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Annuity Spotlight for July 2012
 
What's New 

 

Additional State Adopts NAIC Suitability Model

 

As of July 1, 2012, IIllinois has adopted the same or similar requirements to the NAIC's new Model Suitability rule.The rule requires all insurance producers selling or soliciting annuity products to obtain a four-hour continuing education course from an approved vendor. This is a one-time requirement. Product specific training - by each Carrier - will also be required. Click here to read more about the NAIC Suitability Act and learn how to avoid returned applications!


 

Genworth Introduces New Suitability Form

 

Beginning July 1, Genworth will require the newly updated Annuity Suitability Profile form to be submitted with most annuity transactions, including all new applications. The Suitability Profile helps you document the basis of your recommendation, and the client's understanding of the transaction. A new brochure, the Producer's Guide to Annuity Suitability, is available with additional instructions to help you complete the form properly.


 

North American Companies Announces Rate, Rider, and Product Changes

 

Annuity NA Rate
Click Here for new Rate Sheet

Rate Change:

Effective July 3, 2012, annuity rates changed. Click here for the new rate sheet.

 

NAC RetireChoice Rider Election Change:

When your client elects the optional Additional Benefit Rider on the NAC RetireChoice and chooses to add the Income Pay� rider, only Option 1 of the Income Pay will be available. Option 1 is 5.50% for Life. If clients choose NOT to elect the Additional Benefit Rider, then all three options for the Income Pay are available on the NAC RetireChoice. Click here to read the complete announcement.

 

Changes to Income Pay�:

Bonus Credits on Options 2 and 3 of the Income Pay�, optional Guaranteed Lifetime Withdrawal Benefit (GLWB) Rider have changed effective July 3, 2012. Click here to read the announcement in its entirety.

 

Changes to Option 2 and 3 apply to all approved products for the GLWB. For Option 2 the new Bonus Credit amount will be 6.50%, and for Option 3 the new rate is 6.25%. New Income Pay brochures and updated election forms are now available.

 

NAC Retire Choice Updated State Approvals

As of July 3, 2012, the NAC RetireChoice is now available in TX and WY.

 

Product Suspension:

Sales of the North American Paramount Choice Ten� product are suspended immediately.

 

Avoid Returned Applications 

 

Have you... 


... Completed all required, product specific annuity training?


... Correctly completed all suitability questions?


... Pulled all of the required forms?

 

When in doubt,  call the Annuity Center!

 

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What's Hot

 

Best of Fixed Annuities Snapshot 

 

 

Click here to enlarge.  Updated as of 7/2/2012. 

 

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Let's Explore

 

Looking for Opportunity

 

One often-used measure of interest rates is the London Interbank Offered Rate (LIBOR), which is the average interest rate that leading banks throughout the world charge when lending to other banks. LIBOR rates are also used to help determine rates for adjustable rate mortgages and short term business loans. The 3-month LIBOR hit an all time low rate of 0.245% in June of 2011. Prior to 2009, it had not been below 1% since 1989. As of July 2, 2012, the rate was 0.46%. (Bankrate.com) Annuity Libor1

 

Tracking the 3-Month LIBOR

Take a look at the chart below, tracking both the historical 3-Month LIBOR rate and the daily closing price of the S&P 500 Index going back to 1989. You can see that interest rates and equity markets do not always move together, and at times will move in opposite directions.

 

A strategy that finds opportunity in a potential rise in rates:

The ING Interest Rate Benchmark Strategy is one of several interest crediting strategies available with a fixed index annuity from ING USA Annuity Life Insurance Company. This strategy bases credits on an increase, if any, in the 3-month LIBOR. Not only does this strategy take advantage of rising rates, it's potentially well positioned during a time when rates are near record lows.

 

3-Month LIBOR and the ING Benchmark Strategy Annuity LIBOR2

Looking at the chart below, in periods 1, 2, and 3, rates fell only to recover in the years that follow. The blue bars show how the interest Rate Benchmark Strategy would have performed during those same periods. The benchmark strategy has both a participation multiplier and an industry leading 10% cap, and may help clients make the most out of rising rates regardless of which way equity markets move.

 

How does the Interest Rate Benchmark Strategy work

The strategy bases interest credits on the increase, if any, during the contract year in the 3-Month LIBOR, multiplied by a factor (called the Interest Rate Benchmark Participation Multiplier) up to a stated cap and floored at zero. The Credit Cap and Participation Multiplier are declared in advance, guaranteed for one year, and may be changed annually for each contract. In other words:

 

 

 

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Annuity LIBOR3
Interested in learning more? Click here to view the complete brochure and learn about how the Interest Rate Benchmark Strategy from ING USA Annuity Life Insurance Company can help your client find opportunity in a potential rise in rates.

