What makes us different from other advisors?

We are “smart” advisors with over 30 years of directing clients to safety, specializing in products that never lose principal.

What is a 1035 Exchange?

1035 refers to a provision in the tax code which allows for the direct transfer of accumulated funds in a life insurance policy, endowment policy or annuity policy to another life insurance policy, endowment policy or annuity policy, without creating a taxable event. The 1035 exchange is one of the few parts of the tax code that works in your favor. For example, when you sell shares of stock to buy shares of a different company, the profits on your investment are subject to taxes. With annuities, you can exchange one company’s product for another’s with the earnings from your original investment still tax-deferred until you take money out of annuities for good.

What is a Direct Rollover IRA?

Commonly used when leaving a job, a Direct Rollover is the movement of assets from a qualified retirement plan, such as your former company’s 401(k) plan or another qualified IRA directly to an eligible retirement plan. Direct rollovers provide a convenient way to make sure your retirement assets maintain their tax-deferred status.

Please note: If your employer offers a Roth 401(k) or Roth 403(b) plan, currently only the Roth assets can be rolled into a Roth IRA. The remainder of your plan assets can be rolled into a Traditional IRA.

Advantages of moving your employer’s qualified retirement plan assets:

Control – You will no longer be limited by the investment options of your employer-sponsored plan. You have control.

Keep deferring – Assets continue to grow tax-deferred.

Flexibility – You can convert your Traditional IRA to a Roth IRA once the money has been rolled over and if you are eligible for a Roth IRA.

Options – Depending on your personal situation, you may use your IRA savings for educational purposes, first-time home purchases and other reasons without penalties.

How are the interest rates set for my fixed deferred annuity?

Current Interest Rate

The current rate is the rate the company decides to credit to your contract at a particular time. The company will guarantee it will not change for some time period.

The initial rate is an interest rate the insurance company may credit for a set period of time after you first buy your annuity. The initial rate in some contracts may be higher than it will be later. This is often called a bonus rate.

The renewal rate is the rate credited by the company after the end of the set time period. The contract tells how the company will set the renewal rate, which may be tied to an external reference or index.

Minimum Guaranteed Rate

The minimum guaranteed interest rate is the lowest rate your annuity will earn. This rate is stated in the contract.

What charges may be subtracted from my fixed deferred annuity?

Some annuity based contracts have no fees. A fee is only charged when purchasing a rider. Some annuities have charges related to the cost of selling or servicing it. These charges may be subtracted directly from the contract value. Ask your agent or the company to describe the charges that apply to your annuity; each contract and company is different. Some examples of charges, fees and taxes are:

Surrender or withdrawal charges

If you need access to your money, you may be able to take all or part of the value out of your annuity at any time during the accumulation period. If you take out part of the value, you may pay a withdrawal charge. If you take out all of the value and surrender, or terminate, the annuity, you may pay a surrender charge. In either case, the company may figure the charge as a percentage of the value of the contract, of the premiums you’ve paid or of the amount you’re withdrawing. The company may reduce or even eliminate the surrender charge after you’ve had the contract for a stated number of years. A company may waive the surrender charge when it pays a death benefit.

Some annuities have stated terms. When the term is up, the contract may automatically expire or renew. You’re usually given a short period of time, called a window, to decide if you want to renew or surrender the annuity. If you surrender during the window, you won’t have to pay surrender charges. If you renew, the surrender or withdrawal charges may start over.

In some annuities, there is no charge if you surrender your contract when the company’s current interest rate falls below a certain level. This may be called a bail-out option.

In a multiple-premium annuity, the surrender charge may apply to each premium paid for a certain period of time. This may be called a rolling surrender or withdrawal charge.

Some annuity contracts have a market value adjustment feature. If interest rates are different when you surrender your annuity than when you bought it, a market value adjustment may make the cash surrender value higher or lower. Since you and the insurance company share this risk, an annuity with a MVA feature may credit a higher rate than an annuity without that feature.

Be sure to read the Tax Treatment section and ask your tax advisor for information about possible tax penalties on withdrawals.

Free withdrawal

Your annuity may have a limited free withdrawal feature. That lets you make one or more withdrawals without a charge. The size of the free withdrawal is often limited to a set percentage of your contract value. If you make a larger withdrawal, you may pay withdrawal charges. You may lose any interest above the minimum guaranteed rate on the amount withdrawn. Some annuities waive withdrawal charges in certain situations, such as death, confinement in a nursing home or terminal illness.

What are some fixed deferred annuity contract benefits?

