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Dispelling the Myths- the Truth About Fixed Index Annuities

There are many misunderstood financial products out there, but few are subject to the myths and confusion that fixed index annuities are. Here are five common myths that might stop you from exploring the possibility of a fixed index annuity as a powerful tool to help guarantee* your retirement income security.

Myth One: My heirs won’t get any money from the fixed index annuity if I die

There is a type of payout that many people chose in the past that gave annuities this reputation. It was the life only payout option. But this is just one payout option, and it’s not a good choice for everyone. There are options that will allow your fixed index annuity to pay a benefit to your heirs. Remember that you may be able to add a death benefit into the annuity through a rider**, as well. Also, if you never trigger payments or annuitize, then your beneficiaries would likely receive your contract value after death. Finally, if you choose a payout type with a guarantee* of survivorship or a period certain, then payments will continue until that guarantee* is fulfilled.

Myth Two: Fixed index annuity payments are useless thanks to inflation

Any annuity payment is going to be adversely affected by inflation. Even an IRA distribution is going to be affected by inflation. But annuities can have a special rider** that can be added called a cost-of-living adjustment or COLA rider. This will help increase guaranteed** payments based on inflation. So annuities may offer better protection against inflation than non-annuity assets.

Myth Three: Fixed index annuities have high expenses

This is a popular myth, but it paints an incomplete picture of the annuity and investment industry. Naturally, there are fees involved with annuities. Adding features such as the guaranteed* death benefit rider can result in paying more premiums.  Also, there may be withdrawal charges*** if you surrender all or a portion of your annuity contract in the early years. However, IRA accounts also have fees, and the positions traded within the accounts have commissions when bought or sold. Mutual funds have management fees (represented as expense ratios) as well as possibly having back-end or front-end loads, which are fees to either buy into or sell the mutual funds. Additionally, they may have unexpected capital gains distributions when underlying positions are sold, and this can force you to pay taxes that you weren’t anticipating. In comparison to all the various investing and account fees that retirees face, annuities can actually be even more affordable than some of the other options.

Myth Four: I don’t have the money to invest in a fixed index annuity

While there are some single premium annuities that can require a large initial deposit, there are also ways to purchase annuities through smaller, regular payments. Additionally, annuities can be purchased within an IRA account allowing you to use the funds already inside your IRA.

Myth Five: Fixed index annuities are tied to the market. That makes them risky

One of the advantages of a fixed index annuity is that you can allocate a portion of your annuity to a fixed declared interest rate and allocate a portion to an interest rate tied to an outside index, such as the S&P 500®. Essentially, should the markets decline, the fixed portion of your index annuity will continue to earn interest at the fixed declared rate.  But the portion allocated to the index is tied to the performance of the, and while this portion may not gain anything, it will not lose anything either which prevents a loss of principal. In addition, a fixed index annuity locks in the gains you previously made.

Depending on your individual goals and financial position, a fixed index annuity can be a significantly powerful addition to your overall retirement strategy. An agent can help you see how one might fit into your financial future plans, and he or she can help you secure a conservative, guaranteed* retirement income throughout your golden years.

*Annuity Guarantees are backed by the financial strength and claims-paying ability of the issuing company, and may be subject to restrictions, limitations or early withdrawal fees. Annuities are not FDIC insured.

**Annuity riders may be available for an additional annual premium that may provide additional benefits and income guarantees.

***Most annuities have a surrender period for the first five to 15 years of ownership; withdrawal of amounts will lower your monthly income and the death benefit. Early withdrawal of full principal amount will deplete your principal by the amount of surrender charge still in force.  Withdrawals at ages younger than 59 ½ from an IRA will be subject to an additional 10% federal income tax penalty.

 

Making Sense of Fixed Index Annuities

In recent years, you’ve probably heard a lot about annuities. The reason you’re hearing so much about them now is that after the last 20 years of market upheaval, many retirees and pre-retirees are looking for a more conservative strategy that still offers sufficient returns, which can be exactly what fixed index annuities offer.

What are Annuities?