 

In the Market

 

Planning for the 3.8% Medicare Surtax

 

It's been more than two years since the Patient Protection and Affordable Care Act was passed in March of 2010. One provision of the Act is a 3.8% Medicare surtax that will take effect January 1, 2013. Intended to raise revenue to pay for health care reform, the surtax will apply to certain types of unearned income of individuals, trusts, and estates.

 

Who is affected?

The new Medicare surtax will not apply to everyone. It will be levied on net investment income only, which includes income derived from annuities. The surtax will only come into play for individuals with a modified adjusted gross income (MAGI) above $200,000 for singles, $250,000 for married couples filing jointly, and $125,000 for married couples filing separately. Many taxpayers will maintain income below these thresholds and will not incur any penalty at all.

 

Examples

  • Example #1: A single taxpayer has $215,000 of net investment income, with a large portion of that coming from annuities. The 3.8% tax would apply to $15,000 of income since it is the lesser of the net investment income ($215,000) and the excess over the MAGI threshold of $200,000 for singles.
  • Example #2: A married couple with combined income of $275,000 and no net investment or annuity income would not be subject to the tax.
  • Example #3: A retired couple reports a $300,000 capital gain from the sale of a rental property and $50,000 of other non-investment income, making their total AGI $350,000. The 3.8% tax applies to the smaller of the $300,000 of investment income, or the excess of total income over the $250,000 threshold. Total income of $350,000 is only $100,000 over the threshold, so the couple will pay $3,800 of new tax (3.8% x $100,000).

 

What Should I tell my clients?

The Affordable Care Act does not impose the 3.8% Medicare surtax on distributions from qualified retirement plans, traditional IRAs, Roth IRAs, or on capital gains received from the sale of a principal residence. It may be wise for planners to maximize use of these vehicles prior to turning to a deferred annuity contract for their high-income clients. If annuity contracts are used as part of the plan, high-income taxpayers may consider purchasing those annuity contracts inside of an IRA to avoid the additional 3.8 percent Medicare surtax.  

 
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Sales Ideas

 

Bridging the Retirement Gap

  

What challenges will your clients face in retirement? Lack of savings, rising health care costs and increasing longevity can widen the gap between projected retirement income and expenses. Thankfully, it's not too late to find solutions to bridge that gap, and North American companies offers solutions to help your clients do just that.
One critical step in building your client's retirement income strategy is an assessment of their anticipated expenses and income. North American has designed a one-page worksheet for this purpose which helps clients explore their needs and wants for monthly expenses. Common retirement expenses are broken up into smaller categories: Housing Expenses, Living Expenses, and Health Care expenses. "Needs" are things your client will need for basic living expenses. "Wants" are the things on top of your client's normal expenses that they would like to account for.
 
One way your client can generate guaranteed retirement income they can't outlive is by choosing the Income Pay Optional Guaranteed Lifetime Withdrawal Benefit Rider on one of North American Companies' Fixed Index Annuities. One additional benefit of the Rider - your client can plan exactly h
annuity Chart
Click here to view Chart
ow much income they would like to have at their desired retirement age. Above is a chart which outlines how much premium a current individual would need to have today in order to guarantee $1,000 of monthly income at some point in the future.
 
 
In the highlighted example above (see enlarged chart) a single person, Age 57, would like to plan for $1,000 in monthly income starting at Age 67. This client would need premium of $116,750, today in order to achieve this. While the initial premium shown on the chart does not include premium bonuses, the actual calculation used to plan for the income includes a 10% premium bonus on the initial premium at issue
 
To read more about addressing Planning Gaps in retirement check out North American's brochure, Bridging the Retirement Gap.
 
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Special Announcement

SecureLiving Index 7 and SecureLiving Index 10 Plus is available through Genworth Life and Annuity Insurance Company. Consumers can allocate premium across five crediting strategies based on individual needs and risk tolerances.

 

The products are loaded with other features including competitive cap rates, multi-year guaranteed fixed options, guaranteed minimum accumulation or premium enhancement, a bailout feature, jumbo rates and caps for premiums above $100,000 and $250,000 and the optional Income Protection rider with daily benefit base growth.

 

Click on the link to see the Income Protection promotional flyer
 

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The Annuity Center Website

 

Website BarcodeVisit the new home page regularly for updated news, events, important information and highlights!  In the new Carrier Section you will find all product guides, rates, state approvals and forms, etc. that you need for each carrier.   Visit the new Marketing & Sales and Education & Compliance sections for sales ideas, educational materials and more. 

 

Visit our Annuity Center to register. Or locate the link in the Resources section of our website (www.dworkin.com). 

Contact our Annuity Center for additional information!

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Dworkin Associates Inc. 22 South Main Street Rochester, NH 03867