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Marc's Blog

The Scoop on the Secure Act

November 6, 2019

couple reading a mapWhat’s All the Buzz About?

Given the pervasive chatter about the Setting Every Community Up for Retirement Enhancement Act of 2019 – commonly referred to as the SECURE Act – it’s important to know what the Act’s all about. On March 29, 2019, the House Ways and Means Committee unveiled the Act. While the Act passed the House in a 417:3 vote, its fate is stalled at the Senate and, if passed, it may change your estate planning. The bipartisan bill includes 29 provisions and modifies the requirements for employer-sponsored retirement plans, IRAs, and other tax-advantaged accounts. SECURE stems from concerns that Americans are not financially well equipped enough for their retirement years. In essence, the proposed legislation aims to combat the longevity risk, or an individual’s risk of outliving their retirement assets, by increasing access to tax-favored retirement accounts.

So, What Does That Mean?

With respect to employer-sponsored retirement plans, the SECURE Act modifies current requirements pertaining to various issues, including, but not limited to, multiple employer plans, lifetime income options, automatic enrollment and nonelective contributions, eligibility rules for certain part-time employees, and required minimum distributions. Overall, the bill includes provisions that result in the following:

  • Treat certain taxable non-tuition fellowship and stipend payments as compensation for IRA purposes;
  • Repeal the maximum age of traditional IRA contributions;
  • Treat excluded difficulty of care payments as compensation for determining retirement contribution limits for retirement accounts;
  • Allow penalty-free withdrawals from retirement plans for individuals when a child is born or adopted;
  • Expand the purposes for which qualified education tuition programs can be used;
  • Reinstate and increase the tax exclusion for particular benefits provided to members of volunteer emergency response organizations;
  • Increase penalties for failure to file tax returns; and
  • Increase information sharing to administer exercise taxes.

Specific Implications of the SECURE Act

Practically speaking, these provisions would impact various existing rules related to tax-advantaged retirement accounts. For instance, such changes would:

  • Make it easier for small businesses to set-up “safe harbor” retirement plans for employees;
  • Provide tax credits of $500 per year to employers that create 401(k) or SIMPLE IRA plans with automatic enrollment of employees;
  • Offer retirement plans to part-time employees that work either 1,000 hours per year or have worked 500 hours for three consecutive years;
  • Encourage plan sponsors to include annuities as an option in workplace plans by reducing liability in the event the insurer cannot meet its financial obligations;
  • Change the age at which retirement plan participants must begin taking RMDs; and
  • Expand the purposes for which Section 592 education savings accounts can be used, including covering up to $10,000 per year of qualified student loan repayments.
  • Though all of the above items are important, the most talked about changes are the delayed starting age for RMDs, the allowance to make IRA contributions after age 70 ½, and the impact on “stretch” IRAs.

RMDs Delayed to Age 72

Today, an IRA owner must begin taking RMDs after turning age 70 ½. The current rules require that an IRA owner must take a distribution no later than April 1st of the year after the year he or she turns age 70 ½ and continuing each year thereafter. Under SECURE, the date of an IRA owner’s first RMD is delayed to age 72. This change is said to be fueled by the fact that many individuals are working during the latter years of life and, therefore, are still earning an income from their employment. In turn, the proposed starting age of 72 years old is aimed to provide retirees more discretion as to when they take their RMD and delay it, if desired. The retiree could still choose to take distributions earlier; however, by delaying RMDs from beginning at age 70 ½ to age 72, the actual RMDs will be larger than if the individual had started taking distributions at a younger age.

Traditional IRA Contributions After Age 70 ½

The Act would also allow for individuals to make contributions to their traditional IRAs after reaching the age of 70 ½. As it currently stands, the law has allowed individuals over the age of 70 ½ to make contributions to a Roth IRA, but prohibits such contributions to a traditional IRA. In light of many Americans continuing to work after retirement, coupled with the longevity risk, SECURE would allow contributions to a traditional IRA beyond reaching 70 ½ years old.

Impact on “STRETCH” IRAs

Though many of the above provisions have been described as a step in the right direction, many professionals in the industry caution that the bill is far from a cure-all for current retirement challenges. Prior to the SECURE Act, IRA distributions could be “stretched” to non-spouse beneficiaries, which, in turn, allowed children of IRA owners to take advantage of significant income tax breaks. Under that strategy, IRA owners would name individual IRA beneficiaries and created inherited IRAs for each of them. Each beneficiary would then take RMDs based on their age. However, under the Act, unless an exception applies, distributions must be withdrawn within 10 years of the death of the IRA owner. For taxable IRAs, the timing of distributions within the 10 year period will be based on various factors, including the beneficiary’s other income and expenses, business losses in a pass-through entity, charitable contributions, and Qualified Plan contributions.

NAMING A TRUST AS AN IRA BENEFICIARY

A Revocable Living Trust can also be an IRA beneficiary, if it qualifies as a “look-through.” However, in such cases, under SECURE, distributions are still subject to the 10-year rule. To meet the requirements as a “look-through,” following criteria must be satisfied:

  • The trust must be valid under state law and become irrevocable upon death of the account owner;
  • The trust document must identify individual beneficiaries that are natural persons; and
  • The trustee must provide all require trust documentation to the IRA custodian no later than October 31st of the year after the death of the IRA owner.
  • Of note, the trust taking the distribution for a taxable inherited IRA may result in an increased tax burden due to higher trust income.
EXCEPTIONS TO THE 10-YEAR RULE:
  • The spouse of an IRA owner – An IRA owner’s spouse is permitted to rollover the decedent’s IRA to their own IRA and stretch distribution over their own lifetime.
  • Children under 18 – A child under the age of 18 is excluded from the rule; however, once the child reaches the age of 18, he or she must take distributions within 10 years.
  • Disabled or chronically-ill beneficiaries.
  • Beneficiaries of an age within 10 years of the age of the decedent.

Here’s how it would work under the old rules: Joe, a grandfather, owns an IRA worth $2 million. He leaves it to his granddaughter, Jane, who is 25 years old. Under the old rules, Jane could “stretch” the distributions from that IRA over the course of the remainder of her life, or nearly 60 years. But, under the rules of the SECURE Act, Jane would be prohibited from “stretching” the distributions. Instead, Jane would be required to withdraw the entire balance of the IRA by the time she reached age 36, or within 10 years of death of her grandfather.

…And Beyond

In addition to IRAs (both traditional and Roth), the 10-year rule would also apply to other qualified plans with balances, which includes all defined contribution plans – 401(k), 403(b), 457(b), 401(a), Profit-Sharing Plans, ESOP, Cash Balance Plans, and lump-sum distributions from defined benefit plans. So, absent one of the above exceptions, when a beneficiary is left a qualified plan with a balance, the beneficiary must take distributions within 10 years. Because of these potential changes, proper management of distributions for designated beneficiaries will become even more important under SECURE.

