The document discusses preparing for retirement with a variable annuity product called the Northwestern Mutual Select Variable Annuity. It outlines key features like tax-deferred growth, guaranteed death benefits, and options for guaranteed retirement income. Concerns around running out of money, health costs, and inflation in retirement are addressed through the annuity's features and investment options.
The document discusses the benefits of fixed annuities for retirement planning. It notes that retirees face significant financial challenges, including rising healthcare and living costs. Fixed annuities offer guaranteed returns, provide a stream of income for life, and allow for tax-deferred growth. Immediate annuities provide guaranteed lifetime income, while deferred annuities allow for long-term accumulation of assets on a tax-deferred basis before receiving income.
This document discusses how life insurance can help achieve retirement goals by providing tax advantages. It notes that life insurance builds cash value on a tax-deferred basis that can supplement retirement through tax-favored loans and withdrawals. The document provides an example of a couple using policy withdrawals in retirement to lower their taxes while funding special expenses. It highlights the benefits of leveraging a life insurance policy for retirement through its death benefit, tax-deferred growth, and potential access to cash values.
What is an annuity?
An annuity is an insurance-based contract between you, the owner, and the contract issuer.
This is basically how annuities work: You pay after-tax dollars to the issuer, the issuer invests the money for you, and any earnings accumulate tax deferred. At some point, the issuer pays out the principal and earnings to you or to your beneficiaries. Earnings are taxed as ordinary income when they’re distributed.
This document provides information about immediate fixed income annuities as a way to guarantee income for life after retirement. It discusses factors like life expectancy, the risks of outliving savings, and how annuities provide guaranteed lifetime income through payout options like life only or joint-survivor. The document also covers taxation implications and factors to consider when evaluating different annuity products and insurance companies.
Understanding annuities once and for allKirk Ashburn
Your guide to understanding the fundamentals of annuities, including their pros and cons, in an easy to understand manner so you can make an educated decision. Is guaranteed income for the rest of my life important to me? Is protecting the downside of my investment important to my family? Will I sleep better at night knowing that my investment will not lose value if the market drops tomorrow?
The document discusses the benefits of fixed annuities for retirement planning. It notes that Americans are living longer but face financial challenges in retirement. Fixed annuities offer guaranteed returns, tax deferral, and can provide lifetime income streams. Both immediate and deferred fixed annuities are described as options to help investors meet their retirement income needs through guaranteed and predictable payments.
A Power Point presentation on how Fleur De Lis Financial/Mass Mutual can help you save for retirement in a conservative way, if you looking for safe investments, secure retirements, take a look at this presentation.
Annuities explained is a presentation which will explain everything you need to know about the major types of annuities, what are the best annuities and how to select the most appropriate annuity in your particular situation.
The document discusses the benefits of fixed annuities for retirement planning. It notes that retirees face significant financial challenges, including rising healthcare and living costs. Fixed annuities offer guaranteed returns, provide a stream of income for life, and allow for tax-deferred growth. Immediate annuities provide guaranteed lifetime income, while deferred annuities allow for long-term accumulation of assets on a tax-deferred basis before receiving income.
This document discusses how life insurance can help achieve retirement goals by providing tax advantages. It notes that life insurance builds cash value on a tax-deferred basis that can supplement retirement through tax-favored loans and withdrawals. The document provides an example of a couple using policy withdrawals in retirement to lower their taxes while funding special expenses. It highlights the benefits of leveraging a life insurance policy for retirement through its death benefit, tax-deferred growth, and potential access to cash values.
What is an annuity?
An annuity is an insurance-based contract between you, the owner, and the contract issuer.
This is basically how annuities work: You pay after-tax dollars to the issuer, the issuer invests the money for you, and any earnings accumulate tax deferred. At some point, the issuer pays out the principal and earnings to you or to your beneficiaries. Earnings are taxed as ordinary income when they’re distributed.
This document provides information about immediate fixed income annuities as a way to guarantee income for life after retirement. It discusses factors like life expectancy, the risks of outliving savings, and how annuities provide guaranteed lifetime income through payout options like life only or joint-survivor. The document also covers taxation implications and factors to consider when evaluating different annuity products and insurance companies.
Understanding annuities once and for allKirk Ashburn
Your guide to understanding the fundamentals of annuities, including their pros and cons, in an easy to understand manner so you can make an educated decision. Is guaranteed income for the rest of my life important to me? Is protecting the downside of my investment important to my family? Will I sleep better at night knowing that my investment will not lose value if the market drops tomorrow?
The document discusses the benefits of fixed annuities for retirement planning. It notes that Americans are living longer but face financial challenges in retirement. Fixed annuities offer guaranteed returns, tax deferral, and can provide lifetime income streams. Both immediate and deferred fixed annuities are described as options to help investors meet their retirement income needs through guaranteed and predictable payments.
A Power Point presentation on how Fleur De Lis Financial/Mass Mutual can help you save for retirement in a conservative way, if you looking for safe investments, secure retirements, take a look at this presentation.
Annuities explained is a presentation which will explain everything you need to know about the major types of annuities, what are the best annuities and how to select the most appropriate annuity in your particular situation.
Life insurance provides essential financial protection for loved ones in the event of death. There are different types of life insurance, like term and permanent policies, that offer varying levels of protection and benefits. Determining the appropriate amount of coverage requires a comprehensive needs analysis that considers income needs, cash needs, existing assets and other factors. Permanent life insurance is suitable for long-term needs while term is for temporary protection. Working with a financial professional can help identify the best strategies and products for an individual's specific situation.
The document discusses how a life insurance retirement plan can help clients diversify their tax liabilities in retirement. It notes that 2/3 of investors doubt they will have enough money saved for retirement and many may rely on non-retirement accounts. It then presents a case study of a business owner client who is a good saver but may face challenges with financial vulnerability, outliving savings, and rising taxes. The document argues that using life insurance can provide tax-free death benefits and help mitigate losses from potential future tax rate increases on other retirement assets like 401ks, stocks, and mutual funds.
This document discusses how permanent life insurance can be a tax-advantaged investment asset that provides growth potential, access to cash value through loans, and benefits for heirs. It provides an example comparing returns from life insurance to traditional investments like interest, dividends, and capital gains, showing that life insurance requires less capital and risk to achieve the same results due to its tax advantages. While collateral loans involve risk, permanent life insurance is positioned as an effective strategy for managing assets, accessing funds, and preserving an estate over the long term.
This document provides an overview of annuities, including:
- Annuities are contracts with insurance companies that provide benefits in exchange for premium payments. They are not life insurance.
- There are several types of annuities such as fixed, fixed indexed, and variable annuities.
- Annuities offer benefits like safety, flexibility, earnings potential, and protection. Features include tax deferral, minimum guarantees, beneficiary designation, annuitization, control, death benefits, and withdrawal provisions.
This document introduces the "Anti-AnnuityTM", which is described as Single Premium Indexed Universal Life insurance (SPIUL). It summarizes the credentials and experience of the advisors behind the product. The SPIUL is presented as a tax-advantaged alternative to annuities that allows tax-free growth and access to funds. Examples are given showing how SPIUL can be used to create larger tax-free inheritances than other options like annuities. It also describes how SPIUL can be used to avoid taxes on IRA and retirement account funds by transferring them into the life insurance product. Readers are encouraged to schedule a meeting with the advisors to learn more about SPIUL and how it can save on estate
The document describes an "Everything Solution" product that provides safety, liquidity, yield, growth, death benefits, and long-term care benefits. It is structured as an indexed universal life insurance policy that allows deposits between $100,000-$1,000,000. Account value grows based on S&P 500 index returns up to a cap, and is protected from losses by a floor. Policyholders can withdraw funds penalty-free and interest grows tax-deferred. Upon death, beneficiaries receive proceeds income tax-free. It also allows accelerating some death benefits tax-free for long-term care costs. Case studies show how the product provides growth, income, liquidity, and long-term care benefits for different
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.
