by Butch Boley Annuity Sales Consultant
SUMMARY
Although many Americans are coming to you looking for ways to generate income that will last through retirement, that’s not the primary concern of every client. What about those who’ve saved diligently for years and are simply trying to allocate resources appropriately? Or, maybe you have clients who’ve had the good fortune of coming into money themselves through the smart planning of their parents or grandparents. In these cases, premium bonuses and income riders might not be the name of the game. If you have clients who are simply looking for an annuity to grow their premium and pass on a large legacy to loved ones, it can be tempting to compare roll-up percentages and go for the product with the highest number. But what does that mean for the rest of the benefits the client will receive? Be sure to take a closer look before making any snap decisions.
THE FACTS
- Retired male, age 75
- Spouse recently deceased
- $950,000 in qualified funds to leave on
- No income need
THE GOAL
Develop a plan that would allow the client to turn an unneeded asset into a large legacy for his loved ones. Additionally, he wanted to maintain liquidity to be able to assist his family in case any emergency financial situations might arise.
COURSE OF ACTION
The client and his wife had worked hard throughout their lives to create ample retirement savings. After the client lost his wife, the agent knew it was time to conduct a review. During the meeting, the client mentioned that he had an asset of $950,000 in qualified funds he intended to leave to his children from which he was taking required minimum distributions (RMDs). He had no need for additional income and was unsure of the options available for repositioning these funds to better meet his objectives. Having already assisted the client in comprehensive retirement preparation, the agent knew the client had any potential need for long-term care covered with his other assets, but that the client also wanted to maintain some liquidity with these funds in case of an emergency.
Given the current environment of low caps and rates, the agent contacted Creative Marketing for help in finding an appropriate solution. We knew that the agent could simply recommend a product with a high death benefit roll-up rate, but clearly there was more to the story than that. We needed to dive down into the finer details to do a proper product comparison and find a solution that allowed annual penalty-free withdrawals, even in the first year, that would not hurt the value of the asset if the client needed to take them. We also wanted to grow the asset for the best legacy he could leave those he loved. After a thorough search, we determined the BalancedAllocation Annuity 8TM from Annexus would be the best fit for handling all of the client’s needs.
THE SOLUTION
By repositioning the client’s money into the BAA 8, he could access 5% penalty-free withdrawals of the accumulated value in year one, and 10% each year after, as he would need to continue taking his RMDs. As long as the client didn’t withdraw in excess, the asset wouldn’t be subject to a market value adjustment (MVA). Additionally, the client could benefit from the potential of better long-term accumulation than other annuity options, particularly in this low rate environment because the Balanced Allocation Strategy® options do not include traditional caps.
Most importantly for this client, with the BAA 8, he could also benefit from the optional Family Endowment Rider® (FER). By not electing not to add on the income rider, the FER would guarantee a death benefit not less than the premium increased at 4% annually minus any withdrawals taken. By also not electing the premium bonus, the 4% would grow the death benefit until the earlier of the client reaching age 90 or his death. Because the first 4% of annual withdrawals would reduce the death benefit dollar for dollar, rather than a proportional benefit reduction, the client could take up to 4% annual withdrawals while ensuring the death benefit would be guaranteed to be equal the initial premium regardless of account value!
THE RESULT
For the client: Selecting a product that would allow the client to take his RMDs and potentially other withdrawals while impacting the asset value the least, the client felt comfortable knowing this was the right decision. The asset could further capture more of the market’s upside potential, thereby achieving his goal of providing an even bigger benefit to loved ones in the end.
For the agent:
You work hard every day to make smart decisions in the best interests of the clients you serve. Call your Annuity Sales Consultant to help you comb through the finer product details and simplify the process of selecting the best option every time.
FOR AGENT USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC. 12052 - 2011/11/15 | 18651 3201111
The BalancedAllocation Annuity™ [BAA8 (09/09) or state variation], fixed indexed annuity, and the Family Endowment Rider® (DBR (09/09) or state variation), an optional rider for which a charge is deducted, are issued by Aviva Life and Annuity Company, West Des Moines, IA. Product features, limitations and availability vary by State; see the Product Disclosure for details.
The Family Endowment Rider® provides a guaranteed death benefit floor upon the death of the annuitant equal to the premium accumulated at an interest rate of up to 4% compounded through age 90 on the 8-year contract. After age 90, the rider benefit will not grow any further but will continue to be in place. It is important for you to note that Withdrawals of any type from your Contract will reduce the Enhanced Death Benefit. The amount of the reduction will be based on the amount you withdraw. The first 4 percent of the Accumulation Value withdrawn in any Contract Year will reduce the Enhanced Death Benefit on a dollar-for-dollar basis. Withdrawals in excess of 4 percent in any Contract Year will reduce the Enhanced Death Benefit proportionally.
Interest credited will be equal to the combined growth in the value of each allocation, less charges for any optional riders. Rates/spreads/caps subject to change.