonyourinterest(compounding)
–Interestonthemoneywouldhaveusedtopaytaxes
Guarantees:
–Returnofyourprincipal
–Returnonyourprincipal
Tax-deferred Fixed Annuity
30

31. • Deferstaxliabilityuntilcashiswithdrawn
• Lifetimeincome
• Guaranteedprincipal
• Guaranteedinterest
• Avoidshighcostsanddelaysofprobate
Somefixed annuitieshaveadjustable interest rates.Make
knowifyourrateisfixedoradjustable.
sureyou
Tax-deferred Fixed Annuity
Warning: 31

32. •Productthatmost peoplethinkof whentheythinkofan annuity,purchased bya premiumpaymenttoan insurancecompany
• Designedtoenhancecashflow
• Monthlypaymentscanbeginimmediately
• Paymentscanlastforafixedtermorforyourlifetime
• Paymentamountsdependupon:
-LifeExpectancy,Age, andHealth
-AmountInvested
-InterestRates
Immediate Annuity
(also known as a SPIA)
32

33. IsanImmediateAnnuityRightforYou?
Animmediateannuitymaybeappropriateifyouare:
• Aretireeneedingincreasedmonthlycash-flow
•Apersonwhohasnoheirsorisnotconcernedaboutleavingan estate
• Someonewhohasset aside other fundstoleave to theirheirs
• SomeonewhoneedstoshelterassetsandqualifyforMedicaid
• Aretireewantingtoavoidthehasslesofinvestingonone’sown
Positives of a SPIA
1.Actuarially based, so the older you are and if in poor health the more the annuity will pay out.
2.Tax advantages outside of an IRA on qualified money because payments are partially treated as a return of capital (annuity exclusion ratio).
3.Can guarantee an income for life.
33

34. Negatives of a SPIA
1.Payments are set and may not increase for inflation (with some exemption).
2.When annuitant dies, the payments stop (except for period certain) and the money belongs to the insurance company.
3.SPIA’s aren’t liquid –once completed they are permanent and the money paid cant be accrued
Period certain SPIA
One of the biggest drawbacks for people considering purchasing a lifetime SPIA is that once the purchase is made the money belongs to the insurance company. Payments will be made to the annuitant for life. But what if the annuitant dies suddenly? Then all of that money is gone. The answer is period certain, which would guarantee the payments to the heir for a certain period of time even if the annuitant does immediately.
34

35. Johnisa70-yearoldmale.HepurchasesaSPIAAfor100,000fromawell-knowninsurancecompany.Hislifetimepaymentsare10,000ayearforever.Butifhediessoonafter,thatmoneyislosttotheinsurancecompany.
SoJohnpurchasesan optionknownas aperiodcertain,whichcanbe any periodhe chooses(5-10-20years).Ifhe diesbeforethatperiod,paymentswill bemade to hisheirsfortheremainderoftheperiodcertain.However, whena periodcertainis chosen,payments arereduceddependingon thelengthofthe periodcertain.The longerthelength,thehigherthereduction.
Example:
Johnchoosesa 10-yearperiodcertain.Hispaymentsarereduced
fromthepreviousexampleto9,500ayear. Hediesatthefouryear
anniversary.Paymentswillcontinuetohisheirsforanother6 years.
Example
35

36. Whatisavariableannuity?Itisaninvestmentproductthatplacestheriskisontheconsumer,unlikeotherannuitiesthatplacetheriskonlyonthecompany.
Avariableannuityisa groupofmutualfundssurroundedbyanannuity. Theannuityprovidesthetaxdeferral.ManyinthepastcriticizedVA’sforoutrageouslyhighfeesandfewbenefitsfortheconsumer.Thiswastruebuttimeshavechanged.
Currently,VA’shavestrongbenefitsinreturnforfeesthatarehigh,servetohelpoffsetmarketrisk.
but
Variable Annuities
36

37. Fees-MostVA’shavefeesof2-4%whenthemutualfundandride
feesarefactoredin.
Riders-Today,someVA’sofferridersthatmayprotecttheinitial
principaland/orprovidelifetimeincomeevenifthemarketfalls.
WhoareVA’sgoodfor?Peoplewhoonlywantto be in the market
needtolimittheirrisk.
PositivesofVariableAnnuities
• Canchoosefromoptionsofmutualfunds
but
• Riderscanprotectinitial investmentfordeathbenefit and/orincome
Aspects of Variable Annuities
37