Annuities are contracts issued by insurance companies. In exchange for a principal paid by an individual, the insurer promises payments based on the terms of the annuity contract. There are many different benefits and options that an annuitant can choose.

Annuities can also include added protections and benefits through contract riders*, which offer features such as guaranteed** income benefits, inflation protection and death benefits.

Features of Fixed Index Annuities

Not all annuities are created equal. Some annuities, such as variable annuities, offer a higher return, but they also have a greater risk which could expose an account holder to losses of principal. Other annuities, such as fixed annuities, can restrict the owner’s upside potential making it so his/her nest egg has little opportunity for competitive growth.  However, the fixed index annuity allows for more upside potential than the fixed annuity in that its growth follows the performance of a chosen outside index, such as the S&P 500®. But it offers protections that variable annuities lack. Fixed index annuities have something called a “floor”, which means that if the chosen index chosen does poorly the annuity may not gain anything, but at the same time, it will not lose anything which prevents a loss of principal.

The fixed index annuity also locks in prior gains, an option that variable annuities don’t offer.

Another great benefit of fixed index annuity is the capability to build in guaranteed** minimum income benefits often through a rider. These allow the owner to receive a fixed monthly payment that’s guaranteed** for life and can increase depending on when the owner decides to trigger the payments.

Who Needs a Fixed Index Annuity?

In 1980, 66 percent of Americans had pension plans. By the year 2011, that number had dropped to just 20 percent.*** Pensions used to offer extremely important benefits and allowed retirees an income in retirement. Today employers rarely offer a pension, but a pre-retiree can set up his or her own defined retirement income benefit through a fixed index annuity

Not only does a fixed index annuity help extend a retiree’s retirement dollars, but when purchased inside of a Roth IRA, it can allow the retiree to draw a tax-free post-retirement income. This not only gives the retiree some level of income security but can be a tremendous advantage in a consistently changing tax environment.

Choosing the Right Annuity

When selecting a fixed index annuity for your retirement strategy, it’s important that you qualify the insurance company issuing the contract. A. M. Best offers an objective letter grade for insurers based on their overall financial strength. Choosing an A or higher rated company will help allow you to determine a top-rated insurance company.

An agent can help you understand the various options available within annuity contracts and help you narrow down the annuity or annuities that best suit your financial situation. He or she will discuss with you the objectives you have for your retirement income and help develop a retirement strategy that can help you accomplish those objectives.

*Annuity riders may be available for an additional annual premium that may provide additional benefits and income guarantees.

**Annuity Guarantees are backed by the financial strength and claims-paying ability of the issuing company, and may be subject to restrictions, limitations or early withdrawal fees. Annuities are not FDIC insured.

***Source for pension numbers: http://www.nytimes.com/roomfordebate/2011/02/08/why-americans-cant-save-money/no-more-unions-no-more-pensions-whys-its-hard-to-save

 

If you are unable to access any of the sources through the links provided in this text please contact us at (Phone 1 (855) 829-2365) to request a copy of the desired reference.

5 Reasons Why You Should Consider Fixed Index Annuities for Your Retirement Plan

Every individual planning for retirement has his or her own unique set of goals and concerns for their post-retirement income. That’s why retirement planning is such a complex topic. One of the most flexible, low-risk products to consider adding to a retirement strategy is a Fixed Index Annuity.

Annuities are policies issued by insurers that guarantee certain benefits, payments, and interest in exchange for the premium payment. There are many different types of annuities, including the fixed annuity which offers a set interest rate for a set period of time and the fixed index annuity which has both a fixed rate and the opportunity to see more gains which are linked to a chosen, outside index.

Annuities can be immediate or deferred, meaning that the payout can begin relatively quickly or years down the line. The annual interest earned in annuities is generally not taxable as long as it is not distributed, which allows for even more powerful tax-deferred accumulation.

These are powerful policies that you should consider for your retirement strategy. If you aren’t certain whether they’re a good fit for you, here are five reasons why it’s worth your time to find out.