This document summarizes the benefits of an indexed annuity product called Benefit Gold. It discusses how indexed annuities can provide returns linked to market indexes while protecting the principal amount. The document outlines several crediting methods and indexes available under the product. It also highlights some key benefits including a 5% premium bonus, lifetime income rider, death benefit, and penalty-free withdrawal options.
Fixed index annuities (FIAs) provide principal protection and upside potential pegged to a stock index like the S&P 500, while locking in annual gains. They offer an alternative to stocks and mutual funds for building wealth securely. While FIAs cap annual returns, typically between 5.5-12%, they avoid losses when markets decline. FIAs started gaining popularity after the 2000-2002 market crash as a safer way to grow wealth. Compared to CDs, FIAs provide tax-deferred growth and often higher returns. FIAs use stock market returns but guarantee the principal will never decrease.
Self-Owned Life & Retirement Insurance Arrangement (S.O.L.A.R.)Lee Rogers
A Self Owned Life & Retirement (S.O.L.A.R.) Insurance Arrangement is an arrangement where an executive purchases a Voya Indexed Universal Life-Global Choice (Voya IUL-Global Choice) policy, issued by Security Life of Denver Insurance Company, to provide death benefit protection and to help accumulate funds for retirement. The arrangement can be funded through employer contributions (as a §162 bonus plan), through after-tax contributions from the executive, or a combination of both. While premium payments must be treated as ordinary income, the executive can borrow money from the Voya IUL-Global Choice life insurance policy to pay income taxes. The executive can use the policy as a source of supplemental retirement income, as a source of survivorship benefits, or both.
This document discusses fixed index annuities as a retirement planning strategy. It notes that fixed index annuities offer guarantees of principal, tax deferral, flexibility, access to funds, and a lifetime income stream. They allow interest to be credited based on the growth of a chosen market index while protecting the principal. Fixed index annuities also guarantee income for life and can help address concerns about outliving one's savings.
A Modified Endowment Contract (MEC) is a special type of cash value life insurance
policy that requires extra attention because of the tax laws associated with it. The
federal tax law definition of “life insurance” limits your ability to pay certain high levels
of premiums. Potentially, any insurance policy that accumulates cash value can be
classified as a MEC, either when the policy is issued, or in later years.
What is the difference between Whole Life and Indexed Universal Life for Reti...Michael Grigsby
I get asked a lot about how Whole Life insurance differs from Indexed Universal Life insurance, particularly when it comes to retirement planning. In this presentation, I note the similarities between these forms of permanent insurance, the differences, and why you might use one instead of the other.
Creating A Retirement Paycheck Client Usechadhendrix
The document discusses creating a retirement paycheck and summarizes various retirement income strategies and products. It outlines challenges facing retirees today compared to past generations, such as declining social security benefits and increased healthcare costs. It then summarizes different income sources like annuities, systematic withdrawals, and different annuity types including immediate, deferred, fixed and variable options. It provides a hypothetical case study of a retiree using a mix of products to generate retirement income.
This presentation is to communicate ideas and information that will help you build financial security. We define financial security as a feeling of confidence that you will achieve your financial goals through the actions you are taking today.
This document provides an overview of different types of annuities, including fixed interest annuities and indexed annuities. It discusses key features such as how premiums can be paid, when annuity payments begin, how annuity premiums are invested, and income options. The document aims to help readers understand how annuities can help accumulate retirement assets on a tax-deferred basis and convert those assets into retirement income. It also provides guidance on which type of annuity may be best suited for different investors based on their objectives and risk tolerance.
Annuity is a term that is familiar to most of us and that we have been now hearing for over 200 years. Annuities are nothing but products offered by insurance companies that allow you to save on taxes and derive benefit on retirement. These accumulated funds are later repaid to you either for a fixed term, say 5 to 10 year, or for the rest part of your life.
Annuities are quite similar to Collateral deposits. CDs are offered by banks, similarly, insurance companies offer different return schemes on your annuity investments.
What is the meaning of annuity?
For a layman, an annuity is nothing but a contract between two parties, a person, also called as the insured and an organization which is nothing but an insurance company. The insurance company agrees to pay the insured an agreed upon benefit either in the form of regular interval payments or in lump sum.
Who offers an Annuity?
Annuities are presented by Insurance companies. They reach customers by the way of licensed agents. But before you chose to invest with the insurance company, you should check their insurance licenses. State and federal laws and insurance commissions govern the reserve funds, also known as State Legal Reserve Pools.
How does an Annuity Scheme work?
Annuity is a contract. The insured makes a deposit with the insurance company either in a single go or through regular small installments. Depending upon the type of annuity you choose, the money deposited with the insurance company will earn fixed or variable return.
Different Types of Annuity:
• Single premium immediate annuity: The amount is paid in lump sum and the benefits are derived from the immediate next month onwards.
• Single premium deferred annuity: Again, the amount is paid in lump sum but the withdrawals can be made only after specified time limit
• Annual premium deferred annuity: The premium paid to the insurance company is either in form of quarterly, or monthly or bi-annual or annual installments. Withdrawals are deferred to a later date.
• Variable annuity: This is more of a combination annuity scheme where you can chose either to pay a lump sum amount or in installments. You can choose the investment vehicle as well. Thus, the growth of your fund depends on vehicle chosen.
Thus, depending upon the scheme chosen by you, the amount deposited by you grows. At a time elected by you, the insurance company will start disbursing your deposits from your annuity account.
You also have a choice of withdrawing funds in lump sum after a certain time elapses.
Benefits associated with Annuities:
• Tax Deferral: The money invested in an annuity scheme stays tax free and grows tax free till the time you withdraw it. The age set for withdrawals is 59.5 years. Any funds withdrawn prior to this age bear an annual penalty charge of 10%.
• The insured gets a secured guaranteed return for the rest of life, especially post retirement
Thus, annuity offers you a medium of saving, ensuring avoiding probate for your heirs, safety of funds and much more.
Premium Financing as Tool for Life Insurance FundingJohn Oliver
Premium financing can be an effective solution for clients who do not want to liquidate assets to pay life insurance premiums. Interest paid on loans to pay premiums is usually not tax deductible as it is considered personal interest. Some exceptions exist, such as allowing deduction of up to $50,000 in interest on policies covering key persons. While the insurance and loan would be separate transactions, most premium financing programs involve borrowing from lenders related to the insurance carrier. Premium financing sources have expanded in recent years to include various banks and brokers. Eligibility for premium financing loans depends on meeting minimum requirements for loan size, net worth, and other factors like interest rates.
Retirement planning - Its never too early or too late to startQuantum Mutual Fund
Retirement Planning is the process of determining retirement income goals, the actions and decisions necessary to achieve these goals. It includes sources of income, estimating expenses, implementing a savings program and managing assets.
Therefore, plan your retirement with right mutual fund investments.