38. • Feesarehighfortheinsuranceofmarketrisk
•Thedeathbenefitistaxedasordinaryincome,nottax-freelike regularlife insurance(thisisimportantbecausemanyagents emphasizethedeathbenefit)
• Accesstomoneymaybelimitedin adownmarketduetomarket
losses.
Negatives of Variable Annuities
38

39. How
the New Hybrid
Index
Annuities
Work
39

41. •Atypeoffixedannuitythatoffersthepotentialtocapturesomeof thegainsinthestockmarketwithouttheriskofloss.
• Returnsaredeterminedbytheperformanceofanindexsuchasthe
S&P500.
–AlsoknownasEquityIndexAnnuities(EIA)
–Otherindicescanbe selected,e.g.DJIA,NASDAQ,Russell2000
• Investors’returnsareusuallycalculatedasa percentageoftheindex
performance.
What is an Index Annuity?
41

42. Anindexannuitywasdesignedtobeafixedannuity,oneinwhichtheprincipalwassafe,withaninterestratedeterminedbytrackingastockmarketindex.
Originally,theideawastoreceivesomeofthemarketgainwithnorisk totheprincipal.Companiesoftencomparedit togoingtoa casinowith$10,000andgettingtokeepthe$10,000nomatterhowyouplayed.Even if you lost, you would get to keep your $10,000. But if you managed to win, you would get to keep a chunk of your winnings but have to give up some of the gain.
What is an Index Annuity?
42

43. Theinsurancecompanyinveststheannuitypremiuminbonds.The
principalremainssecurebecause itis notattachedto the market.
interestratethatthebondsthrowoffisusedforthefollowing:
The
1
2
3
4
-Anyinterestguarantee
-
-
-
Commissionto the agent
Thepurchaseofoptionstoprovidemarketupside
Theinsurancecompanyprofit
Ararelynoticedobservation:Itisobviousthatwhena higher
commissionispaidtotheagentorabiggerupfrontbonusgiven
tothe
client, thereislessmoneyremainingtopurchaseoptions.Themore
moneyleft fromtheinteresttopurchaseoptions,thehigherthe potentialgainfortheclient.
How they Work
43

44. • Surrenderperiodsareusually7–15years.
-Bonusesashighas10%oftheinitialinvestmentareoftenofferedfor longersurrenderperiods
•Investorsgiveupsomeoftheupsideinreturnfora no-loss guarantee.
-Mosthaveamaximuminterestrate(cap)anda floor
• Providetraditionalannuitybenefits.
-Tax-deferredgrowth
-Permitearlywithdrawalwithoutpenaltyundercertainadversemedical
conditions
Index Annuity Features
44

45. Thehigherandlongersurrendersareusuallydeterminedby one oftwothings:(1)the upfrontbonusto the client or(2)high commissionstotheagent.
Annuitieswithlargeupfrontbonusesrequirea longerholdingperiod
sothecompany‘scanrecoup
its money.Ahigherbonusforthe
client
creates
higher
surrender
fees
and
a
longer
surrender
period.
Surrender Periods
45

46. Factorsthatcaninfluenceperformance:
• ParticipationRate(PercentageofProfit)
-Thepercentageofthe annualgainin the indexthatis creditedto the account value
-Mayormaynot be guaranteed(so it canchange)
• AnnualAssetFee
-Aflatpercentagedeductionfrom the indexgrowth
-Sometimescalled“yieldspread” or “margincost”
-Most indexannuitieshave noasset fee (but somedo)
• Cap
-Themaximumpercentofthe gainin the indexto be creditedto the account
-Some EquityIndexAnnuitieshave no cap
Performance of Equity Index Annuities
46

47. Itisimportanttogetanannuitythatresetsannually.Statistics showthat anannuitythatlocks in the annualprofit,calledratcheting,will outperformanannuitythattakestwoyearsormoretolockintheprofit.
Thisisthecaseevenifthebenefitsappearhigherinanannuitythat locksintheprofitsovera 2yearperiodorlonger.
A cap is the top end percentage an annuity crediting method can earn (its ceiling).
A spread is a fee.
Crediting Methods –Caps and Spreads
47