1. Some Annuities offer built-in guarantees*: These policies offer many different guarantees that other products don’t. For example, you can build a guaranteed minimum income benefit into a fixed indexed annuity that allows for a set annual distribution. Other guarantees can include death benefits paid to heirs and guaranteed interest growth.**

2. Some Annuities can offer protection against inflation: Inflation is a very real concern for retirees whose savings are limited and can be impacted by the rising cost of goods. Inflation protection riders on products like the index annuity help ensure that your retirement income rises in tandem with increases in the consumer price index without requiring more of your principal.**

3. Some Annuities create predictability: There once was a time when most retirees relied on their employer pension to meet all their retirement income needs. In today’s financial landscape, employer pensions and other defined-benefit plans are rarely offered by employers. According to the National Institute on Retirement Security***, only 33 percent of private sector employees had pensions in 2005–compared to 88 percent in 1975. Annuities can offer a predictable post-retirement income stream.

4. Annuities provide great flexibility: Annuities can be purchased inside a traditional or Roth IRA, or they can be purchased on a non-qualified basis outside of a qualified retirement account.

5. Fixed Index Annuities can be paid out in a lump sum after the surrender period or you can choose from, different options for annuitization such as period certain payouts, joint and last survivor, and income for life, depending on the policy you choose. The policy  can be designed with a guaranteed income rider that can be triggered any time after a set date.**

Contact us today to see how Fixed Index Annuities can fit into your retirement strategy and help give you an edge as you secure a comfortable retirement.

 

*Annuity Guarantees are backed by the financial strength and claims-paying ability of the issuing company, and may be subject to restrictions, limitations or early withdrawal fees. Annuities are not FDIC insured.

**Annuity riders may be available for an additional annual premium that may provide additional benefits and income guarantees.

***Ilana Boivie. “Will We See Action?” National Institute on Retirement Security. August 27, 2010. http://www.nirsonline.org/index.php?option=com_content&task=view&id=432&Itemid=150

Will You Be OK? Annuities, Retirement and You

The retirement years are the well-earned culmination of decades spent as a devoted professional. They are the reward at the end of work’s rainbow and the time during which adults finally get to enjoy their time. But how can any of that be true when you spend your retirement and the years leading up to them concerned about running low of money in retirement?

Re-Examining Post-Retirement Goals

One of the best ways to help secure the financial stability of your retirement is to define your financial goals while you’re still working and accumulating money. If your goals are to live a modest but comfortable retirement, then your retirement objectives will be different than if your goals revolve around taking vacations and moving into the “penthouse suite” in a seaside community. Understanding your financial retirement objectives in advance will allow you to determine your retirement goals accordingly.

Additionally, a clear picture of your future retirement income needs will help you choose the most appropriate products to grow your retirement income. For example, if income security and predictability are your highest priorities, then a fixed indexed annuity designed with a guaranteed* minimum income benefit** could help to both stretch your retirement income and deliver the predictability you desire.

Reconsidering Your Tolerance for Risk

It doesn’t matter what your retirement income goals are, if you choose products that don’t fit in your retirement portfolio you could end up with less than you need. Reassessing your tolerance for risk and making sure that it’s appropriate for your needs is a vital part in helping to secure your retirement income.

A Fixed Index Annuity can offer an interesting balance for individuals who want higher yields than traditional fixed products offer, but who also want safety and guarantees*. The index annuity offers a potential to earn interest based on market gains linked to the performance of a chosen index while also guaranteeing a competitive base interest rate.

Exploring Extenuating Circumstances

When most of us think about retirement, we think about the positive things: the free time, the relaxation, the ability to enjoy day on your own terms. What we often don’t think about are those uncomfortable events that can affect our loved ones. That’s why additional strategies, such as estate planning, are necessary in conjunction with retirement goals.

The fixed index annuity offers benefits for both retirement and estate planning. They can be structured to include cost-of-living increases and long-term care riders which increase the annuity’s benefit to help cover nursing home expenses. For estate planning, annuities can provide death benefits to heirs.** Should you decide to name a charity as your beneficiary, you may be able to set up a charitable remainder trust that provides a regular income to you for a set period of time, secures a decreased tax rate on the income, and gifts the remainder to the charity.