But, Don’t Bank on SECURE

In May 2019, the bill passed in the U.S. House of Representatives by a staggering vote of 417:3. At that time, some anticipated a quick Senate passage; however, it appears those expectations were very optimistic. Today – months later – the bill is on hold at the Senate. In general, when a bill reaches the Senate, it goes through a similar process it went through in the House. In particular, the bill is discussed in a Senate committee and then reported to the Senate floor for a full schedule of debates and votes. However, a bill can bypass that process when the Senate unanimously agrees to pass the bill. At this juncture, several Senators have taken issues with various provisions of the bill as it stands. In turn, this could redirect the bill from the fast-track of passing in the Senate via unanimous consent to the longer process of committee consideration, followed by report to the Senate floor for debate, vote, and even potential amendment, which would require its return to the House to vote again on the amended version. Overall, the process could be quite lengthy given the current status. And, to top it off, given the concerns raised by certain Senators, it’s also possible that SECURE, as it’s written today, may not pass at all! So, as the old adage goes, don’t count your chickens…or, in this case, don’t bank your retirement plan on it passing just yet.

Even If…

Despite all of the commotion surrounding the SECURE Act and its current status, the fate of the bill is very uncertain. However, even if it passes, exemptions will still exist, and the passage of the bill will not be the end of stretch IRAs. Viable alternatives will also still be available, such as investing in Section 7702 plans. Of course, this area involves issues and complexities that are not discussed here. Despite eligibility, the above strategies may not be appropriate for your financial situation, so it’s important to consult your tax or financial professional to review these items and determine what is best for you under the most current rules and regulations.

Filed Under: Marc's Blog

The Bear Naked Truth About Fixed Indexed Annuities

November 6, 2019

two polar bearsWhat is the Bear Naked Truth?

Let’s begin by discussing what a fixed indexed annuity or FIA is and how they came to be. An FIA is not your parents’ or grandparents’ annuity. An FIA is a tax-deferred opportunity to enjoy all of the upsides of the market without the risks associated with market volatility. It is essentially an insurance contract designed to capture market gains while deflecting market losses. With an FIA, your money is protected from unexpected downturns in the market.

Background

FIAs were introduced in 1995 but have become increasingly popular due to their inherent safety. They are a great vehicle for retirement asset accumulation because they cannot lose money due to market volatility and they can have potentially higher interest crediting when the markets are “up.” FIAs are intended to be long term, but they also generate long term benefits with a guaranteed minimum rate of return. Suitable candidates for FIAs will generally include individuals who are reluctant to invest directly in the markets but would like opportunities for market based returns.

Unlike variable annuities, which are securities investments subject to market volatility and SEC regulation, FIAs are safe insurance products subject to regulation by the insurance commissioners in each of the 50 states. Consumers can also take comfort knowing that only insurance licensed professionals may offer these safe retirement tools. The value proposition of FIAs is that they essentially allow the purchaser to participate in the market’s upside, while avoiding the downside risks associated with the market.

FIA Myths Vs. FIA Truths

An FIA may not be the right choice for everybody but for millions of Americans it can be a fantastic planning tool and help them reach their overall financial goal. There are tons of FIA myths roaming around and confusing consumers. Here are just a few samples of FIA Myths vs. FIA Truths:

Myth: If a client purchases a fixed indexed annuity, they are “stuck” even if they decide they don’t want it after all.

Truth: All annuities have a “free look” period, usually 10- 30 days, giving purchasers an opportunity to change their mind, cancel the contract and get a refund. Each state’s insurance commissioner determines the refund standard and specifically how long after the purchase the client may be entitled to receive a refund.

Myth: Many FIA sales are unsuitable for the client.

Truth: A thorough suitability review is required on every annuity sale. All too often blanket statements perpetuate this myth as misinformed people erroneously conclude that if an FIA is not right for them, they must not be right for anybody.

Myth: The surrender penalties on FIAs are extremely high, and can be as much as 20%.

Truth: The average surrender penalty for FIAs is about 10% but some surrender charges are as low as 5%. The fact is, only when an FIA owner withdraws more than the allotted annual free withdrawal amount during the surrender period will surrender charges even come into play.

Myth: You will lose your principal in an FIA if you cash out early.

Truth: FIAs preserve and protect your money from market risk and loss, they are not personal ATMs. The purchaser agrees not to withdraw the entire balance before a certain number of years has elapsed, which allows the insurance company to make an informed decision as to how to best (conservatively) invest the funds. FIA contracts are liquid but, like any contract, there will be some limitations.

Myth: C ommissions are high on FIAs and agents are encouraged to sell inappropriate products.

Truth: The average commission for FIAs is less than 6% which is paid to an agent at point of sale by an insurance carrier, NOT the consumer! In addition, the agent actually services the FIA for the client as long as the contract is in force, which generally spans several YEARS.

What’s So Attractive About An FIA?

It is believed that nearly 90% of annuity owners purchase FIAs because they provide retirement savings and protect contract holders from losing money. Here are the most popular reasons/features that were particularly appealing to consumer and focus group participants:

  • Liquidity: in a fixed indexed annuity, your deposits remain entirely in your control and you are not giving up access to your cash.
  • Locked-In Gains: FIAs offer locked-in gains and the potential for significantly higher annual returns than other safe-money solutions such as CDs or bonds.
  • No Loss of Principal: an FIA provides 100% guarantee of your principal – you can’t lose money because of a weak market.
  • Tax-Advantaged Accumulation: growth is tax-deferred which provides maximum compounded expansion of your retirement income fund.
  • Guaranteed Income Stream: An FIA can provide additional benefits like income insurance or a minimum guaranteed income for life, when you select an optional income rider.
  • Crediting Choices: FIAs allow you to choose a crediting strategy.

Comparing Fixed Indexed and Variable Annuities

All too often you hear stories about how “bad” FIAs are compared to variable annuities or VAs. Technically, this is an improper comparison because FIAs are NOT securities. FIAs are long-term products. They are guaranteed insurance contracts so there is naturally going to be some kind of cap or limit to the earning potential since insurance contracts are an entirely different animal from VAs. FIAs are not designed to compete with VAs or other securities (nor are they positioned that way). The truth is, FIAs are safe alternatives to traditional stock market investing options; they are not products designed to behave like VAs and directly compete with VAs.