48. DifferentCreditingMethods
Whyare most annuitiesdependant onthe S&P500?Thisissimplybecause theS&P500is lessvolatileand theoptionscostless.
Fromourexperiencethetwo most successful creditingmethods are:
1-The S&P500 point-to-pointwith a capthatis usually7or8%.Thiscrediting methodresets annuallyand thus compounds. However, it will miss abig yearbecause ofthe cap.
EVENWHATAPPEARSTO BEASMALLCAP,7 OR 8%, CAN BEVERY EFFECTIVEDUETO COMPOUNDING.
2-In a big year,the most profitablecreditingmethodappears tobetheS&Pmonthly point-to-point.Thisstrategyhasa monthlycap. In ayearwhenthe market goessteadily up,it hasprovidedamazinggainsto belockedin at year’send.The negativesideof
thisstrategy isthat in avolatilemarket,a badmonth or twocanwipe outallofthe gains
THETWOABOVEUSUALLYHAVENO FEES ORSPREADS.
Todaythere are NASDAQ,Dow,and evenglobalcreditingstrategies.Most have caps.
48

49. Thenewhybridannuitieswithguaranteedincomeriderscreate guaranteedincomestreamsthatyoucanturnonasyouneed, while yourlumpsumcontinuestoearninterestbasedona creditingstrategy ofyourchoice,withoutthefearofloss.Theseannuitieshavebecome increasinglypopularaspeoplelookforwaystogenerateguaranteed streamsofincomewithout losing controloftheir lumpsum.Your initialprincipleincreaseswithguaranteedannualinterestandpayouts alsoincreasewithage.Thisgivesretireestheguaranteedincome streamsthattheyneedtoensurethemselvesofalwayshavingthe moneytheyneedtocontinueenjoyingtheirretirement.
The New Hybrid Annuities
49

50. Thefactthattheseincomestreamscanbeturnedonandoffgives
peoplecontrol oftheir retirementincomeand,therefore,their lives.The ownersoftheseannuitieshaveguaranteedincomewaitingtobeused whentheyneedit.Thisincomeisavailabletothemwhenunforeseen circumstancescreatea needforit.
Whatfollowsisan exampleofthe
incomeavailable fromoneofthese
newhybridannuities
for
a
70
year
old
person
who
places
$100,000
in
the
annuity.
The New Hybrid Annuities
50

51. Endof
Year
AttainedAge
AccumulationPeriod
WithdrawalPaymentBase
Guaranteed Withdrawal Percentage
GuaranteedAnnual Withdrawal Payment
Issue
70
$110,000
n/a
n/a
1
71
$115,500
6.10%
$7,045.50
2
72
$121,275
6.20%
$7,519.05
3
73
$127,339
6.30%
$8,022.34
4
74
$133,706
6.40%
$8,557.16
5
75
$140,391
6.50%
$9,125.41
6
76
$147,411
6.60%
$9,729.09
7
77
$154,781
6.70%
$10,370.33
8
78
$162,520
6.80%
$11,051.37
9
79
$170,646
6.90%
$11,774.58
10
80
$179,178
7.00%
$12,542.49
11
81
$188,137
7.10%
$13,357.75
12
82
$197,544
7.20%
$14,223.18
13
83
$207,421
7.30%
$15,141.76
14
84
$217,792
7.40%
$16,116.64
15
85
$228,682
7.50%
$17,151.16
The New Hybrid Annuities (example)
51

52. Whenanannuityisannuitizedthemoneyisgiventotheinsurance company,which then returnsit backto the client based onacontractual obligation.Theclientcanreceivetheirmoneyasanincomestreamfor life orovera predeterminednumberofyears,ora combinationofboth. Regardlessofwhichpayoutoptionisselected,theclient hasnocontrol oftheir money.
Inrecentyears,annuitieshaveaddedanincomeridertotheirmenuof options.Thisriderallowstheowneroftheannuitytoreceive
guaranteedlifetimeincomefromanannuitywithoutannuitizing
therefore retainfullcontrol oftheir money.
it and
Income Riders and How They work
52

53. Theseridersareofferingthebestofbothworlds:guaranteedincome
andavailabilityofthe lumpsumofmoneyif anunexpectedneed arises.
Theridershavevariousformsbutsomecommonfeatures.Theyall havea payoutfactorbasedontheageoftheannuitant.Manyhave guaranteedgrowthratesthatapplytoa special“IncomeAccount Value.”All ofthe ridersguaranteean incomestreamthat can goupbut will nevergodownaslongastheownerdoesnottakeadditional
withdrawalsfromtheannuity.Mostoftheriders
turntheincomeonandoffastheychoose.
allow
the
owner
to
Income Riders and How They work
53