Your retirement can be great, but it’s going to take a financial strategy to get it there. Annuities often play an integral role in a well-structured retirement and estate plan. Contact us today to see how these tools can help make your retirement dreams a reality.

 

*Annuity Guarantees are backed by the financial strength and claims-paying ability of the issuing company, and may be subject to restrictions, limitations or early withdrawal fees. Annuities are not FDIC insured.

**Annuity riders may be available for an additional annual premium that may provide additional benefits and income guarantees.

Annuities and Your Retirement

Annuities are insurance products. When you pay premium into an annuity, the insurance company that issued your annuity will make a stream of payments back to you later. In fact, you can receive annuity payments every month, quarter or year. You may even choose the disbursement to be issued to you in a lump sum. Annuities are tax-deferred. Furthermore, the amount that you receive is based upon your payment period selection as well as the annuity’s value.

The two main annuity options are immediate and deferred. If you select the immediate option, then you will begin receiving payments right away or within one year of the issuing date. The deferred contribution option features two phases. The first phase is the accumulation stage. The second phase is the payout stage, and when you arrive at this point, you’ll start to receive the annuity’s planned payments.

You can also choose from several different types of annuities, which include fixed annuities, and fixed index annuities. With a fixed annuity, the insurance company will agree to pay you a specified interest rate during the growing phase of your annuity.

In a fixed index annuity, you have the potential to earn interest based on upward shifts in one of the market’s indexes, without participating in the market. Your annuity is protected and will not lose value even if the market goes down.

Be sure to research all annuity types before you agree to a policy. By managing your retirement income, you can help make sure that your funds grow enough to cover your future needs.

Your annuity should be carefully selected by you and a qualified and licensed insurance agent. Visit willibeok.com to get started on a retirement income plan that works with your budget, while helping to prepare you for your financial retirement needs.

By contacting us you may be offered insurance products for sale.

 

Annuity guarantees rely on the financial strength and claims-paying ability of the issuing company, and may be subject to restrictions, limitations or early withdrawal fees. Annuities are not FDIC insured.

 

Questions to Ask When Purchasing a Fixed Indexed Annuity

DisclaimerFull TranscriptMore Information
Scott Turney and Turney Financial Group, LLC; Sparta, TN. Insurance licensed in 51 jurisdictions.
Speaker 1: Americans are living longer and spending more time in retirement. That means many of us may be wondering if our retirement money will last, and if we’ll be able to enjoy our same standard of living as the years go by.

In addition to social security, a pension, 401(k) or IRA, a fixed indexed annuity may be good to have in your financial mix. Since they are tied to a market index, fixed indexed annuities offer the opportunity for growth as the market rises. At the same time, they protect your principal from the uncertainty of market volatility. Like all annuities, they earn tax-deferred interest to help your money grow even more and they can give you a steady stream of guaranteed income for life.

We all have different needs in retirement. So, before you talk to your insurance agent, it’s best to have a clear picture of what you want from a fixed indexed annuity.
First, how much retirement income do you need beyond the resources you already have? Consider things like where you want to live, your monthly expenses and activities you want to pursue in retirement.

Second, think about how and when you’d like to access the money in your annuity. One lump sum or payments over time. More money in the near time or down the road?

And perhaps most importantly, what is your tolerance for financial risk? Are many of your other financial assets in high risk products like stocks, or in safer products like indexed annuities?

When you do meet with your insurance agent, be sure to discuss specific features of the indexed annuity you are considering. Such as, how is the interest calculated and applied? What are the terms and conditions for receiving payments? Are there extra charges for withdrawals if something major comes up in your life? And what, if any, penalties must you pay for ending your contract early?

Next, do some research on the company issuing the annuity contract. Make sure they have a solid track record. Confirm that the company is licensed in your state, and that they are reputable and financially strong. It’s reassuring to know that top insurance companies that provide annuities have successfully weathered many economic times and financial environments. And typically, there are state guarantee associations to back up your contract.

