This slide show is a primer about annuities and how they function. It has been reduced to its simplest terms. ENJOY!

1. Demystifying Annuities
Thomas Potter
Independent Life Insurance Professional
Plans4Retirement
480 221-4206
www.plans4retirement.com

2. THE DIFFERENT USES OF LIFE INSURANCE
AND AN ANNUITY

3. THE DIFFERENT USES OF LIFE INSURANCE
AND AN ANNUITY
LIFE INSURANCE PROTECTS YOUR FAMILY IF YOU DIE
TOO SOON

4. THE DIFFERENT USES OF LIFE INSURANCE
AND AN ANNUITY
LIFE INSURANCE PROTECTS YOUR FAMILY IF YOU DIE
TOO SOON
AN ANNUITY PROTECTS YOU FROM OUTLIVING YOUR
INCOME IF YOU
LIVE TOO LONG

5. Annuity Seminar Goals
•Provide you with sound and unbiased
information

6. Annuity Seminar Goals
•Provide you with sound and unbiased
information
•Acquaint you with annuity:
Types

7. Annuity Seminar Goals
•Provide you with sound and unbiased
information
•Acquaint you with annuity:
Types
Benefits

8. Annuity Seminar Goals
•Provide you with sound and unbiased
information
•Acquaint you with annuity:
Types
Benefits
Characteristics

9. Annuity Seminar Goals
•Provide you with sound and unbiased
information
•Acquaint you with annuity:
Types
Benefits
Characteristics
•What to consider if you are shopping for an
annuity

10. An annuity is:
A multi-year insurance interest - paying contract that has the
insurance company’s guarantees of:

11. An annuity is:
A multi-year insurance interest - paying contract that has the
insurance company’s guarantees of:
•Predictable income you cannot outlive

12. An annuity is:
A multi-year insurance interest - paying contract that has the
insurance company’s guarantees of:
•Predictable income you cannot outlive
•The return of your principal and interest earnings

13. An annuity is:
A multi-year insurance interest - paying contract that has the
insurance company’s guarantees of:
•Predictable income you cannot outlive
•The return of your principal and interest earnings
•Minimum interest earnings in every economic climate

14. An annuity is:
A multi-year insurance interest - paying contract that has the
insurance company’s guarantees of:
•Predictable income you cannot outlive
•Protection from market risk
•Minimum interest earnings in every economic climate
“Annuities are among the highest rated financial products in
consumer satisfaction” (Nat’l Assn of Fixed Annuities)

15. Three ways to define an annuity
•How interest is credited - fixed rate or equity indexed

16. Three ways to define an annuity
•How interest is credited - fixed rate or equity indexed
•Methods of investment - single or multiple payments

17. Three ways to define an annuity
•How interest is credited - fixed rate or equity indexed
•Methods of investment - single or multiple payments
•When or if distributions start - deferred or immediate

18. Three investment methods
•Fixed rate – contractually stated

19. Three investment methods
•Fixed rate – contractually stated
•Equity indexed – interest earnings based upon an
underlying index e.g. S&P 500

20. Three investment methods
•Fixed rate – contractually stated
•Equity indexed – interest earnings based upon an
underlying index e.g. S&P 500
•Variable – a securities product
No guarantees – principal or earnings – total risk

21. Three investment methods
•Fixed rate – contractually stated
•Equity indexed – interest earnings based upon an
underlying index e.g. S&P 500
•Variable – a securities product
No guarantees – principal or earnings – total risk
Seller must have a securities license

22. Three investment methods
•Fixed rate – contractually stated
•Equity indexed – interest earnings based upon an
underlying index e.g. S&P 500
•Variable – a securities product
No guarantees – principal or earnings – total risk
Seller must have a securities license
High investment fees

23. Annuity Benefits
•Guaranteed lifetime income

24. Annuity Benefits
•Guaranteed lifetime income
•Annuities avoid probate

25. Annuity Benefits
•Guaranteed lifetime income
•Annuities avoid probate
•Early withdrawals without penalty or surrender charges for:
Terminal illness
Chronic illness
Long term care

26. Annuity Benefits
•Guaranteed lifetime income
•Annuities avoid probate
•Early withdrawals without penalty or surrender charges for:
Terminal illness
Chronic illness
Long term care
•Death benefits for survivors

27. Annuity Benefits
•Guaranteed lifetime income
•Annuities avoid probate
•Early withdrawals without penalty or surrender charges for:
Terminal illness
Chronic illness
Long term care
•Death benefits for survivors
•Numerous payout options