54. IncomeAccountValue-TheIncomeaccountvalueisonlyanumberthatisusedto calculateincomeatthe time the clientwishesto activatetherider.The income accountvalueisNOTthesameastheaccountvalue.Theaccountvalueisthe client’smoneyandgrowsbasedonthecreditingmethodthatisselectedeveryyear duringtheannualreview.ManyclientsconfusetheirAccountValue(theiractual money)withtheirIncomeAccountValue(avaluewhichisusedtocalculatea guaranteedincomestream).Mostincomeriders have aguaranteed growthfactor thatcreatesaseparateincomebucket(IncomeAccountValue),whichthengrows
ataguaranteedrate.Youmustcarefullyreadthefineprintontheseridersto determinewhatwillkeepyoufromreceivingtheseguaranteedgrowthrates.Many ridersdonotgivetheguaranteedgrowthrateifawithdrawalismadeintheyear. Thismeansthatif theannuityisin a qualifiedaccount,andtheclientisover70½ yearsofage,therequiredminimumdistribution,whichmustbetakenbylaw,will nullifytheguaranteedgrowth.Thisisparticularlytrueinthelargergrowthrates.
Income Riders and How They Work
54

55. PayoutFactor-AllIncomeRidershavea payoutfactor.Thisfactorisa percentage
thatisbasedontheageofthe annuitantwhentheyfirstwishtoreceivea guaranteedincome.Thesefactorsarealmostalwaysthesame:5%atage60,6%at age70,7%atage80andabove.However,indifferentinsuranceproducts,the factorchangesevery10years,every5years,oreveryyear.
ProductA-Payoutfactor=5%at age60,6%at age70,7%at age80andabove. ProductB-Payoutfactor= 5%atage60,5.5%atage65,6%atage70,6.5%at
age75,7%atage80,7.5%atage85andabove.
ProductC-Payoutfactor= 5%atage60,5.1%atage61,5.2%atage63,5.3%at
age64,….upto8%at age90.
Allincomeridershavea feeassociatedwiththem.Thesefeesareusuallywithina35to50basispointrange.Someofthefeesaretakenonlyfromgain(e.g. nogain=nofee)andothersaretakenregardlessoftheperformanceoftheannuity.
Income Riders and How They Work
55

56. Sowhichridersisthebestforyou?Itdependsonyourrealsituation andwhenyouwanttostart taking income.Ifyouare goingtolet your accountbuildfora periodoftime(5to6years)beforeyouplanon takingincomeandyouwill notneedtomakeanywithdrawals,thenan annuitywitha highguaranteedgrowthfactormightbetherightonefor
you.Onthe otherhand,if youare lookingtostart yourincomein1or
2
years,thentheannuitywiththe
highest
payout
factor
and
lowest
fees
might
be
the
most
appropriate.
IncomeRidersand How They Work
56

57. A New Index Strategy
The Rainbow Strategy
(Global Lookback)
57

59. Inthesetimesofhighvolatility,peoplearelookingforwaystodiversifytheirportfolioinordertoprotecttheirnesteggandtrytocaptureasmuchoftheupsideaspossible.Butwhatexactlyisdiversification?Isitchoice?AJellyBeanStorecanhavethousandsofdifferentchoicesofcolorsandflavorsbuteverythingyoubuyisstillajellybean.Truediversificationisamixtureofuncorrelated,orlessercorrelated,
items.Whenlookingfordiversificationforwhereyouputyournest
egg,youwant
theglobe.
to
be
spread
out
across
the
different
economies
around
The Rainbow Strategy
59

60. Wheredoyouthinkwearegoingtoseetheeconomyimprovinginthe
nexttenyears?China?Europe?Japan?America?Howwouldyouliketobeinapositionwhereyouwouldnothavetoguesswhicheconomywillgrowthefastesttobeabletotakeadvantageofthatgrowth?Thatiswhatthenew"rainbowcreditingmethod”does.
Manyoftheexpertsfamiliarwiththisstrategysayitislikebeingable
tobetontheraceafterthehorseshaverun.Hereishowitworks.
Thestrategyusesfourindicesfromaroundtheworld:theHangSengin
China,theDowJonesEurostoxx50inEurope,theNikkei225Index
Japan,andtheS&P500inAmerica.Thisstrategyisnotonly diversifiedusingeconomiesfromaroundthe world,butit is also weightedsothat mostofthemoneyisgoingtotheindicesthatare producingthebestresults.
in
The Rainbow Strategy
60

61. Attheendoftheyear,therainbowstrategyallocates 40%ofthemoney
inthestrategytotheindexthathasgrownthemost,30%ofthemoney totheindexwhichcameinsecond,20%ofthemoneytotheindex whichcameinthird,and10%tothethetrailingindex.Thismeansthat the70%ofyourmoneyisallocatedtothetoptwohighestgrowth indexes.Itthenaddsupall oftheseresultsandmultipliesthetotalby60%.A1.5%freeissubtracted.Iftheresultispositive,youraccountis credited with the earnings.Ifthe result is negativeorzero,youraccount remainsunchangedfromtheprioryear.Soinupyears,youraccountis
growingat a substantial
earningsareprotected.
rate
and
in
down
years
your
principal
and
past
The Rainbow Strategy
61