UTI Mutual Fund provides various mutual fund investment options to help investors meet different life goals at various life stages. It offers equity, debt, balanced and specialty fund schemes. Some of its equity fund categories include banking, energy, infrastructure and tax saving funds. Popular debt fund options are bond, gilt, liquid and short term income funds. Balanced funds provide a mix of both growth and income. Specialty funds cater to needs like retirement. UTI also offers online tools for fund research, comparison and transaction along with customer support services.
Life insurance provides essential financial protection for loved ones in the event of death. There are different types of life insurance, like term and permanent policies, that offer varying levels of protection and benefits. Determining the appropriate amount of coverage requires a comprehensive needs analysis that considers income needs, cash needs, existing assets and other factors. Permanent life insurance is suitable for long-term needs while term is for temporary protection. Working with a financial professional can help identify the best strategies and products for an individual's specific situation.
The document discusses how a life insurance retirement plan can help clients diversify their tax liabilities in retirement. It notes that 2/3 of investors doubt they will have enough money saved for retirement and many may rely on non-retirement accounts. It then presents a case study of a business owner client who is a good saver but may face challenges with financial vulnerability, outliving savings, and rising taxes. The document argues that using life insurance can provide tax-free death benefits and help mitigate losses from potential future tax rate increases on other retirement assets like 401ks, stocks, and mutual funds.
This document discusses how permanent life insurance can be a tax-advantaged investment asset that provides growth potential, access to cash value through loans, and benefits for heirs. It provides an example comparing returns from life insurance to traditional investments like interest, dividends, and capital gains, showing that life insurance requires less capital and risk to achieve the same results due to its tax advantages. While collateral loans involve risk, permanent life insurance is positioned as an effective strategy for managing assets, accessing funds, and preserving an estate over the long term.
This document provides an overview of annuities, including:
- Annuities are contracts with insurance companies that provide benefits in exchange for premium payments. They are not life insurance.
- There are several types of annuities such as fixed, fixed indexed, and variable annuities.
- Annuities offer benefits like safety, flexibility, earnings potential, and protection. Features include tax deferral, minimum guarantees, beneficiary designation, annuitization, control, death benefits, and withdrawal provisions.
This document introduces the "Anti-AnnuityTM", which is described as Single Premium Indexed Universal Life insurance (SPIUL). It summarizes the credentials and experience of the advisors behind the product. The SPIUL is presented as a tax-advantaged alternative to annuities that allows tax-free growth and access to funds. Examples are given showing how SPIUL can be used to create larger tax-free inheritances than other options like annuities. It also describes how SPIUL can be used to avoid taxes on IRA and retirement account funds by transferring them into the life insurance product. Readers are encouraged to schedule a meeting with the advisors to learn more about SPIUL and how it can save on estate
The document describes an "Everything Solution" product that provides safety, liquidity, yield, growth, death benefits, and long-term care benefits. It is structured as an indexed universal life insurance policy that allows deposits between $100,000-$1,000,000. Account value grows based on S&P 500 index returns up to a cap, and is protected from losses by a floor. Policyholders can withdraw funds penalty-free and interest grows tax-deferred. Upon death, beneficiaries receive proceeds income tax-free. It also allows accelerating some death benefits tax-free for long-term care costs. Case studies show how the product provides growth, income, liquidity, and long-term care benefits for different
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.
This document summarizes the benefits of an indexed annuity product called Benefit Gold. It discusses how indexed annuities can provide returns linked to market indexes while protecting the principal amount. The document outlines several crediting methods and indexes available under the product. It also highlights some key benefits including a 5% premium bonus, lifetime income rider, death benefit, and penalty-free withdrawal options.
Fixed index annuities (FIAs) provide principal protection and upside potential pegged to a stock index like the S&P 500, while locking in annual gains. They offer an alternative to stocks and mutual funds for building wealth securely. While FIAs cap annual returns, typically between 5.5-12%, they avoid losses when markets decline. FIAs started gaining popularity after the 2000-2002 market crash as a safer way to grow wealth. Compared to CDs, FIAs provide tax-deferred growth and often higher returns. FIAs use stock market returns but guarantee the principal will never decrease.
Self-Owned Life & Retirement Insurance Arrangement (S.O.L.A.R.)Lee Rogers
A Self Owned Life & Retirement (S.O.L.A.R.) Insurance Arrangement is an arrangement where an executive purchases a Voya Indexed Universal Life-Global Choice (Voya IUL-Global Choice) policy, issued by Security Life of Denver Insurance Company, to provide death benefit protection and to help accumulate funds for retirement. The arrangement can be funded through employer contributions (as a §162 bonus plan), through after-tax contributions from the executive, or a combination of both. While premium payments must be treated as ordinary income, the executive can borrow money from the Voya IUL-Global Choice life insurance policy to pay income taxes. The executive can use the policy as a source of supplemental retirement income, as a source of survivorship benefits, or both.
This document discusses fixed index annuities as a retirement planning strategy. It notes that fixed index annuities offer guarantees of principal, tax deferral, flexibility, access to funds, and a lifetime income stream. They allow interest to be credited based on the growth of a chosen market index while protecting the principal. Fixed index annuities also guarantee income for life and can help address concerns about outliving one's savings.
A Modified Endowment Contract (MEC) is a special type of cash value life insurance
policy that requires extra attention because of the tax laws associated with it. The
federal tax law definition of “life insurance” limits your ability to pay certain high levels
of premiums. Potentially, any insurance policy that accumulates cash value can be
classified as a MEC, either when the policy is issued, or in later years.
What is the difference between Whole Life and Indexed Universal Life for Reti...Michael Grigsby
I get asked a lot about how Whole Life insurance differs from Indexed Universal Life insurance, particularly when it comes to retirement planning. In this presentation, I note the similarities between these forms of permanent insurance, the differences, and why you might use one instead of the other.
Creating A Retirement Paycheck Client Usechadhendrix
The document discusses creating a retirement paycheck and summarizes various retirement income strategies and products. It outlines challenges facing retirees today compared to past generations, such as declining social security benefits and increased healthcare costs. It then summarizes different income sources like annuities, systematic withdrawals, and different annuity types including immediate, deferred, fixed and variable options. It provides a hypothetical case study of a retiree using a mix of products to generate retirement income.
This presentation is to communicate ideas and information that will help you build financial security. We define financial security as a feeling of confidence that you will achieve your financial goals through the actions you are taking today.
This document provides an overview of different types of annuities, including fixed interest annuities and indexed annuities. It discusses key features such as how premiums can be paid, when annuity payments begin, how annuity premiums are invested, and income options. The document aims to help readers understand how annuities can help accumulate retirement assets on a tax-deferred basis and convert those assets into retirement income. It also provides guidance on which type of annuity may be best suited for different investors based on their objectives and risk tolerance.
Annuity is a term that is familiar to most of us and that we have been now hearing for over 200 years. Annuities are nothing but products offered by insurance companies that allow you to save on taxes and derive benefit on retirement. These accumulated funds are later repaid to you either for a fixed term, say 5 to 10 year, or for the rest part of your life.
Annuities are quite similar to Collateral deposits. CDs are offered by banks, similarly, insurance companies offer different return schemes on your annuity investments.
What is the meaning of annuity?
For a layman, an annuity is nothing but a contract between two parties, a person, also called as the insured and an organization which is nothing but an insurance company. The insurance company agrees to pay the insured an agreed upon benefit either in the form of regular interval payments or in lump sum.
Who offers an Annuity?
Annuities are presented by Insurance companies. They reach customers by the way of licensed agents. But before you chose to invest with the insurance company, you should check their insurance licenses. State and federal laws and insurance commissions govern the reserve funds, also known as State Legal Reserve Pools.