28. Annuity Benefits
•Guaranteed lifetime income
•Annuities avoid probate
•Early withdrawals without penalty or surrender charges for:
Terminal illness
Chronic illness
Long term care
•Death benefits for survivors
•Numerous payout options
•Creditor proof

29. Annuity Benefits
•Guaranteed lifetime income
•Annuities avoid probate
•Early withdrawals without penalty or surrender charges for:
Terminal illness
Chronic illness
Long term care
•Death benefits for survivors
•Numerous payout options
•Creditor proof
•Early LIMITED withdrawal of money

30. Characteristics of annuities
•SAFETY OF PRINCIPAL

31. Characteristics of annuities
•SAFETY OF PRINCIPAL
•Interest growth is tax deferred

32. Characteristics of annuities
•SAFETY OF PRINCIPAL
•Interest growth is tax deferred
•Distributions of interest taxed as ordinary income

33. Characteristics of annuities
•SAFETY OF PRINCIPAL
•Interest growth is tax deferred
•Distributions of interest taxed as ordinary income
•Each contract has an owner, an annuitant, and a beneficiary

34. Characteristics of annuities
•SAFETY OF PRINCIPAL
•Interest growth is tax deferred
•Distributions of interest taxed as ordinary income
•Each contract has an owner, an annuitant, and a beneficiary
•Annuities are sold by banks, brokerage firms, independent agents and
captive agents.

35. Characteristics of annuities
•SAFETY OF PRINCIPAL
•Interest growth is tax deferred
•Distributions of interest taxed as ordinary income
•Each contract has an owner, an annuitant, and a beneficiary
•Annuities are sold by banks, brokerage firms, independent agents and
captive agents.
•Any guarantees are backed by the insurance company

36. Characteristics of annuities
•SAFETY OF PRINCIPAL
•Interest growth is tax deferred
•Distributions of interest taxed as ordinary income
•Each contract has an owner, an annuitant, and a beneficiary
•Annuities are sold by banks, brokerage firms, independent agents and
captive agents.
•Any guarantees are backed by the insurance company
•Upon death, proceeds avoid probate.

37. Characteristics of annuities
•SAFETY OF PRINCIPAL
•Interest growth is tax deferred
•Distributions of interest taxed as ordinary income
•Each contract has an owner, an annuitant, and a beneficiary
•Annuities are sold by banks, brokerage firms, independent agents and
captive agents.
•Any guarantees are backed by the insurance company
•Upon death, proceeds avoid probate.
•Creditor proof

38. Characteristics of annuities
•SAFETY OF PRINCIPAL
•Interest growth is tax deferred
•Distributions of interest taxed as ordinary income
•Each contract has an owner, an annuitant, and a beneficiary
•Annuities are sold by banks, brokerage firms, independent agents and
captive agents.
•Any guarantees are backed by the insurance company
•Upon death, proceeds avoid probate.
•Creditor proof
•Minimum amounts are needed to purchase them

39. Characteristics of annuities
•SAFETY OF PRINCIPAL
•Interest growth is tax deferred
•Distributions of interest taxed as ordinary income
•Each contract has an owner, an annuitant, and a beneficiary
•Annuities are sold by banks, brokerage firms, independent agents and
captive agents.
•Any guarantees are backed by the insurance company
•Upon death, proceeds avoid probate.
•Creditor proof
•Minimum amounts are needed to purchase them
•Penalties will be assessed for early liquidation of the annuity

40. Costs Associated with Annuities
•No commissions – the insurance company pays the producer

41. Costs Associated with Annuities
•No commissions – the insurance company pays the producer
•No investment fees

42. Costs Associated with Annuities
•No commissions – the insurance company pays the producer
•No investment fees
•No producer fees – at least from me

43. Costs Associated with Annuities
•No commissions – the insurance company pays the producer
•No investment fees
•No producer fees – at least from me
•All annuities have surrender/penalties/liquidation charges for
terminating the contract before its maturity date

44. Costs Associated with Annuities
•No commissions – the insurance company pays the producer
•No investment fees
•No producer fees – at least from me
•All annuities have surrender/penalties/liquidation charges for
terminating the contract before its maturity date
•If any, all costs are specified in the contract and explained before the
purchase by the producer

45. What is annuitization?
Annuitization is the conversion of your annuity’s account value to a
guaranteed stream of income according to your payout option choice.

46. What is annuitization?
Annuitization is the conversion of your annuity’s account value to a
guaranteed stream of income according to your payout option choice.
•Single Premium Immediate Annuities (SPIAs) are annuities that convert
a one-time premium into an immediate income stream.