62. The RainbowStrategy
Hereisanexampleofhowthiswouldactuallywork:
IndexAgrows60%X40%ofmoneyisallocated=24%
IndexBgrows30%X30%ofmoneyis allocated= 9%
IndexCgrows20%ofmoneyisallocated=4%
IndexDshrinks10%X10%ofmoneyisallocated=-1%
Total
=
36%
36%X60%=21.6%-1.5%spread=
20.1%interestcredited
Andyoudid nothavetoworryaboutwhich ofthe fourGlobalMarkets
wasgoingtogrowthemost.Thisstrategydidall oftheworkforyou!
62

63. The RainbowStrategy
Insummary,theRainbowstrategyoffersthemostinnovativeresponse
tothevolatiletimesthatwearecurrentlylivingin.Ifyouarelooking fora waytoprotectyourretirementnesteggandstill havea verygood chancetoearnsomeimpressivereturns,thenthisnewandinnovative strategyhasdefinitelyearnedtherighttobehighlyconsidered.Finding
thesekindof
returnswiththesafetythattheseproductsarefamous
for
is
the
perfect
answer
to
the
uncertainty
ofthe era in which we live.
63

64. Therainbowmethodisan optionbasketwhosebest-performingindicesare weightedmoreheavilythanthosethatperformlesswell. Itisalways a"look-back"becausethemoneyisallocatedbasedontherankingoftheperformance aftertheperiodisover.Rainbowsarealways indexblends,butnotallindex blendsarerainbows.The differenceisblendedmethodsstateatthebeginning whatthepercentagemake-upisoftheindicesintheblend,buttherainbow methodcombinationisbasedon thereturnscalculatedwiththelargestportion goingtothebestperformers.The Rainbowmarketingappealhasbeen expressedbysayingthatthe annuitybuyergetstobetontheraceafterithas beenrunandthatmostof thebetwillbeputdownonthehorsesthat“winor place.”
Rainbow Connection
(Getting the largest pot of gold)
64

65. InmyearlierlookIsaid thatifthechoicewas betweentheS&P500method witha cap anda rainbowmethod with ahighercapthatI wouldpickthe rainbowmethod everytime–andI stillfeelthatway. However,I notedthat cappingtherainbowreturnsomewhatdefeatsthemainattractionofusingthe method–it’dbe likepickingthewinninghorsesaftertheracebutbeing limitedtoa $2bet.
Theotherpointraisedwas thatofcorrelation,orhow closelyoneindextracks another.Forexample,theS&P500and DowJonesIndustrialAveragehave over99%correlationoverthelast50years. Ifyourgoalisdiversityinreturns itdoesn’tmake sensetoputtogetherindicesthatmove thesame way. My feelingisifyou areusingtherainbowmethodyou shouldattempt indicesthat havethelowestcorrelationbecauseonemighthita home run.Sure,oneindex couldbe astinker,butthelowestperformerisgiventheleastweightthustheimpact is minimized.
Rainbow Connection
(Getting the largest pot of gold)
65

66. GlobalLookback:
The
Basket
• S&P500
• DowJonesEUROSTOXX50
• Nikkei225Index
• HangSengIndex
66

67. GlobalLookback:
TheBasket
Nikkei225Index
AnIndexoftheMostActivelyTradedIssues
Exchange
i.e.Toyota,Canon,Sony
HangSengIndex
ontheTokyoStock
AnIndexthat containsthe40LeadingStocksontheHongKingStock
Exchange
i.e.HSBC,Cosso,Espirit,Holdings
67

68. GlobalLookback:
TheBasket
DowJonesEUROSTOXX50
AnIndexthat
includesblue-chipsectorleadersin
i.e.Bayer,Nokia,Volkswagen
S&P500
WesternEurope
AUSIndexthatincludes500LeadingCompanies
Industries
fromaRangeof
i.e.GeneralElectric,Wal-Mart,Microsoft
68

69. Go with the Winner
Schedule a meeting with the top Annuity experts
1-800-254-9567
69

70. Disclaimer:
This booklet does not give individual tax or investment advice, it's purpose is to educate you on annuities. None of the examples in the booklet should be used for your personal planning. The products and ideas referenced in this booklet may not be available in: all states, all ages and all scenarios.