How does an Annuity Scheme work?
Annuity is a contract. The insured makes a deposit with the insurance company either in a single go or through regular small installments. Depending upon the type of annuity you choose, the money deposited with the insurance company will earn fixed or variable return.
Different Types of Annuity:
• Single premium immediate annuity: The amount is paid in lump sum and the benefits are derived from the immediate next month onwards.
• Single premium deferred annuity: Again, the amount is paid in lump sum but the withdrawals can be made only after specified time limit
• Annual premium deferred annuity: The premium paid to the insurance company is either in form of quarterly, or monthly or bi-annual or annual installments. Withdrawals are deferred to a later date.
• Variable annuity: This is more of a combination annuity scheme where you can chose either to pay a lump sum amount or in installments. You can choose the investment vehicle as well. Thus, the growth of your fund depends on vehicle chosen.
Thus, depending upon the scheme chosen by you, the amount deposited by you grows. At a time elected by you, the insurance company will start disbursing your deposits from your annuity account.
You also have a choice of withdrawing funds in lump sum after a certain time elapses.
Benefits associated with Annuities:
• Tax Deferral: The money invested in an annuity scheme stays tax free and grows tax free till the time you withdraw it. The age set for withdrawals is 59.5 years. Any funds withdrawn prior to this age bear an annual penalty charge of 10%.
• The insured gets a secured guaranteed return for the rest of life, especially post retirement
Thus, annuity offers you a medium of saving, ensuring avoiding probate for your heirs, safety of funds and much more.
Premium Financing as Tool for Life Insurance FundingJohn Oliver
Premium financing can be an effective solution for clients who do not want to liquidate assets to pay life insurance premiums. Interest paid on loans to pay premiums is usually not tax deductible as it is considered personal interest. Some exceptions exist, such as allowing deduction of up to $50,000 in interest on policies covering key persons. While the insurance and loan would be separate transactions, most premium financing programs involve borrowing from lenders related to the insurance carrier. Premium financing sources have expanded in recent years to include various banks and brokers. Eligibility for premium financing loans depends on meeting minimum requirements for loan size, net worth, and other factors like interest rates.
Retirement planning - Its never too early or too late to startQuantum Mutual Fund
Retirement Planning is the process of determining retirement income goals, the actions and decisions necessary to achieve these goals. It includes sources of income, estimating expenses, implementing a savings program and managing assets.
Therefore, plan your retirement with right mutual fund investments.
UTI Mutual Fund provides various mutual fund investment options to help investors meet different life goals at various life stages. It offers equity, debt, balanced and specialty fund schemes. Some of its equity fund categories include banking, energy, infrastructure and tax saving funds. Popular debt fund options are bond, gilt, liquid and short term income funds. Balanced funds provide a mix of both growth and income. Specialty funds cater to needs like retirement. UTI also offers online tools for fund research, comparison and transaction along with customer support services.
1. The document discusses planning and saving for retirement, including estimating costs of one's desired lifestyle and identifying sources of retirement income such as pensions, 401ks, IRAs, Social Security, and other savings vehicles.
2. It explains compound interest and its power to grow savings over time, demonstrating concepts like the Rule of 72.
3. The importance of starting to save and plan for retirement early is emphasized.
This document discusses personal finance concepts related to earning, spending, saving, and borrowing. It explains that earning involves gaining money through work or owning a business, and career choices, employment opportunities, and ability to advance affect lifetime earnings. Spending involves using money to purchase goods and services, and responsible spending involves planning and considering opportunity costs. Saving puts money aside for future needs and has benefits like providing for emergencies or earning interest. Borrowing obtains money now in exchange for future repayment, and should only be done for amounts that can be realistically repaid. The document emphasizes making responsible financial choices in light of considerations like career impacts, trade-offs, savings benefits, and borrowing obligations.
Mutual funds pool money from investors and invest in a portfolio of securities like stocks, bonds and other assets. The presentation discusses the history, growth and regulations of the Indian mutual fund industry. It covers key concepts like the flow cycle, organizational structure, expense ratios and types of mutual fund schemes. The goal is to educate investors about mutual funds and how they can provide diversification and professional management.
1) The personal financial planning process involves 5 steps: evaluating your current financial health, defining goals, developing a plan of action, implementing the plan, and reviewing/revising the plan over time.
2) Financial goals should be specific, assign a cost, and have a target date. Goals can be short, intermediate, or long-term and help motivate sticking to the financial plan.
3) Developing a plan requires determining actions needed to achieve goals like cutting expenses, increasing income through career choices, starting to save and invest, and ensuring flexibility, liquidity, and protection from unexpected costs.
Financial Planning - Helping You Sail Successfully into the FutureFrank Wiginton
This document summarizes the key aspects of developing a comprehensive financial plan. It discusses that a financial plan should address goals, assets, debts, taxes, investments, insurance, estate planning and more. It outlines the multi-step process of developing a plan, including initial interviews, data gathering, analysis, draft reviews and implementation. It emphasizes that a good financial plan takes over 20 hours to fully prepare. The document also provides background on the author, Frank Wiginton, a certified financial planner who believes comprehensive planning is needed to make appropriate financial recommendations and decisions.
This document provides information about mutual funds including their structure, types, history in India, advantages and disadvantages. It discusses that a mutual fund is a trust that collects money from investors and invests in stocks, bonds, money market instruments and other securities. The document outlines the key entities involved in mutual funds like sponsors, trustees, asset management companies, custodians and various distribution channels. It also summarizes the different types of mutual fund schemes and provides a brief history of mutual funds in India from 1964 to the present.
This module discusses investment planning. It begins by explaining the importance of investment planning in the overall financial planning process. It then covers types of investment products and their associated risks and returns. The module discusses how to evaluate investment choices based on a client's goals and needs. It also explains how to create, monitor, and rebalance client portfolios over time. The module teaches how to recommend an appropriate investment portfolio for a client. It emphasizes that higher potential returns generally come with higher risks. Throughout, the module focuses on balancing risks and returns for clients based on their individual risk tolerance and time horizons.
The document discusses basic financial planning and outlines several key areas to consider including medical protection, savings, investments, and long-term protection for death, disability, critical illness, personal accident, hospitalization, surgery, and long-term care. It notes the importance of considering time orientation versus goal orientation for savings and investments, as well as risk appetite, when planning finances.
This document outlines topics that will be covered in a financial planning course, including how to plan an investment portfolio, understand assets and liabilities, ensure adequate insurance coverage, learn about different asset classes and risk appetite, plan for post-retirement income and children's education, relate investments to goals, and achieve financial peace and happiness. It also discusses concepts like the new economy, goal setting, overcoming challenges, and inverting the savings equation from expenses-focused to savings-focused.
Normally people think financial goals require a high salary or wealth, but financial planning can achieve goals. Financial planning involves managing current resources through disciplined investing in options to achieve financial goals. It considers resources, investment options, and goals. A financial planner analyzes the situation, recommends an asset allocation plan, and monitors it over time to achieve the client's changing needs and opportunities.
The document discusses various risks to consider for retirement planning such as longevity risk, inflation risk, and investment risk. It introduces variable annuities as a potential solution to help mitigate these risks by providing guaranteed lifetime income, protection against market downturns, and upside potential from stock market investments. Variable annuities can help secure retirement income through features such as living benefits and death benefits. Working with a financial advisor can help assess if a variable annuity is a suitable strategy for individual retirement goals and risk tolerance.