47. What is annuitization?
Annuitization is the conversion of your annuity’s account value to a
guaranteed stream of income according to your payout option choice.
•Single Premium Immediate Annuities (SPIAs) are annuities that convert
a one-time premium into an immediate income stream.
•A deferred annuity can be annuitized at the end of its term, during the
term of the contract, or not at all.

48. What is annuitization?
Annuitization is the conversion of your annuity’s account value to a
guaranteed stream of income according to your payout option choice.
•Single Premium Immediate Annuities (SPIAs) are annuities that convert
a one-time premium into an immediate income stream.
•A deferred annuity can be annuitized at the end of its term, during the
term of the contract, or not at all.
•When you annuitize you are trading control of your money for
a fixed stream of income from the insurance company

49. Considerations before annuitizing
•Once you annuitize an annuity you cannot reverse the process

50. Considerations before annuitizing
•Once you annuitize an annuity you cannot reverse the process
•Before annuitizing your deferred annuity consider exchanging it for an
immediate annuity because:
Better interest rates

51. Considerations before annuitizing
•Once you annuitize an annuity you cannot reverse the process
•Before annuitizing your deferred annuity consider exchanging it for an
immediate annuity because:
Better interest rates
More favorable taxation treatment for distributions

52. Considerations before annuitizing
•Once you annuitize an annuity you cannot reverse the process
•Before annuitizing your deferred annuity consider exchanging it for an
immediate annuity because:
Better interest rates
More favorable taxation treatment for distributions
•Be sure of your payout option selection – this is not able to be changed

53. Annuity payout options
•Period Certain – you select the number of periods you want to receive income

54. Annuity payout options
•Period Certain – you select the number of periods you want to receive income
•Life/ Joint Life – payments are received as long as one spouse is alive

55. Annuity payout options
•Period Certain – you select the number of periods you want to receive income
•Life/Joint Life– payments are received as long as one spouse is alive
•Life with Period Certain or Joint Life with Period Certain – you are guaranteed
to receive payments for the period you selected or for as long as you live,
whichever is greatest. This is the best of both worlds

56. When an annuity contract matures
•You can take your money (P&I) as a lump sum and pay taxes on the
interest at your ordinary income tax rate.

57. When an annuity contract matures
•You can take your money (P&I) as a lump sum and pay taxes on the
interest at your ordinary income tax rate.
•You can roll the contract over with the same or different insurer for a new
deferred annuity, likely with different terms

58. When an annuity contract matures
•You can take your money (P&I) as a lump sum and pay taxes on the
interest at your ordinary income tax rate.
•You can roll the contract over with the same or different insurer for a new
deferred annuity, likely with different terms
•You can transfer the contract to an immediate annuity to receive periodic
income payments.

59. Who is a good candidate for an annuity?
•Investors who cannot afford to risk/lose principal.

60. Who is a good candidate for an annuity?
•Investors who cannot afford to risk/lose principal.
•Those who currently have investments in CDs, T-bills, savings accounts or
money market accounts and are willing to trade some liquidity for higher
returns.

61. Who is a good candidate for an annuity?
•Investors who cannot afford to risk/lose principal.
•Those who currently have investments in CDs, T-bills, savings accounts or
money market accounts and are willing to trade some liquidity for higher
returns.
•People that have 401(k)’s and want to protect their gains or a portion of
those gains, from possible market risk.

62. Who is a good candidate for an annuity?
•Investors who cannot afford to risk/lose principal.
•Those who currently have investments in CDs, T-bills, savings accounts or
money market accounts and are willing to trade some liquidity for higher
returns.
•People that have 401(k)’s and want to protect their gains or a portion of
those gains, from possible market risk.
•Those that want a pension-like income stream for a period of time or the
rest of their lives

63. If you can get life insurance

64. If you can get life insurance
Annuities are probably not good for
legacy purposes

65. If you can get life insurance
Annuities are probably not good for
legacy purposes
WHY?

66. If you can get life insurance
Annuities are probably not good for
legacy purposes
WHY?
The proceeds are taxable
to your beneficiaries

67. DISCLAIMER
THESE PRESENTATION POINTS DO NOT REPRESENT TAX
OR LEGAL ADVICE.
CHECK WITH YOUR TAX OR LEGAL ADVISOR IF YOU HAVE ANY
QUESTIONS OR CONCERNS, HOW THESE FINANCIAL PRODUCTS
MIGHT AFFECT YOUR FINANCIAL CONDITION.
PLANS4RETIREMENT

68. THANKS FOR ATTENDING
QUESTIONS?
Presented by: Thomas Potter
480 221-4206
www.plans4retirement.com
info@plans4retirement.com