Below is a simple chart comparing basic features between a typical FIA and a typical VA:

Fixed Indexed Annuities Chart

How FIAs Really Work

What makes an FIA tick and how will the FIA features help you reach your planning goals?

The first step is choosing the right FIA that best suits your planning needs. Each product is unique so there isn’t a one size fits all solution. Once a suitable FIA is identified, a premium or series of premiums are paid to the insurance company. The insurance company then takes the premiums and invests the money it receives on behalf of all annuity owners.

During the accumulation phase of the life of your FIA, taxes are deferred – you will not be subject to paying taxes on your FIA’s interest until you begin receiving distributions from the contract. Because your FIA is earning tax-deferred interest, the funds in your FIA are able to grow at a much faster rate than funds that are not tax-deferred.

An easy comparison is to a popular childhood game that involves ladders and playground slides…do you remember that game? What does this have to do with the inner workings of an FIA? With an FIA, the rules of the game have changed and are always in your favor. The ladders still represent market gain but the chutes no longer represent a loss of your money when the market is in turmoil. With an FIA, you are not subjecting your assets to market volatility. An FIA allows you to participate in the upside of the market and capture gains while shielding yourself from market losses. How?…

Imagine that every time you land on a ladder, the market is up so your FIA recognizes gains and its value increases. However, the real magic happens whenever you land on a slide. A slide no longer means you suddenly plunge and potentially lose everything – you don’t lose money so you don’t have to worry about recovering losses! When the market is down, you lose nothing and stay in the same spot. This is the true power of an FIA, you enjoy the upside of the market but even if the market crumbles, your principal is always protected.

When Is An FIA The Right Option?

Determining whether an FIA is right for your own retirement planning needs will depend on your personal circumstances and retirement goals. There is no other product available today that offers consumers the same level of safety and reward as an FIA.

The combination of absolute principal protection, locked-in gains, access to the funds, tax-deferred growth and a legacy that may be passed on to loved ones is of utmost importance to many Americans and helps explain the explosive growth of FIA sales over the past couple of years. FIAs are an amazing opportunity for those who want the safety of something like a CD that also comes with the ability to enjoy market gains without assuming any of the risk associated with direct market investments as we are constantly faced with navigating the choppy, dangerous waters of Wall Street.

America’s Tax Solutions™ has developed an Annuity Checklist for clients to help determine how an FIA strategy can fit into your overall plan. If you would like to learn more about FIAs and the potential benefits, your retirement distribution planning specialist can assist you today!

There are seven basic FIA features that really seem to intrigue consumers most:

  1. FIAs are safe – no loss of principal
  2. FIAs lock in gains
  3. FIAs are liquid
  4. FIAs enjoy tax-advantaged accumulation
  5. FIAs allow you to choose a crediting strategy
  6. FIAs can provide a guaranteed stream of income for life
  7. FIAs pass directly to named beneficiaries

 

Filed Under: Marc's Blog

Tax-Free Retirement

November 6, 2019

retired couple walking on beachIs Tax-Free Retirement possible? YES, it is!

So what is the big secret to tax-free retirement, is it evasion? Absolutely not! Is it some new product? No!

To begin, American’s face two threats to their retirement nest egg… first, outliving their nest egg and second, losing that nest egg to heavy, immediate and unnecessary taxation. That’s the bad news. The good news is today there are huge tax advantages that allow people with retirement savings to create enormous tax‐deferred and even tax‐free wealth for themselves and their families.

Most people are already familiar with typical taxable investment plans which include tax-deferred assets such as stocks, mutual funds, bonds, traditional IRAs, 401(k) s and 403(b)s. But a tax-free retirement strategy may be possible for some Americans through careful planning. However, the appropriate tax-free strategies must be in place today, not tomorrow. Once the opportunities are lost, they are sometimes impossible to recapture and use to benefit you, your family or even your business.

Tax Diversification

Tax buckets illustrationUnderstanding tax diversification can be a huge benefit for you and your family. The subject of diversification is often discussed when topics such as mutual funds, stocks, bonds, real estate and other investment classes are on the table. However, what about tax diversification? Are you familiar with strategies that are available to help you spread your investments across taxable, tax-deferred and tax-free accounts.

The primary reason for developing a tax diversification strategy is it’s impossible to know precisely what your tax rate will be throughout retirement, especially if retirement is still many years away. Based on current tax rates, you may be able to say that your retirement tax bracket will be lower than your current one. But who’s to say that your tax rates won’t change?

Tax diversification helps protect your investments and minimize risk from significant tax rate changes. In addition, putting all of your investments in only one type of account is unlikely to be the most tax-efficient strategy.

Are you familiar with strategies that are available to help you spread your investments across taxable, tax-deferred and tax-free accounts.

The primary reason for developing a tax diversification strategy is it’s impossible to know precisely what your tax rate will be throughout retirement, especially if retirement is still many years away. Based on current tax rates, you may be able to say that your retirement tax bracket will be lower than your current one. But who’s to say that your tax rates won’t change?

Tax diversification helps protect your investments and minimize risk from significant tax rate changes. In addition, putting all of your investments in only one type of account is unlikely to be the most tax-efficient strategy.

Are We Due for a Tax Hike?

tax hike chartMany Americans believe taxes will continue to rise in the years ahead. Despite the popular belief that we are paying more taxes than ever before, the reality is we currently enjoy the second lowest tax rates in U.S. history:

A confusion among many taxpayers is knowing the difference between a “marginal” tax rate and an “effective” tax rate. The simplified difference is your “marginal” tax rate refers to your tax bracket while your “effective” tax rate refers to your actual tax percentage liability.

For example, two individuals may be in the same 25% tax bracket (marginal rate) but one may only have a tax liability of 15.2% while the other has a tax liability of 18% (effective rate) based on their respective individual earnings. This confusion can unfortunately lead to some poor planning decisions especially when it comes to investing in retirement as overestimating one’s true tax rate is a common mistake.

People today are more concerned than ever before about outliving their money. However, people also tend to forget that as we age, there is less time to recover from losses such as market plunges.

With all the bumps in the road through your retirement years, it is vital that you map out a retirement strategy. A proper retirement income plan should include multiple sources of retirement income. At least one of those income sources should be non-taxable. This allows a retiree to coordinate various retirement income streams and overall minimize (or even eliminate) taxation of that income.

Small Business Owners: Utilizing Tax-Free Strategies

Small business owners are often grossly underinsured or not insured at all. Why? There are many reasons, but it’s usually because of tight cash flow in the business and because some financial professionals are just not aware of the unique needs of business owners.