This document provides an overview of immediate fixed income annuities as a way to guarantee an income for life after retirement. It discusses factors to consider such as life expectancy, how long savings may last in retirement, income annuity payout options, taxation of annuity income, and things to evaluate when purchasing a fixed income annuity like fees and the financial strength of the insurance company.
This document describes the Transamerica Retirement Income Plus variable annuity. It offers lifetime withdrawals with rates between 4-6.5% depending on age. The annuity simplifies retirement planning by reducing choices to investment selection and contribution amount. It aims to grow and protect retirement income through features like annual compounding when withdrawals are not taken. The annuity addresses challenges retirees face like rising lifespans, declining pensions, and low interest rates.
The document discusses establishing a sound retirement plan through 5 key steps: 1) envisioning goals, 2) estimating expenses, 3) evaluating resources, 4) earmarking guaranteed income, and 5) ensuring action is taken. It emphasizes the importance of having a plan to ensure adequate access to funds, healthcare coverage, and lifetime income in retirement.
Survivor universal life insurance 4088541883 san jose california connie dello...Connie Dello Buono
connie dello buono 4088541883 san jose california ca life ins lic 0G60621 on page 3 is about preserving your heir's inheritance, charitable gifts, key person coverage and wealth transfer
The document describes the MassMutual Equity Edge variable annuity. It provides growth potential through market participation, principal protection, and guaranteed lifetime retirement income. It offers a simplified approach with fewer ongoing decisions than traditional variable annuities. The annuity aims to be suitable for conservative investors seeking principal protection with some equity exposure for retirement.
Spencer Lodge Fund Advisers Dubai Life Insurance. Spencer Lodge MD of Fund Advisers Dubai Universal life insurance offers you the freedom to increase or decrease your policy’s death benefit to fit your individual needs. Policies have minimum and maximum premium amounts that you must meet to maintain your coverage, but the timing of payments can be flexible. Access to cash values Universal life insurance policies have a cash value that has the potential to increase over time. If financial needs arise, you can tap into your policy by taking tax-advantaged policy loans and making partial withdrawals without income taxes.
"The Case For Annuity," by Phil Wasserman. This book shows an unbiased view on annuities, how they can offer you secure income streams, and growth potential while having no market risk or volatility.
LifeShares LLC Life Settlement Investments are a non-correlated, fixed-income alternative investment that provides equity-like returns without subjecting your portfolio to market volatility or other non-market risks.
This document provides an overview of deferred fixed interest and indexed annuities. It discusses how these annuities can help accumulate funds on a tax-deferred basis for retirement and overcome obstacles to retirement planning like a lack of savings discipline, taxes, inflation, and longevity. The document also explains how deferred annuities work during the accumulation and income phases, and the benefits of tax-deferred growth.
This document discusses creating a retirement income and investment strategy. It emphasizes the importance of planning before investing and outlines 4 steps to constructing a personalized strategy: 1) Estimate retirement expenses, 2) Identify sources of retirement income, 3) Determine tolerance for income variance, and 4) Construct the strategy with a financial professional. A case study example is provided to illustrate how these steps are applied for a hypothetical retiree. The key is to have guaranteed income sources cover essential needs and to work with an advisor to develop a customized plan.
The document discusses the Ameriprise Financial Confident Retirement approach, which provides a framework to create a sound retirement plan. The approach is built on four principles: 1) Cover essential expenses with guaranteed income sources like Social Security, annuities, and bonds. 2) Ensure lifestyle through flexible withdrawal plans and diversified growth investments. 3) Prepare for unexpected costs like long-term care and medical expenses using insurance. 4) Leave a legacy by controlling assets through estate planning and maximizing amounts given to heirs using life insurance. The approach aims to provide clients with strategies to manage risks and confidently fund retirement.
This document summarizes an insurance policy that allows policyholders to bear the investment risk of the investment portfolio. It offers a savings and protection plan with multiple investment choices and life insurance coverage to protect goals in case of death. The key points are:
- The policyholder bears the investment risk of the investment portfolio, which consists of various funds across risk levels.
- Policyholders cannot withdraw or surrender their investment for the first 5 years.
- The plan provides life insurance coverage and allows policyholders to continue their savings for goals even if they die, by waiving future premiums.
- Policyholders can choose their investment portfolio strategy between a fixed portfolio strategy with various fund options, or a life-
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This document summarizes a unit-linked insurance plan from HDFC Life. Key highlights include:
- The plan offers three options - Invest Plus, Premium Waiver, and Golden Years Benefit.
- Premiums can be paid regularly or as a lump sum. Fund value grows based on investment performance.
- Death benefit is highest of sum assured, fund value, or total premiums paid. Premium waiver option waives future premiums on proposer's death.
- Plan has lock-in period of 5 years during which partial withdrawals and policy discontinuance rules apply.
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The document discusses the features and benefits of Tata AIG Life's InvestAssure Flexi unit linked insurance plan (ULIP). It offers flexibility in terms of premium payment terms, policy terms, investment fund choices, ability to make top-ups, switch funds and redirect premiums. The plan also allows partial withdrawals and provides a maturity bonus. The flexibility allows customers to customize the plan based on their protection and investment needs.
The document summarizes a unit-linked pension plan called BSLI Empower Pension Plan offered by Birla Sun Life Insurance. The key details are:
1. It allows customers to save for retirement through regular premium payments over 5-30 years. Premiums are invested in funds to build a retirement corpus.
2. At retirement (vesting date), the customer can use the corpus to purchase a lifelong pension stream or make withdrawals within tax-free limits.
3. The plan provides guaranteed additions to the fund value from the 6th policy year onwards. It also guarantees a minimum vesting benefit based on premiums paid and years to vesting.
4. Death and surrender benefits are also
Indexed universal life insurance policies from Aviva combine the features of traditional universal life insurance with the potential to earn interest based on the performance of a stock market index. The policies provide life insurance protection, potential for cash value growth, and flexibility. Premium payments are initially placed in a basic interest strategy and then may be allocated to indexed strategies where interest is credited based on the movement of a stock market index, subject to participation rates and caps. This limits downside risk while allowing upside potential.
1. Heather Martin Preparing for Retirement The Northwestern Mutual Life Insurance Company (Northwestern Mutual) Milwaukee, WI The Northwestern Mutual Life Insurance Company (Northwestern Mutual) Select Variable Annuity Presented by
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4. Retirement Concerns Source: National Association for Variable Annuities 2005 survey of 1,000 respondents. In a 2005 poll, people identified the following retirement concerns: 28% High health care costs 24% Running out of money 18% Inability to maintain standard of living 16% Decline in social security 9% Inflation
5. Retirement Concerns The performance of variable funds is not guaranteed. No investment strategy can guarantee a profit or protect against a loss. What you can do to help address them High health care costs Factor health care costs into your retirement income needs Running out of money Put a portion of assets into guaranteed lifetime income plans Inability to maintain standard of living Combine retirement income approaches to help match your standard of living to your income Decline in social security Increase personal savings in your pre-retirement years Inflation Participating in variable investments can give your savings the potential to keep pace with inflation
6. How long can you expect to live in retirement? Source: Actuarial Tables—Life Expectancy - Treasury Regulations 1.72-9 . Life expectancy for men and women Years 0 5 10 15 20 25 30 55 60 65 70 75 80 85 Age Men Women
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8. Risk of Periods of High Inflation and Down Markets on Systematic Withdrawals Source: 2005 Ibbotson Associates, Inc. All rights reserved. Used with permission Hypothetical value of $500,000 invested at year-end 1972. Portfolio: 50% large company stocks, 50% intermediate-term bonds. Assumes reinvestment of income and no transaction costs or taxes. Each monthly withdrawal is adjusted for inflation. Each portfolio is rebalanced monthly. An investment cannot be made directly in an index. Past performance is no guarantee of future results. Source: Stocks – Standard 7 Poor’s 500; Bonds – 5 year US government bond; Inflation – Consumer Price Index. Annual inflation-adjusted withdrawal as a % of initial portfolio wealth 5 % withdrawal rate $100,000 $300,000 $500,000 $600,000 $0 $400,000 $200,000 1976 1980 1984 1996 1988 1992 1972 6 % withdrawal rate 7 % withdrawal rate 8 % withdrawal rate 9 % withdrawal rate
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13. Retirement Income Plans Variety of choices Variable annuity Lump sum Specified period Single life Life w/certain period Joint life Systematic withdrawal Annuitization (Income) Variable annuitization All guarantees in an annuity are backed solely by the claims-paying ability of the issuer.
