Retire Safe & Tax Free - Marc My Words... Annuities


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Annuities offer exposure to Equities but with downside protection.

For the investor, the uncapped indexed annuity: a strategy that purports to allow nervous clients to benefit from surging equity indexes while having downside protection.

We are pretty excited to sell these products as either a fixed income piece of the portfolio or as a vehicle for guaranteed lifetime withdrawal benefits for our clients. Say hello to the uncapped indexed annuity, a product that purports to give normally jittery clients a way to benefit from surging equity markets without actually being in the market.

"It's been a game-changer, no question about it."

Allianz Life Insurance Co. of North America began incorporating the Barclays U.S. Dynamic Balance Index, an uncapped strategy, in its line of preferred indexed annuities last August, 2014.

In a typical indexed annuity, clients' accounts receive a minimum guaranteed rate of interest. Carriers will also credit an interest rate that's tied to the performance of an index. The client isn't actually invested in the index.

Normally, clients don't capture the full amount of the index's performance because carriers use a cap. For instance, a contract could have a cap that allows the account to capture 5% of the gain, so if the index rises 20% in a given period, only the 5% portion will be used to calculate the interest. Carriers also have other tools they can use. They can limit the extent to which a client participates in an index.

Uncapped indexes, as the name suggests, don't use index caps to limit returns.

But that doesn't mean that clients are now able to grab equity-like returns from this fixed income product. Rather, carriers use another lever to limit the returns in the form of a spread. This spread is set for a period of time and then reset by the carrier, normally on an annual basis, but this can vary based on the product.

Allianz isn't the only one in the uncapped indexed annuity game. In February, Nationwide Life Insurance Co. launched its New Heights uncapped indexed annuity, building it in collaboration with the Annexus Group, a firm that specializes in product design. This annuity uses a "balanced allocation strategy" wherein some of the performance is attributed to the movement of the equity index, while another component of the performance is based on a declared interest rate set by the carrier and there's also a spread.

In "down" years for the index, Nationwide won't apply the spread, noted Mike Morrone, associate vice president of business development and product management at the carrier. "The uncapped strategy helps against inflation," he noted. "You'll have a risk averse or conservative client, and they'll have the ability to have a little more protection against inflation risk."

"We've been successful in the indexed annuity market because we've been able to meet clients' expectations. "With uncapped strategies, by the time you subtract the spread, the client will get about 8% or 9%," he said. Clients need to understand that "uncapped" doesn't mean that they'll get equity-like returns, but rather they may beat the capped strategy by 1% to 1.5%.

The ideal candidate for this product is a conservative investor, "They want equities until their statement goes down."

This Index Annuity is a safe, NO RISK investment so please contact me today!

Marc H. Weiss, Archer Weiss Insurance & Financial Services, Inc. Please Call Toll free: 1-800-831-2901 or (818) 610-8560