As a business owner, you have the option to offer classic retirement plans such as SEP-IRAs, 401(k)s or Solo-401(k)s. But what if there is a better option? Maybe even a tax-free option? There is no limit to how much you can contribute and as your business needs change you may be able to access your money as needed in the form of tax-free loans.

What do you plan to do with your business when you retire? Many small business owners today are planning on selling their business when they retire but are unsure what to do with some of the cash they receive from the proceeds of a sale. There is also a tax-free strategy that permits that business owner to deposit the proceeds of the sale into in income tax free “bucket.”

Intrigued? Be sure to contact your local retirement distribution expert to discuss how this strategy could be great for you and your business. Everyone’s needs and situation are different but a simple review of your personal goals and/or business needs is a FREE service offered by America’s Tax Solutions professionals and member affiliates. A tax-free strategy component may be what your overall plan is missing.

Find Out About a Tax-Free Strategy That Offers All These Benefits:

  • Flexibility
  • Tax Security
  • Liquidity
  • Accessibility
  • Market Protection
  • Preferred-Tax Treatment

Tax-Free Investment Vehicles

There are three common vehicles that can be used to accumulate tax-free income: municipal bonds, Roth IRAs and insurance. Keep in mind that because every investor has different goals, financial needs, and/or limitations, it is critical to discuss any retirement planning strategy with your personal retirement distributions expert, wealth preservation consultant and/or tax professional.

Municipal Bonds

Municipal bonds (“munis”) are widely considered one of the safest investments for Americans. They are essentially loans you are providing in exchange for interest payments. They are typically issued by local and state governments to finance important public works projects such as schools, sewer systems and roadways. Once your muni matures, you get your original “loan” investment back.

Yes, you can generate tax-free income from your muni investment but the rate of return on munis tends to be painfully low and may not be appealing for certain investors.

Roth IRAs

Roth IRAs allow tax payers to accumulate tax-free funds through direct Roth IRA contributions or via conversion. Of course, funds contributed to a Roth IRA have already been taxed, but the growth in that account will be tax-free as qualified distributions are withdrawn from the Roth IRA.

A big downside of Roth IRAs, however, is the low contribution limit and the inability of high income earners to contribute to a Roth. As of 2006, Congress allowed employers to adopt a Roth 401(k) plan which has much higher limits than a Roth IRA but employers are not required to offer this option.

Insurance

Specifically, Indexed Universal Life (IUL) policies can be a fantastic option for certain people who are disappointed by the limits of tax-deferred options that are available to them. High income earners in particular are usually drawn to an IUL because of the incredible tax benefits, liquidity and the ability to contribute essentially as much as they want without facing IRS imposed contribution limits.

It’s very easy for high income earners to max out their contributions to traditional retirement plans and this limitation is eliminated with IUL. Market safety is also a key feature of a standard IUL policy – you can capture gains while avoiding market risk (principal protection).

“Compound interest is the eighth wonder of the world. He who understands it, earns it…he who doesn’t…pays it.”
– Albert Einstein

Why Tax-Free Retirement Planning is Essential

Market volatility, the instability of Social Security, and the potential for higher future taxes could mean that our retirement dollars may have to work harder and last longer during retirement. Unfortunately, your existing retirement plans and overall financial and asset protection strategies may not be enough.

If there was a way you could put away money for the future without government imposed contribution limitations and excessive or unnecessary taxation, would you be interested in that? What if that money could also grow tax-free, you could access it tax-free and you could pass it on to your loved ones tax-free…is that something people should be talking about? The answer should be obvious…YES!

If this is so great, why aren’t more people taking advantage of a tax-free retirement strategy? Candidly because nobody is talking to them about it. Unfortunately, many financial and tax professionals are not familiar with the concept or fully understand a tax-free retirement strategy themselves, so they are in no position to really educate their clients about the opportunities that are available.

The professionals at America’s Tax Solutions™ (ATS) are experts in this area and are available to answer your planning questions. Not every strategy is suitable for every individual so it is important to discuss any strategy with your personal advisors, attorney and/or tax professional before making investment decisions. If your current advisors do not have expertise in this area, your local ATS wealth preservation consultant or ATS tax professional can assist you.

Filed Under: Marc's Blog

Securing Your Retirement Today

November 6, 2019

Will You Outlive Your Retirement Nest Egg?

Negative market performance over the last few years has impacted the way people look at retirement planning. Significant loss of retirement funds created a common dilemma: will you have enough to live on during retirement? If this is a concern for you or any of your loved ones, ask yourself: Is there a way to create a guaranteed stream of income that cannot be outlived? Is there a way to enjoy tax deferred accumulation on my retirement assets? The answer is yes!

What is an FIA?

An FIA is a Fixed Indexed Annuity. Many people shudder when they hear the word “annuity” and immediately think: “Oh no, I’ve heard about those annuities and I know how terrible they are!” The reality is that many people are confused as to what an FIA is and what they can do for you and your family. An FIA is a tax deferred opportunity to enjoy all of the upsides of the market without the risks associated with market volatility. It is essentially an insurance contract designed to capture market gains while deflecting market losses. With an FIA, your money is protected from unexpected downturns in the market.

FIA History

FIAs were introduced in 1995 but have become increasingly popular due to their inherent safety. They are a great vehicle for retirement asset accumulation because they cannot lose money due to market volatility and they can have potentially higher interest crediting when the markets are “up.” FIAs are intended to be long term, but they also generate long term benefits with a guaranteed minimum rate of return. Suitable candidates for FIAs will generally include individuals who are reluctant to invest directly in the markets but would like opportunities for market based returns.

“FIAs are intended to be long term, but they also generate long term benefits with a guaranteed minimum rate of return.”

Is an FIA Right For Everyone?

The answer is no. An FIA may not be the right choice for everybody and there are several FIAs available today to choose from. Determining whether an FIA is right for your own retirement planning needs will depend on your personal circumstances and retirement goals. If you would like to learn more about FIAs and the potential benefits, your retirement distribution planning specialist can assist you today!

FIA Basic Benefits:

  • Guaranteed Stream of Income That You Cannot Outlive
  • No Loss of Principal
  • Lock in Gains
  • Tax Advantaged Accumulation
  • Liquidity
  • Crediting Options Allow You to Choose a Crediting Strategy Each Year
FIA MYTH:
  • Fixed Indexed Annuities are investments.
FIA FACT:
  • The only annuity that is an “investment” is a variable annuity. Variable Annuities are securities subject to SEC regulations. FIAs are safe insurance products subject to regulation by the insurance commissioners in each of the 50 states.
FIA MYTH:
  • The value proposition of an FIA is sharing in the upside of stocks with no downside.
FIA FACT:
  • The value proposition of an FIA is allowing the purchaser to have very limited participation in the market’s upside, while avoiding the downside risks associated with the market.