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22. The Northwestern Mutual Select Variable Annuity Source: Morningstar® Principia Pro for Mutual Funds and Morningstar® Principa Pro for Variable Annuities/Life, based on 12/31/05 review of all 3,381 A share class and 2,682 B share class mutual funds (excludes municipal bond funds), and all 497 front-load and 26,009 back-load variable annuity funds (excludes money market funds). The total annual expense % averages for Morningstar Mutual Funds reflect the cost to manage and distribute (12b-1) a mutual fund. The total annual expense % averages for Morningstar Variable Annuities and the Northwestern Mutual Select Variable Annuity reflect the cost to manage the funds and the mortality and expense charge, which includes the cost for distribution. Although a product’s expenses are one consideration, a client should give equal consideration to the features and benefits of mutual funds and annuities before making a product choice. The variable annuity prospectus explains and discloses other product features which include purchase options, a death benefit, tax-deferred growth, income options, and service options. Variable annuities are suitable for long-term investment purposes, typically retirement. Total Annual Expense % Average Morningstar Mutual Funds Morningstar Variable Annuities Northwestern Mutual RR series Select TM Variable Annuity
23. Retirement Savings What is asset allocation? Asset allocation is the process of combining asset classes such as stocks, bonds, and cash in a portfolio in order to meet your goals. Based on your individual risk tolerance, investment goals and time horizon No investment strategy can guarantee a profit or protect against a loss. Cash Bonds Stocks
24. Retirement Savings Rebalancing: 1984-2004 0% Portfolio weightings Target asset mix: 50 % stocks/50 % bonds 50% 72% 28% 75% 25% 42% 55% 45% 50% 20% 40% 60% 80% 1984 1989 1994 1999 2004 Source: 2005 ibbotson Associates, Inc. All rights reserved. Used with permission. Assumes reinvestment of income and no transaction costs or taxes. Stocks: 50% large and 50% small company stocks. Bonds: intermediate-term government bonds. This index performance does not reflect the different fees and charges associated with variable annuities. If it did, the performance would be lower than cited above. Source: Small Company Stocks - Dimensional Fund Advisors, Inc. (DFA) U.S. Micro Cap Portfolio; Large Company Stocks - Standard & Poor’s 500®, which is an unmanaged group of securities and considered to be representative of the stock market in general; Intermediate-Term Government Bonds - 5-year U.S. Government Bond. Past performance is no indication of future results. 58% Stock allocation Bond allocation
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27. Retirement Savings What if you don’t use it? Owner- Annuitant potential for many years of tax deferral Spouse Beneficiary Owner- Annuitant Non-Spouse Beneficiary Owner- Annuitant Dies before annuitizing When transferring assets in a manner which skips one or more generation, be cautious of the generation skipping transfer tax. For example, this may apply when a grandparent names a grandchild as the annuity’s beneficiary. Additional deposits cannot be made after the primary annuitant’s death. Inflation and changes in tax law may adversely affect this arrangement. Due to market performance, variable annuities may provide more or less than the amount originally invested. annuitize when wanted tax deferral ceases Dies before annuitizing
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Editor's Notes
Hi, my name is Firstname Lastname. I am a registered representative with Northwestern Mutual. This presentation, which takes about twenty five minutes, will highlight some common retirement concerns and the role a deferred, variable annuity can have in preparing for retirement.
Variable annuities are long-term investments that are suitable for retirement. They are also securities that are sold by prospectus. There a few things that are important to remember about any investment. One is that with any investment, the performance of variable funds is not guaranteed and can fluctuate. Another is that no investment strategy can guarantee a profit or protect against a loss.
What comes to mind when you think about retirement? Everyone’s vision of retirement is unique. However, most people would agree on the need for a retirement paycheck. Thinking about a retirement paycheck means transitioning our thinking from ‘savings’ to ‘income.’ One way to address any concern is to become familiar with products that can provide income. This next slide lists what some people have identified as their concerns about retirement….
In a 2005 poll of 1,100 people that was done by the National Association for Variable Annuities, people identified these as their greatest concerns about retirement. High health care costs – health care costs typically increase as people age Running out of money – the fact that people are living longer introduces the possibility of running out of money Inability to maintain standard of living – income needs can change during retirement, as lifestyles change Decline in Social Security - Although an important source of retirement income, Social Security was never designed to fully support retirement income needs. The average monthly benefit paid to a retired male worker in October, 2006 was $1,137, according to the ssa.gov website. Inflation – Inflation can erode buying power over time. For example, a dollar in 1980 is worth 41 cents n 2006, according to the US bureau of labor statistics for all urban consumers.
This slide lists some of the things that you can do to address these concerns: For example you can factor health care costs into your retirement income needs. You can put a portion of assets into guaranteed lifetime income plans to address the risk of running out of money. The reason more and more people are concerned about running out of money is the fact that people are living longer, as I’ll show you in a moment. Combining retirement income approaches to help match your standard of living to your income. Increasing your personal savings in your pre-retirement years can address concerns you might have about a decline in Social Security.
‘ How long can you expect to live in retirement?’ The fact that people are living longer is well known. Living longer means a longer retirement. The positive is that that gives people more years to enjoy family, friends, and dreams. A longer retirement also introduces the possibility of not having sufficient retirement income to support those dreams. People are living longer, making it more important that retirees have enough funds to last them through retirement. This image shows the average life expectancies of men and women at various ages. Life expectancies are stated as statistical averages, meaning people may live more or fewer years than those in your age group. It is impossible to predict exactly how long a person will live. Personal savings and investments are more important in helping to close the retirement income gap. By starting early, savings have time to grow, further ensuring that your retirement years will not be spent worrying about money. Source: Actuarial Tables— Life Expectancy - Treasury Regulations 1.72-9.
So where will the retirement income come from? Some or all of these will be the sources used by most people at some point to create their retirement paycheck.