Annuity income payments

One of the most important benefits of deferred annuities is your ability to use the value built up during the accumulation period to give you a lump sum payment or to make income payments during the payout period. Income payments are usually made monthly but you may choose to receive them less often. The size of income payments is based on the accumulated value in your annuity and the annuity’s benefit rate in effect when income payments start. The benefit rate usually depends on your age and sex, and the annuity payment option you choose. For example, you might choose payments that continue as long as you live, as long as your spouse lives or for a set number of years.

There is a table of guaranteed benefit rates in each annuity contract. Most companies have current benefit rates as well. The company can change the current rates at any time, but the current rates can never be less than the guaranteed benefit rates. When income payments start, the insurance company generally uses the benefit rate in effect at that time to figure the amount of your income payment.

What about the tax treatment of annuities?

Below is a general discussion about taxes and annuities. You should consult a professional tax advisor to discuss your individual tax situation.

Under current federal law, annuities receive special tax treatment. Income tax on annuities is deferred, which means you aren’t taxed on the interest your money earns while it stays in the annuity. Tax-deferred accumulation isn’t the same as tax-free accumulation. An advantage of tax deferral is that the tax bracket you’re in when you receive annuity income payments may be lower than the one you’re in during the accumulation period. You’ll also be earning interest on the amount you would have paid in taxes during the accumulation period. Most states’ tax laws on annuities follow the federal law.

Part of the payments you receive from an annuity will be considered as a return of the premium you’ve paid. You won’t have to pay taxes on that part. Another part of the payments is considered interest you’ve earned. You must pay taxes on the part that is considered interest when you withdraw the money.

How do I know if a fixed deferred annuity is right for me?

The questions listed below may help you decide which type of annuity, if any, meets your retirement planning and financial needs. You should think about what your goals are for the money you may put into the annuity. You need to think about how much risk you’re willing to take with the money. Ask yourself:

  • How much retirement income will I need in addition to what I will get from Social Security and my pension?
  • Will I need that additional income only for myself or for myself and someone else?
  • How long can I leave my money in the annuity?
  • When will I need income payments?
  • Does the annuity let me get money when I need it?
  • Do I want a fixed annuity with a guaranteed interest rate and little or no risk of losing the principal?
  • Do I want a variable annuity with the potential for higher earnings that aren’t guaranteed and the possibility that I may risk losing principal?
  • Or, am I somewhere in between and willing to take some risks with an equity-indexed annuity?

Will I ever lose money in a fixed or fixed indexed annuity?

No. Fixed annuities have a guaranteed interest rate. Once you earn interest, the interest cannot be taken away from you. Your principal is always safe.

How can you grow your retirement dollars without risking your original premium?

Annuities are conservative tax deferred contracts offered by life insurance companies. It’s imperative that an insurance company’s portfolio is conservative and maintains high liquidity to meet contract owners’ needs. Most insurance companies hold the philosophy to invest in quality US Government, US Government Agency and investment-grade corporate bonds. Only an insurance company has the regulatory reserve requirements and the financial strength to provide all the guarantees of an annuity.

Many accounts charge penalties for withdrawals before maturity. What if I want to withdraw money should the need arise without paying excessive penalties or losing previously credited interest?

Annuities have guaranteed penalty-free withdrawal options that allow you to access a portion of your money without paying any company penalties or charges. In the event you are confined to a nursing home, you may have access to a larger portion of your money, penalty-free. Annuities have the ability to guarantee a lifetime income while preserving access to money in case of emergencies.

Interest earned on most checking and savings accounts, CDs, mutual funds, dividends (except for special tax-free funds), T-bills and common stock dividends may be taxable by the Federal and/or State Government each year as earned, even if you do not take the interest out. How do I avoid this?

Interest credited to your annuity is not currently taxable by the Federal or State Government each year, unless withdrawn. Tax Advantage Compounding! Earn interest on your premium, earn interest on your interest, earn interest on your dollars that you would have normally been paid in Federal and State Income Taxes. You do not pay taxes on your annuities growth until you take it out of your annuity.

How do I ensure more than one guarantee for my retirement income?

Only annuities can guarantee:

  • Your monthly income check could be the same every month depending on the settlement or income option selected. Your income cannot decrease if interest rates fall.
  • Your monthly income check keeps coming to you as long as you live (depending on settlement or income option selected).
  • Your annuity income cannot run out.
  • If you die prematurely, your annuity can be guaranteed to continue at the same monthly payment amount to a named beneficiary if a specified period is chosen (depending on settlement or income option selected).
I have had success in the market in the past. However, how do I avoid going backwards due to a market downturn?

To offset the effects of inflation, indexed annuities offer potentially higher benefits based on the appreciation of a bond or stock index. You can lock in your interest annually and still continue to grow with future appreciation in the index.