Preparing For Taxation During Retirement

Many retirees are surprised by the amount of taxes they pay. They once believed the myth that taxes decline in retirement. The truth is, without some planning, taxes can stay the same or even increase during retirement. Tax breaks specifically applicable to seniors are rare these days. Tax traps and a retirement tax ambush are much more likely. There was a time when income tax rates actually did decrease in retirement. When income tax rates were higher and there was a heavily graduated tax system, there were thirteen tax brackets. Many people received less income during retirement than during their working years so it did not take much of a drop in income to push a retiree into a lower bracket. Now, there are relatively few tax brackets and one would need to have a significant drop in income to drop into a lower tax bracket.

Roth It!

Do you believe your taxes will be higher in the future? If so, you may want to consider converting your Traditional IRA (or other qualified plan) into a Roth IRA. Once you have reached the age of 70½, the Required Minimum Distributions (RMDs) that you are required to take from an IRA are fully taxed as ordinary income. By converting to a Roth today and paying the taxes upon conversion now, you may be able to enjoy tax free distributions. Also, Roth IRA owners are not subject to RMD rules! It is important to emphasize that a Roth conversion is not for everyone. It is essential that you make an informed decision. So before converting, you may want to contact your retirement distribution specialist for an analysis of the benefits of doing a Roth conversion on your IRA. The analysis will show the differences between Roth and Traditional IRA growth and distributions in both a numeric and graph format.

Social Security Benefits and COLAs

Cost of living adjustments (COLAs) are designed to help retirees keep up with inflation. When COLAs are applied to the higher benefit available at age 70, the breakeven age gets younger. The longer a retiree lives, the higher the lifetime benefit will be due to theimpact of COLAs on the higher starting amount.

Social Security

Social Security benefits were once exempt from income taxes. In 1981, the National Commission on Social Security Reform first introduced a tax on Social Security benefits of “upper income” recipients if the taxpayer’s income exceeded a threshold amount of $25,000 for an individual and $32,000 for a married couple filing jointly. This tax was first levied in 1984. It’s not surprising that a survey of retirees between ages 70½ and 75 with a net worth of at least $1,000,000 found taxes were the largest expense by a wide margin. In this particular survey, taxes in fact took about 4% of net worth each year – not 4% of annual income, but 4% of net worth was eroded by taxes each year!

Simple Mistakes Can Cost Beneficiaries Everything

brocken piggy bankBeneficiary designation forms are an often overlooked area of estate planning that can have dire consequences if not taken care of. For example, divorce is already an unpleasant event but imagine that your ex-spouse gets the proceeds of your life insurance policy and/or retirement accounts because you forgot to update your beneficiary designation forms. In Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, Kari Kennedy was the administrator of her father’s estate and tried to recover $402,000 that was paid to her father’s ex-spouse. As part of the divorce agreement, the soon to be ex-wife had given up her rights to Mr. Kennedy’s pension and other work-related benefits.

However, Mr. Kennedy failed to remove his ex-wife as the beneficiary of his investment plan assets and replace it with Kari’s name. Following his death, the funds went to his ex-spouse, not Kari as he had intended.

The case made it all the way to the Supreme Court but, unfortunately, Kari was not deemed the beneficiary because, under ERISA, the beneficiary designation form trumps a divorce decree. The Court made it clear that a former spouse can give up the right to retirement benefits as part of a divorce decree but the specific terms of an ERISA governed plan ultimately control what happens to the plan assets.

This is an extreme case but it illustrates the dire consequence of failing to review and update beneficiary designation forms whenever a life changing event occurs such as death, divorce, marriage or birth. A beneficiary review is an important part of your financial review process that your advisor can help guide you through.

Prepare to Minimize Your Income Tax Liability

Consider estimating your federal and state income tax liabilities periodically to ensure proper withholding levels and quarterly estimated tax payments. This will prove especially important if you sell significant assets during the year or experience large swings in your income level. Also, consider maximizing your deductible expenses and savings such as qualified retirement plans, charitable giving, deductible expenses, etc. Be careful to meet all IRS dates and deadlines for withholdings and filings.

Life Insurance

It is a good idea to review your life insurance policies and obtain an in-force illustration on those policies. If you have assets that are hard to value and are not terribly liquid, you should consider life insurance. If set up correctly, the life insurance proceeds may be free of income and estate taxes for your loved ones. The proceeds may be used to pay any debts of the estate and taxes on the estate, which will prevent any hard to value assets and retirement funds from being liquidated to pay the taxes. 

“If set up correctly, the life insurance proceeds may be free of income and estate taxes for your loved ones.”

Review Your Estate Plan This Year

Is your Will up to date? Does it reflect your personal wishes for the distribution of your assets? Since not all assets pass through a Will, have you reviewed your beneficiary designation forms lately? Have the personal or financial circumstances of your beneficiaries significantly changed over the past year? Have you considered a gifting program to move assets from your estate to those you wish to enrich? Have you reviewed your estate plan in light of changing estate tax laws or changes in your personal financial position? It’s important to regularly meet with your financial consultant to review these items, and make sure your estate plan is up-to date.

Filed Under: Marc's Blog

America’s Long-Term Care Crisis: Are You Prepared

November 6, 2019

doctor with senior woman patientThis newsletter is a special edition dedicated to an often overlooked and/or misunderstood planning tool. As we age, our financial planning needs naturally change and we have to anticipate roadblocks ahead that most ignore until it’s too late. When the subject of potential or unforeseen health problems arises, as human beings our natural and typical reaction is to deflect this dose of reality and convince ourselves “That won’t happen to me, it will happen to the other guy, but not me.” This is especially true for those who currently have a strong bill of health since it’s hard to imagine such a drastic change in your health when you are presently in good shape.

Regardless of your current health status, too many Americans leave out a crucial planning component when they are structuring or contemplating a retirement plan. You may have a sizable IRA, 401(k), pension plan and expect to collect Social Security benefits as well, but what happens if suddenly you fall ill and are no longer able to care for yourself? What happens if you can no longer afford the proper medical care? What happens if you have nearly drained your IRA, 401(K) and pension funds? What happens if you need to go into a nursing home or other care facility? Are you prepared to face such challenges?

Protect, Preserve and Defend Your Health

We protect ourselves from costs associated with car accidents, flood and fire damage to our homes, and we have individual healthcare coverage to help prevent serious illness. Many of us have life insurance to plan for the future and to provide tax-free benefits to our families when we are gone. That’s great and a normal part of our lives, but sometimes it’s just not enough. As we have evolved as a society, so have our financial, retirement and health planning tools.