Learn more at indexedannuitiesinsights.com and get your smart buyer checklist.

It’s worth taking a little time now to make your best choices for the years to come.

Scott Turney and Turney Financial Group, LLC; Sparta, TN. Insurance licensed in 51 jurisdictions.

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CD’s- Certificate of Deposit

DisclaimerFull TranscriptMore Information
Scott Turney and Turney Financial Group, LLC; Sparta, TN. Insurance licensed in 51 jurisdictions.
Speaker 1: How many people get excited about earning a 1% interest rate on their hard-earned money? If 1% gets you excited, then a CD is exactly what you were looking for. So what is a CD?

Most people know what a CD is, but let’s give a quick definition: a CD is a certificate of deposit which is an agreement between a consumer and a financial institution, such as a bank, where the amount deposited, the time frame and the interest rate are all specified and agreed upon. And, yes, CDs are considered a safe place to keep your money.*

Although they are considered safe, how are interest rates on CDs today? Currently, the average rate for a one-year CD is 0.25% and the average rate for a five-year CD is around 0.79%. Isn’t that exciting? Now, those numbers are a national average according to bankrate.com.** So to make it simple, let’s say you get a CD for 1%. There are a couple of factors to consider with this 1% CD.

First off, let’s consider inflation. As of now, the government says inflation is about 1.5%. I’ll let you be the one to decide if it is higher than that or not because, historically, it is around 3% to 4%.*** So if it is 1.5%, you are already in a negative situation. You are not even able to keep up with inflation with a 1% CD.****

Next, let’s consider taxes. For 2013 and the future, the maximum rate to be taxed is increasing from 35% to 39.6%. This makes it even harder to really earn anything on this 1% CD. With inflation and taxes now taken into consideration, you are not earning anything on CDs today. If anything, most people in a CD are possibly going backward instead of forward.

So how are the interest rates on CDs today? Not only are the interest rates on them significantly low, but when you take into account all of the factors with CDs, you are most likely not earning much of anything. Let us show you a way to possibly earn more and keep it just as safe as a CD.

Scott Turney and Turney Financial Group, LLC; Sparta, TN. Insurance licensed in 51 jurisdictions.

*Bank Certificates of Deposit are insured by the FDIC up to $250,000 per depositer.

**Date figures for CD rates were pulled off of Bankrate.com

***The information provided was gathered from the following sources:

http://www.bankrate.com/finance/cd/rate-roundup.aspx

http://www.usinflationcalculator.com/inflation/current-inflation-rates/

http://www.smartmoney.com/taxes/income/new-investment-tax-slated-for-2012-1341348347663/

http://www.money-rates.com/basicguides/cd/how-to-compare-cdrates.htm

****If you are unable to access any of the material we referenced, please call 1 (866) 240-8972 to request a copy.

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“Retirement Insurance”


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Scott Turney and Turney Financial Group, LLC; Sparta, TN. Insurance licensed in 51 jurisdictions.
Speaker 1: Alright, you got to ask yourself: Why in the world would I pick an insurance company to put my money with?

Well, let me ask you this: How many of y’all in this room have homeowners insurance? I would say every single one of you all do. The reason you have homeowner’s insurance is just in case.

How many of you all in this room have car insurance? Well, where I come from, the state of Tennessee, you have to car insurance or you’re not allowed to drive. It’s a law.
How many of you all have health insurance? I’d say most everybody in this room probably has health insurance.

What about life insurance? How many of us in this room have either had or still have life insurance? Well, needless to say, we’re sitting here today and we’re sitting here saying: We insure every single thing that’s important to us. Would you agree? I do.

Now, here’s the big question. How many of y’all have retirement insurance? That’s what I do for my clients and I can help you with that.* Give us a look and give us a call. Call our toll free number 1-855-829-2365.**

Scott Turney and Turney Financial Group, LLC; Sparta, TN. Insurance licensed in 51 jurisdictions.

* “Retirement insurance” refers to the use of annuities to deliver an income stream in retirement. Read terms and conditions of policy carefully before purchase.

**You will speak with an insurance-licensed agent.

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