One approach to retirement income is systematic withdrawals. A systematic withdrawal program refers to a method of creating a retirement paycheck by establishing regular withdrawals from a pool of your invested assets. The amount withdrawn is typically a percentage of the total pool. For example, a 4% withdrawal from a $500,000 pool would provide $20,000. A systematic withdrawal program is flexible because you can adjust the amount withdrawn according to your needs, keeping in mind the fact that too much dipping on the asset pool or withdrawing too high of a percentage can increase the risk of running out of money. A systematic withdrawal program is not a guaranteed lifetime income program. However, if used thoughtfully and if market return support it, this approach has the potential to meet your income needs. This image shows a hypothetical example of the impact of periods of high inflation and down markets on systematic withdrawals. Significant losses in the early years during which withdrawals are taken will have an impact because the losses cannot be recouped. This image looks at a hypothetical 50% stock, 50% bond portfolio and the effect various inflation-adjusted withdrawal rates have on the end value of the portfolio over a long payout period. Each hypothetical portfolio has an initial starting value of $500,000. It is assumed that a person retires on December 31, 1972 and withdraws an inflation-adjusted percentage of the initial portfolio wealth ($500,000) each year beginning in 1973. As illustrated, the higher the withdrawal rate, the greater the chance of potential shortfall. The lower the rate, the less likely you are to outlive your portfolio. Therefore, early retirees who anticipate long payout periods may want to consider assuming lower withdrawal rates. Taking withdrawals during a time period of low inflation and up markets would show different results. Income plans offered by annuities are another approach.
Before we explore the role of a deferred variable annuity in retirement, let’s clarify because there are a few different kinds of annuities. Deferred variable annuities are long-term investments that are sold by prospectus. They are typically suited for retirement. Annuities are issued by insurance companies. Any guarantees in an annuity are backed solely by the claims-paying ability of the issuing insurance company. The fees and expenses vary from issuer to issuer. We’ll talk in more detail about the fees and expenses of the Northwestern Mutual Select Variable Annuity in a few minutes. Some of the charges associated with variable annuities, as well as other investments are a sales charge or a withdrawal charge. Typically if there is a sales charge, then there is not a withdrawal charge, and vice versa. Sales charges are typically paid once. Withdrawal charges are typically paid if money is taken out within a few years of purchase. Sometimes, withdrawal charges expire. The mortality and expense fee, and portfolio fee are on-going, asset based charges. Some issuers have an annual contract fee. Some issuers waive the contract fee at a specific threshold. Savings grow tax deferred. The tax-deferral can permit savings to compound at a faster rate than if taxed. Keep in mind that money taken out of variable annuities may be subject to ordinary income tax and a10% IRS early withdrawal penalty if taken before age 59 ½. The tax deferral feature of VAs creates a lot of debate. The tax-deferral is provided by tax law and there is no charge for tax-deferral, nor is there double tax deferral. The tax treatment of IRAs or other qualified plans is substantially the same. You don’t need an annuity to get tax deferral.
Let’s talk about how they work. A deferred annuity has two phases. The first is accumulation. It’s the period of time that the contract values can accumulate before they are put into the income plan. During this ‘savings’ phase, there can be a lump sum deposit, or a series of deposits. During the savings phase, there is tax-deferral. The second phase is the annuitization or payout phase. This is when the values are put into an income plan. This is different than an immediate annuity. With an immediate annuity, a lump sum payment is converted into an income stream. Northwestern Mutual also issues Single Premium Immediate Annuities. For our talk today, we’ll focus on deferred, variable annuities.
In a deferred variable annuity, what is guaranteed and what is not? There is an element that is not guaranteed. That is the performance of the variable funds. For any investments, the performance of variable funds is not guaranteed. The guaranteed death benefit is in effect during the accumulation or savings phase. It assures that the beneficiaries will not lose principal if the annuitant dies prematurely. I’ll explain how it works: if the annuitant dies before taking an income plan, the direct beneficiary gets the higher of 1) what was put into the contract less any withdrawals, or 2) the current value. For example, if $100,000 is put into the contract, and market performance decreases that $100,000 to $90,000, the direct beneficiary is entitled to $100,000. If the market activity increased the $100,000 to $110,000, the direct beneficiary is entitled to $110,00. The income plans are guaranteed. Many people wonder, ‘if performance of the variable funds is not guaranteed, how can an income plan be guaranteed. To help clarify, while the deferred variable annuity is in the savings or accumulation phase, the values are invested in variable funds. The performance of those variable funds is not guaranteed. When the contract values are put into an income plan, the amount of your payment is based on the amount that went into the income plans. If someone invested $500,000 and it grew to $600,000, that person’s income plan would be based on $600,000. If someone invested $500,000 and it dropped to $400,000, that person’s income plan would be based on $400,000. The guarantees in any annuity are backed by the claims-paying ability of the issuing insurance company. The guarantees in the Northwestern Mutual Select Variable Annuity are backed by Northwestern Mutual.
We’ll explore where deferred variable annuities can fit into preparing for retirement. Deferred variable annuities can be used for both savings and income, as we’ve talked about. The variable investment options within a variable annuity, although not guaranteed, provide the potential for savings to keep pace with inflation. Tax-free transfers among investment options and automatic portfolio rebalancing offer ease-of-use for maintaining your asset allocation, or ease of keeping your allocation in alignment your risk tolerance and time horizon. The automatic portfolio rebalancing feature is available for contracts of $10,000 or more in value. There’s the guaranteed death benefit that I described earlier. In addition, the guaranteed income options that include lifetime income appeal to those that don’t have access to a pension, or those concerned about outliving their income. Remember that guarantees in an annuity are backed solely by the claims-paying ability of the issuer. The guarantees in our annuity contracts are backed by the financial strength of Northwestern Mutual. Let’s talk about income plans….
This chart summarizes some of the options when it’s time to create a retirement paycheck, and you don’t have to choose among these options until you require a distribution. Of course for tax-qualified contracts, there is an IRS requirement that you begin taking some money out as required minimum distributions at age 70 ½. The simplest distribution alternative is the lump sum payment, where the entire balance is withdrawn. This may be the least effective from a tax or income management standpoint. You bear a tax liability for your accumulated earnings, which may also include a federal penalty tax of 10% for withdrawals before age 59½. Systematic withdrawal, which we talked about earlier, can work well for those who want flexibility in their income stream. This type of payment may also be subject to certain charges and taxes. Annuitization is the process of putting the value of your annuity into an income plan. Annuitization can create a retirement paycheck or supplement other retirement income sources. With a specified period income plan, payments will continue for the number of years chosen. With the single life only option, payments will continue for as long as one person lives. With the life a certain period, payments are guaranteed for your life, but for no less than the stated number of years. The joint life and survivor option guarantees payments during the lifetime of two people, typically a husband and wife. With variable annuitization, your income amount is set at the time you annuitize but may be changed based on the market performance of the investment options you choose. This option offers the potential of rising income that may outpace inflation, but also the possibility that a declining or stagnant economy could affect or lower your monthly income. Any guarantees associated with an investment in variable annuities are subject to the claims-paying ability of the issuer. Read your prospectus carefully for all the fees and expenses that may apply to your variable annuity contract. I’ll explain these in more detail….
With a specified period income plans, income continues for the number of years you choose. Income stops at the end of the period. If the annuitant dies before the end of the period, income continues to the direct beneficiary until the end of the specified period.
For a single life income plan, income continues for as long as one person lives. With Joint & survivor income continues for a long as two people live. At the death of the first person, income continues uninterrupted to the second person. Income continues until the death of the second person. Both of these scenarios bring up a good question, ‘what happens if the annuitant or annuitants die only a few months after taking a lifetime income plan?’ Income would stop. Fortunately, a certain period can be included in the income plan. I’ll explain how that works…
A certain period included in a lifetime or joint lifetime income plan guarantees income for a minimum number of years, even if the annuitants die. Let’s use an example. For a single life with a 10 year certain period If the annuitant dies in year two, income continues to the direct beneficiary for eights years to fulfill the ten year certain period If the annuitant dies in year eleven, income stops. Generally certain periods can be up to 20 years.