The good news is people are living longer. The bad news is people are living longer. Unfortunately, you can’t depend on a hope that “it will happen to the other guy.” Everyone should make an effort to plan for the worst while they are still in a position to do something about it. Planning for long-term care is relatively simple these days but there are a few particular solutions that every American should know about. We always talk about Protect, Preserve and Defend your retirement accounts from Uncle Sam while leaving a legacy to your loved ones. What if there was a way to incorporate that mantra into a long-term care solution? Well, there is! Ask your retirement distribution expert about the new options available to you.

*Important Note: Everyone has a different situation and available solutions vary by state so it is important to clarify that this issue is intended for educational and informational purposes only – it is not intended to be a substitute for personal professional advice.

Key Advantages

  • Long-Term Healthcare Expenses Are Covered
  • Joint and Single Options
  • Almost Any Asset May Be Used as Funding Source
  • Guaranteed Premiums
  • Optional Riders: Lifetime Benefits
  • Return of Premium Feature (all years)
  • Accelerated Death Benefit (for qualifying expenses)
  • Leave a Legacy for Heirs (unused death benefit)

* Features and options may vary – it is imperative to discuss all features and options available to you with your personal advisors.

Statistics the state of health in america today

Avoid Irreversible Financial Consequences

In the past, a lot of people shunned long-term care (LTC) planning because of the costs associated with traditional LTC. Statistically, only about 3% of American adults have LTC coverage. Additionally, about 70% of Americans turning 65 will need some type of LTC care in their lifetime so you or a loved one will likely face a long-term care event. The problem is, this type of event can spell financial disaster and have irreversible consequences. There is, however, a light at the end of this dark LTC tunnel…

New solutions that offer better options than traditional LTC insurance are now available. By incorporating asset-based options into your planning strategy, you can help avoid irreversible financial consequences of a long-term care event!

What Is The Real Cost of Aging?

It’s no secret that healthcare costs have risen dramatically over the past several decades. Unfortunately, it’s nearly impossible to know how much you need to put aside to cover your average healthcare costs, let alone guess how much you may need to cover long-term healthcare costs should your health take a turn for the worse. So what is the average American supposed to do and how can they effectively plan for such obstacles? Traditionally, standard long-term care insurance was really the only viable option but it was very expensive. However, with new LTC solutions, many Americans can now have peace of mind when it comes to long-term care planning.

How much can you expect to pay on average for nursing home care in your state? Below is a chart showing the medial annual costs for nursing home care in select states. The amount for each state is approximate and is based on a 365 day stay with a semi-private room accommodation:

Annual costs for nursing hoe care

Healthcare

Medicare and Medicaid were not designed to cover LTC expenses. As stated earlier, people are living longer and maladies such as Alzheimer’s and dementia are rapidly increasing. Many of us have personal experience with loved ones who have suffered with such age related illnesses. There has been a tremendous spike in life expectancy in America over the last 50 years, thus the need for access to better long-term care solutions has become a necessity. What makes the new LTC solutions different? Unlike programs such as Medicare and Medicaid, new LTC solutions don’t require you to spend down all your assets first or rob your savings accounts until you are essentially penniless.

TYPES OF SERVICES YOU MAY NEED

  • Hospice
  • Nursing Home
  • Assisted Living
  • Home Health Care
  • Adult Day Care
  • Caregiver Training
  • Supportive Equipment

DAILY ACTIVITIES TYPICALLY IMPAIRED BY HEALTH PROBLEMS

  • Eating
  • Bathing
  • Dressing
  • General Mobility
  • Restroom Use

Death Benefits

We all like the idea of a tax-free retirement, but what about tax-free death benefits? Generally, your death benefits under this type of new hybrid policy will be tax-free to beneficiaries.

What If You Decide You Don’t Like the Strategy?

Buyer’s remorse is a common affliction that doesn’t often end on a positive note. However, with these new planning options, if you decide you don’t like it anymore or just flat out change your mind in the first year, you are not stuck…within the first year you can get your entire premium returned to you.

Most Important… Ask Questions!

Not sure you have your long-term care needs adequately covered? Your personal retirement distribution specialist, CPA, or other professional advisor can assist and help you determine what is right for you and your family to make sure you are prepared and protected. Not all long-term care solutions are appropriate for every individual so it is important that you meet with your professional advisors for an assessment to ensure you have the proper strategy for your situation. Don’t take a chance with your long-term healthcare needs…prevention is the best medicine after all. Call for an appointment today to preserve, protect and defend your health!

Filed Under: Marc's Blog

Common IRA Mistakes That Can Be Avoided

November 2, 2019

couple discussing IRA paperworkMISTAKE #1: Failure to Name a Designated Beneficiary or Failure to Update the Designation Form 

If you fail to name a designated IRA beneficiary, it could have unintended consequences. What is a “designated” beneficiary? Aren’t all beneficiaries “designated”? No, they are not the same! A designated beneficiary is a living, breathing, human with a remaining life expectancy. Charities cannot be designated. Estates cannot be designated. Trusts cannot be designated. Your beloved dog cannot be designated. Failure to name a designated beneficiary essentially diminishes the opportunity for individual beneficiaries to maximize the benefits of tax deferred distributions on an inherited IRA. 

Life changing events such as marriage, death, divorce, birth and adoption occur regularly and could impact your beneficiary designation decisions. Every IRA owner should conduct a beneficiary form review at least once a year to ensure that IRA assets will pass to the intended beneficiaries. 

MISTAKE #2: Beneficiaries Fail to Take Advantage of the Stretch Opportunity and Cash Out the IRA 

As an IRA owner, you may have all of the relevant information and knowledge about the incredible opportunities for tax deferred RMDs and minimizing any unnecessary taxation, but do your heirs? Many beneficiaries are in the dark and remain unaware of their options when it comes to inherited IRAs. Some beneficiaries even think the only option is to cash out the inherited IRA, potentially exposing the IRA to heavy, immediate and unnecessary taxation. 

MISTAKE #3: Taking the Wrong RMD Amount 

Assuming you remembered to take an annual distribution from your IRA, did you confirm that you took the correct minimum amount? Who did the calculation? Was it based on your balance as of December 31st of the prior year? Do you have more than one IRA? Were RMD calculations made from each of those IRAs? Did you add outstanding rollovers/IRA assets in transit and recharacterizations? Did you use the correct life expectancy factor? There is nothing wrong with taking out more than the required minimum, however, do not make the mistake of taking too little as the consequences are steep.

If you fail to take out at least the correct minimum distribution each year after your required beginning date, the IRS will impose a 50% penalty on the amount you failed to take but should have! 

For the first distribution year only (after an individual turns 70½) the IRA owner has until April 1st of the following year to take his/her very first RMD.

MISTAKE #4: Failure to Take an RMD on Time

Do you know when your required beginning date (RBD) is? As stated before, when an IRA owner turns 70½, the owner has until April 1st of the following year to take the very first RMD. After the first distribution, each subsequent RMD must be taken no later than December 31st each year.

Failure to take your RMD by the deadline will subject the undistributed amount to a 50% penalty. Not only will you be responsible for the penalty, you still have to take the RMD and pay the taxes. If your filing date has passed or your tax return has already been processed when an RMD error is discovered, you will need to file an amended return.

MISTAKE #5: Taking Distributions Out Too Early

Are you under 59½ but plan to take a distribution from your IRA? The IRS will impose a 10% early distribution penalty on all taxable distributions that are taken before an IRA owner reaches 59½ unless some other exception applies. The basic exceptions for the 10% penalty are death, disability, medical expenses in excess of 7.5% of the AGI (in the year of distribution), qualified higher learning expenses, first time home buyer and health insurance for unemployed owners who have been receiving unemployment compensation for at least 12 consecutive weeks.

An IRA owner may also avoid a 10% early distribution penalty if the distributions qualify under I.R.C. Section 72(t) as part of systematic, substantially equal, periodic payments.

MISTAKE #7: Errors in Disclaiming IRAs

A disclaimer is a legal document and formal refusal of an inheritance by a beneficiary. Disclaimer rules apply to all IRA beneficiaries. Beneficiaries, are not required to accept an IRA or any portion thereof and may, instead, choose to disclaim all or a portion of their share. To have a valid disclaimer, the beneficiary must not have accepted the IRA assets or property. The only exception to this rule is the year of death RMD for the deceased owner. 

All disclaimers must be submitted in writing to the IRA custodian within 9 months of the owner’s death. Disclaimers are irreversible, permanent decisions. Some beneficiaries make the mistake of disclaiming an IRA with the intent of passing on the disclaimed assets to someone else like their child or spouse. Disclaimed IRA assets may only go to the contingent beneficiary designated by the original owner. Disclaiming beneficiaries have zero control over the disclaimed amounts. 

MISTAKE #8: Not Knowing the Special Rules for Spousal Beneficiaries 

When it comes to IRA beneficiaries, surviving spouses have more options than non-spouse beneficiaries. For tax purposes or other personal reasons, a surviving spouse may wish to disclaim all or a portion of an IRA (s)he interited from a spouse, causing the disclaimed amount to pass on to the named contingent beneficiary on the deceased’s IRA beneficiary designation form. 

What if your spouse is under 59½ when you pass away and needs access to the IRA funds? A surviving spouse can choose to remain as a beneficiary if he or she needs the money but wants to avoid the 10% early distribution penalty. If the young spouse takes RMDs as a beneficiary, this penalty will be avoided because beneficiary distributions are never subject to that penalty. Beneficiary RMDs must begin no later than December 31st of the year following the owner’s death. 

If the spouse is over 59½, then there really is no advantage in remaining a beneficiary. The surviving spouse may elect to treat the inherited IRA as his or her own and roll it over. Spousal beneficiaries may choose this option at ANY TIME even if the surviving spouse already began taking distributions as a beneficiary. Once the spouse decides to treat the IRA as his or her own, it is retitled or can be rolled over and the surviving spouse steps into the owner’s shoes. The spouse is now the owner of the IRA and names his or her own beneficiaries, creating an opportunity for the new beneficiaries to stretch RMDs over their individual life expectancies. Once this option is chosen, the spouse cannot revert to a beneficiary status. The IRA will now be treated as if the original owner never existed. 

MISTAKE #9: Rollover Errors 

Many IRA owners miss the 60-day deadline due to unexpected life events. The 60-day clock for a rollover begins when the owner receives the distribution. Also, you are limited to one rollover per year (every 365 days, not per calendar year). This one year limitation applies to all of your IRAs that have distributed or received rollover funds. 

The simplest way to avoid missing the 60-day rollover deadline is to only transfer IRA assets via trustee-to trustee transfer. This way, you never run the risk of forgetting to complete the transaction or fail to complete the transaction due to an unavoidable event. The additional bonus of using a trustee-to-trustee transfer is that, unlike rollovers, they are unlimited. If you have a custodian that refuses to do a trustee-to-trustee transfer and will only move your IRA assets by issuing you a check, you can ask that the check be made payable to the new IRA for your benefit and this will qualify as a direct rollover. For example, the check may be issued to “New Custodian, F/B/O John Doe.” 

If you have more than one account with your new custodian, be sure to confirm that the rolled over IRA assets are placed into the correct account immediately following the transaction as you will only have 60-days to correct an error. 

IMPORTANT: IRA beneficiaries cannot do an IRA rollover and they do not have 60-day rule. They need to use trustee-to-trustee transfers. 

MISTAKE #10: Assuming a Will Takes Care of Everything 

IRAs do not pass through a will, it is that plain and simple. Beneficiary forms on file with the custodian will determine how IRA assets will be distributed upon the death of an IRA owner. Custodial agreements are binding, private contracts between the IRA owner and custodial institution. Regardless of how perfect and well drafted a last will and testament may be, its terms cannot and do not override the terms of a custodial agreement. 

MISTAKE #11: Choosing the Wrong Custodian 

Just because the IRS allows multi-generational stretching, permitting beneficiaries to stretch RMDs over their remaining life expectancies, does not mean that the custodian is required to offer it. Several custodians require beneficiaries to take distributions within 5 years or require a lump-sum distribution. Multi-generational IRA rules are permissive rules, not mandatory regulations. Many people tend to forget that custodial agreements are individual, private contracts and custodians are the ones who make all of the rules, including any restrictions. Although the IRS allows multi-generational stretching, an IRA custodian does not have to offer this option. 

MISTAKE #12: Not Knowing the Downside to Naming a Charity or Trust as an IRA Beneficiary Along With Individuals

Charitable giving is always encouraged but did you set up a separate IRA for this purpose? Do you have a beneficiary who is not capable of handling money so you named a trust as your IRA beneficiary? If either applies to you, make sure you know the potential pitfalls of naming a charity or trust as an IRA beneficiary along with individuals. 

If you set up a separate IRA for your favorite charities, there are no concerns. However, if you named individual beneficiaries along with your favorite charities, there is a risk that the opportunity for the individuals to stretch RMDs over their own life expectancies will be destroyed. 