When taking income plans from a deferred variable annuity, income plans can be either fixed or variable. With fixed, the income amount does not change. If a person had no other sources of retirement income, over time inflation could reduce their buying power. When a fixed income plan is taken, the portfolio and mortality and expense fees cease. With a variable income plan, payments fluctuate based on the performance of underlying funds. The portfolio fees and mortality and expense fees continue. A variable income plan has the potential to keep pace with inflation. A payment is guaranteed, but the amount of the payment is not guaranteed. Whether a fixed, variable, or combination of income plan is suitable for you depends on many factors, including your personal circumstances, and your risk tolerance. It’s important to remember that once an income plan has started, the remaining values are not accessible. How can insurance companies provide lifetime income?
Through a concept known as risk sharing. In life insurance as well as annuities there is a concept known as risk sharing. Both products use a strategy of risk management or risk sharing. Life insurance protects against dying too soon. Annuities protect against outliving your income. How can life insurance companies offer annuities that guarantee lifetime payouts? Good question. The company doesn’t know how long you will live. How it works The concept of risk sharing makes the lifetime payout work . When you buy a lifetime payout annuity, you are sharing the longevity risk with others. The amount the annuity payment is determined by how much money each annuitant puts into the annuity, the type of payout chosen, interest rates, and his or her life expectancy. Some annuitants will die early, while others will live beyond their life expectancy. Annuitants who die sooner forego their future lifetime payouts, helping finance those members who live longer. Those who live a long time often benefit beyond the premiums they have paid.
All guarantees in any annuity are backed solely by the claims-paying ability of the issuing company. What is an indicator of the issuing company’s financial strength? Their financial strength ratings. Here are Northwestern Mutual’s.
Northwestern Mutual deferred annuity contracts are issued with guaranteed minimum income plan rates. These can establish a placeholder for future income because they are carved into the contract and do not change. How does this benefit you?
When Northwestern Mutual clients put their deferred annuity values into an income plan to create a retirement paycheck, they will receive the higher of current deferred annuity settlement rates or guaranteed minimum payment rates. The significance of this is that if current rates are higher than the guaranteed minimum, you are entitled to receive the current rates. However, if the current rates happen to be lower than the current rates, you are entitled to the minimums. This establishes a placeholder for future income. What about the fees and expenses associated with variable annuities? The fees and expenses can vary from issuer to issuer. Here is some information about the Northwestern Mutual Select variable annuity…
This chart shows the annual expenses of our Select VA alongside the average Morningstar mutual fund and Morningstar VA. The chart shows that both the front-end and back-end designs of the Select VA are competitive. The assumption that all VAs are too expensive relative to other choices available in the marketplace simply does not apply to Northwestern’s variable annuity. The Northwestern Mutual Select Variable Annuity offers a variety of investment fund options across asset classes. Access to a variety of investment funds options is important to help maintain asset allocation….
What is asset allocation? The asset allocation decision is one of the most important factors in determining both the return and the risk of an investment portfolio. Asset allocation is the process of developing a diversified investment portfolio by combining different assets in varying proportions. An asset is anything that produces income or can be purchased and sold, such as stocks, bonds, or certificates of deposit (CDs). Asset classes are groupings of assets with similar characteristics and properties. Examples of asset classes are large company stocks, long-term government bonds, and Treasury bills. Every asset class has distinct characteristics and may perform differently in response to market changes. Therefore, careful consideration must be given to determine which assets you should hold and the amount you should allocate to each asset. Factors that greatly influence the asset allocation decision are your financial needs and goals, the length of your investment horizon, and your attitude toward risk. How do you maintain asset allocation?
Importance of rebalancing 1984–2004 Because asset classes grow at different rates of return, it is necessary to periodically rebalance a portfolio to maintain a target asset mix. This image illustrates the effect of different growth rates on a static (unbalanced) portfolio over a 20-year period. In 1984, the target asset mix began with a 50% allocation to stocks and a 50% allocation to bonds. The proportion of stocks in the portfolio grew modestly up through 1994 when it accounted for 58% of the portfolio. The bull market of the late 1990s helped propel the value of stocks, causing the portfolio to be overweighted. By 2004 stocks accounted for 72% of the portfolio. Asset classes associated with high degrees of risk tend to have higher rates of return than less volatile asset classes. For this reason, a portfolio that is not rebalanced periodically may become more volatile (riskier) over time. Government bonds are guaranteed by the full faith and credit of the United States government as to the timely payment of principal and interest, while stocks are not guaranteed and have been more volatile than bonds. The data assumes reinvestment of income and does not account for taxes or transaction costs. Variable annuities are subject to certain insurance related fees and charges that are not associated with other investments. Source: Small Company Stocks—Dimensional Fund Advisors, Inc. (DFA) U.S. Micro Cap Portfolio; Large Company Stocks—Standard & Poor’s 500 ® , which is an unmanaged group of securities and considered to be representative of the stock market in general; Intermediate-Term Government Bonds—5-year U.S. Government Bond.
Periodic rebalancing is important to help reduce portfolio risk. Because asset classes grow at different rates of return it is necessary to periodically rebalance a portfolio to maintain a target asset mix. For example a portfolio that is 50% bonds and 50% stocks could get out of balance if bonds outperform stocks. Transfers among funds in a VA are tax-free. What happens if you don’t use your savings? What if you don’t put the values into an income plan?
In the case of non tax-qualified contracts, if the annuitant/owner dies before taking an income plan the direct beneficiary has the flexibility to: Take the values as a lump sum Put the values into an income plan Take the values over five years Use the contingent annuitant feature to become the annuitant, continuing the tax deferral; once the contract is being continued in the manner, additional deposits cannot be made. This comes into play only if you do not use all of the values in your contract. Earlier we described what happens if the annuitant dies after an income plan in in effect.
This slide shows how the contingent annuitant feature could work. Tax deferral cannot continue indefinitely; applicable IRS rules will govern when the values must be used. Remember, this feature applies to non tax-qualified contracts. For tax qualified contracts, such as IRAs, the usual IRS guidelines apply.
As we wrap up, we can review the role of a deferred variable annuity in a retirement portfolio. Variable investment options can permit savings to keep pace with inflation Tax-deferred growth permits savings to compound Tax-free transfers among investment options for ease of asset allocation Automatic portfolio rebalancing for ease asset allocation (for contracts of $10,000 or more)
Guaranteed Death Benefit protects beneficiary Contingent Annuitant feature offers flexibility to beneficiary (non tax-qualified contracts) Competitive cost Flip a switch to begin income plan for ease of use Guaranteed lifetime options address risk of outliving assets Variety of income plans available for flexibility
As a Northwestern Mutual Financial Representative, our mission is to develop enduring relationships with clients by providing expert guidance for a lifetime of financial security. We want to help you increase financial security by increasing your knowledge and helping you coordinate actions in all three life stages that we have discussed. First, I will get to know you and find out about the personal, professional, and financial goals that are most important to you. Then, I will review the steps you have already taken toward these goals and determine if I might be able to provide some specific recommendations to further help you achieve them. Finally, if you choose to implement these recommendations, we will continue to work together by regularly reviewing the progress toward your goals.” This presentation has already begun the first step, and we can continue it in a personal meeting that I make available at no cost or obligation to all attendees. Please see me after the meeting or sign up for a personal meeting by… [GIVE INSTRUCTIONS]. Note: Optional slide