Charities cannot be “designated” beneficiaries, period. They have no life expectancy and there is no way around this rule. If a charity’s portion of an IRA is not split or cashed out in a timely manner, the stretch opportunity will be destroyed for other individual beneficiaries. The simple solution is to split the IRA while you are alive to accommodate charitable goals, while preserving the stretch opportunity for your individual beneficiaries. 

Like charities, trusts are not “designated” beneficiaries. You may think you have nothing to be concerned about because you paid a lot of money to have a qualifying “see through trust” drafted. You may have also been told that individual beneficiaries can still stretch the RMDs. The fact is, even assuming that a trust is a properly drafted “see through trust,” the individual beneficiaries will be stuck using the life expectancy of the oldest trust beneficiary. This is to the detriment of younger beneficiaries as it eliminates their opportunity to maximize the IRA and receive RMDs over their individual, much longer, life expectancies. 

There will naturally be situations where a trust makes sense or is the only viable option, but bear in mind that there is no tax advantage to naming a trust as the beneficiary of an IRA.

Filed Under: Marc's Blog

AARP Report on Annuities

October 24, 2019

Why annuities are among the strongest retirement savings vehicles.

How to guarantee your retirement income for life.

green car on moneyGiven today’s fragile and unpredictable economy, many people are looking for ways to provide GUARANTEED income for life from their retirement savings. This is the finding of a report entitled “Money Matters” from AARP, the 40-million-member association for people age 50 and over.

The report notes that retirees should guaranteeenough retirement income to cover recurring expenses such as rent or mortgage payments, utilities, food and medicine. Other issues addressed in the report include when to claim Social Security benefits, whether to buy an annuity, and what to do with homes and mortgages.

“Rules of thumb no longer apply,” according to AARP. Their report also offers general financial guidance that challenges some conventional wisdom, including not placing all of your retirement savings at risk in the stock market.

Income growth potential without risk

You may be aware that annuities provide regular payments for life. However,
relatively few people use them out of fear that they are risky or inappropriate. People want growth potential WITHOUT the risk. With people living longer, facing increasing costs and addressing new challenges every day, risk cannot be part of the planning process for all of a person’s monies.

Annuities can help retirees address today’s economic challenges by offering greater potential for growth than what a traditional fixed asset can offer. Furthermore, annuities offer protection from market downturns.

When most individuals think of retirement, they think about how to save enough money. We have not spent nearly enough time discussing the best ways to take that money and turn it into an income stream that lasts throughout retirement for a lifetime.

Why does “annuity” seem to be a dirty word?

After the recent stock market decline, consumers are interested in-safe retirement investments and products. Yet “annuity” seems to be a dirty word in many circles, particularly among financial advisors. They cite high fees, complicated guarantees on investment earnings, early surrender penalties, and agents who may not understand your financial goals or have your best interests at heart.

I do not agree with these objections about annuities!

Instead, I believe annuities to be the strongest of retirement savings vehicles currently available to consumers.

Annuities have significant advantages and can be a do-it-yourself pension. In planning for retirement, you give a lump sum of money to an insurance company and an annuity can start paying you a monthly income for the rest of your life, no matter how long you live or what happens in the economy going forward.

Reliable lifetime retirement income

When you retire, however, you need to shift your thinking and focus on generating reliable lifetime retirement income, which is the goal of annuities.

Annuities may also be a good investment while you’re accumulating retirement savings, especially if they offer guaranteed rates of growth on the Income Account Value. Annuities definitely deserve a place in your retirement income portfolio. Given that you’re planning for the rest of your life, it’s well worth your time to investigate them.

Filed Under: Marc's Blog

The Truth About Fixed Indexed Annuities

October 24, 2019

What do Walmart, Wells Fargo, major wire houses and Tony Robbins all have in common? They’re all part of a growing stampede to sell Fixed Indexed Annuities.  2015 will end up as the year where Fixed Indexed Annuity sales were up over 36% from the previous year, a new record high for FIA sales.

Financial commentators of all stripes tend to harp on high profile cases where consumers were sold annuities ill-suited to their needs. These commentators also claim annuities are too complicated, expensive and have inflexible terms, making them unattractive to changing needs.

Many advisors believe annuities offer clients little more than 3 to 4% interest.

more control of your financial futureWe believe the public is not getting a balanced picture and the time has come to set the record straight and give consumers the truth about fixed indexed annuities.

It’s crucial to disseminate accurate information to clients about what fixed indexed annuities (FIAs) do and why they should be considered as part of a retirement portfolio. A fundamental problem is that many advisors simply dismiss FIAs products as having no real value. New marketplace voices, i.e., Tony Robbins, should be a wake-up call and help people realize that clients do in fact value what FIAs offer and they want the benefits of an FIA.

Robbins even stated there is a major unfilled need for products that protect consumers from market risk and simultaneously produce tremendous streams of guaranteed income.

FIAs are designed to guarantee income, offer peace of mind and provide protection and that’s why nearly 90% of annuity owners buy them – they protect contract holders from losing money. It’s important for advisors to keep their story simple and this is where someone like Tony Robbins excels, keeping his story short, sweet and attractive to consumers which can threaten your relationship with your clients. But why do consumers find the story so appealing?

Years ago, workers could count on monthly income from corporate defined benefit retirement plans and retail buyers had little contact with annuities. Most hadn’t even heard of annuities, which tended to be the purview of institutional money managers.  With Baby Boomers retiring in droves and searching for guaranteed income, annuities enter into the lexicon more frequently.  It’s clear that FIAs are capturing public attention and gaining a larger market share.

FIA deposits were at record levels and closed out 2015 at $50 Billion. Why the record growth:

  • Deposits remain entirely in your control – you are not giving up access to your cash.
  • FIAs offer the potential for significantly higher annual returns than other “safe money”
    solutions such as CDs or bonds.
  • Your principal is 100% guaranteed – you can’t lose money.
  • FIA growth is tax-deferred, maximizing compound growth of your retirement income fund.

You get income insurance or guaranteed income for life when you select an optional income rider.

So what is the truth? It’s really all about Income, Income, Income.

As powerful a tool as FIAs can be for safe money return, what makes them so attractive is their ability to protect principle and simultaneously provide a guaranteed lifetime income stream, not to mention tax efficiency and upside potential without the downside risk.
No other financial product in the marketplace today does all of these things as efficiently as a Fixed indexed annuity. Learning the truth about FIAs and their power give advisors the opportunity to immediately serve their clients’ best interests. Our Special Report is a definitive guide to Fixed Indexed Annuities, please call our office at (800) 831-2901 for a copy.

We look forward to the opportunity to clearing up the myths, hype and confusion surrounding these important investment vehicles.

Filed Under: Marc's Blog

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