Life Cycle Financial Planners, LLC

Tag: best annuity

  • How Are Investments Different From Annuities?

    How Are Investments Different From Annuities?

    Although annuities and investments are not the same things, there are important differences and similarities between them:

    Other than variable annuities, 100% of the principal and the growth of an annuity is guaranteed, no matter what. Even when the stock market was down 40% in 2007 and 35% in 2020, annuity contracts were protected and no principal was lost. With variable annuities, the policyowner does assume market risk, making them very different tools. What follows is a discussion of some of the pros and cons of annuities versus investments.

    Annuities create GUARANTEED, INCOME FOR LIFE. Using the right annuities can create unbeatable amounts guaranteed, future income that will be greater than any other strategy. For this reason, many people describe annuities as private pension plans.

    Annuities are contracts with some of the strongest guarantors in the world. Investments are typically not contracts with guarantees.

    All the money in an annuity is guaranteed, including all gains it earns from the day it is purchased. Everything in an annuity contract is regulated and spelled out, providing the most transparency. This creates safety, security and predictable outcomes. This is quite different from investments, such as real estate or equities in the stock market, which are good examples of speculation and risk. One is not better or worse than the other. They all have their places in a comprehensive financial plan. Annuities are precise, transparent and dependable. Most of our clients have annuities and investments.

    Guaranteed Interest Annuity

    Tax Deferral: Not paying tax during the annuity’s growth phase can be very meaningful. Taxes will ultimately be paid on distributions. Annuities are not tax shelters but the advantages of tax deferral is significant, especially for retirement purposes.

    Rather than exposing inherited assets to loss, mismanagement and other risks, annuities are often used to create lifetime income for beneficiaries. Grandparents are increasingly using annuities to create sheltered income for children and grandchildren. Structured properly, the income is protected and safe from divorce and probate.

    Unlike investments, some annuity companies offer generous bonuses to new policyholders. They do this by crediting the incoming account value with as much as 10%. Many people consider the bonus as an offset to surrender charges. The bonuses are added to the annuity’s account value and begin earning interest from day one.

    Most annuities have NO FEES and there is NO COMMISSION paid from your assets. The one time commission is paid from the insurance company, NOT YOUR ASSETS. For example, when you pay a single premium of $200,000 into an annuity, the amount earning interest from day one is $200,000 plus the bonus if there is one. In comparison, a 1% fee for the same $200,000 investment is reducing the account value each year, by $2000. At the end of 10 years, it adds up to $20,000. If that fee taken from your account is 1.5%, then you will pay $30,000 over 10 years.

    For people under age 59.5, there is a small penalty for withdrawing money from their annuity. Investments are not subject to these types of penalties.

    Some annuities and some investments have surrender penalties. CDs are examples of investments with surrender penalties. Annuities have small, declining surrender penalties to allow insurance companies to invest your money with longer durations and better returns.

    For a quote, please call us at 561-771-4647 or email Ted Bernstein, about a complimentary phone consultation.

  • What To Expect From Insurance Professionals?

    What To Expect From Insurance Professionals?

    The majority of our new clients have life insurance and annuities when we meet them. People are often surprised to learn they are not paying the lowest premiums and they’re also surprised by how much innovation has occurred since they last bought coverage. The addition of living benefits is a great example of a fundamental change to life insurance coverage that is here to stay. On the annuity front, people may not know that annuities guarantee that principal is never lost and some annuities include Long Term Care riders for small rider fees. In essence, these annuities double or triple the monthly payments for long term care needs.

    Working with insurance professionals brings these four advantages:

    1. Experience.
    2. Guidance through the process.
    3. Automatic reviews.
    4. Inside baseball.

    One of the most difficult industries to successfully navigate on your own is the insurance industry. The products come from the actuarial science world, making them difficult to understand for most people. The rate of change within the industry is what makes it impossible to navigate on your own. There are hundreds of insurance companies fighting for market share by constantly creating unique and innovative products. These companies have some of the brightest and most well educated people improving the products they bring to the markets. Unless you make it your business to get educated and stay educated, you will always be ahead when working with professionals. There is nothing simple about buying life insurance or annuities. Even term insurance appears to be a commodity, but it is not. Every company’s product is different and there are significant differences within the carriers.

    For example, unless you have studied the issue of conversion deadlines and living benefits, it is impossible to compare apples to apples for a specific policy you may be considering. The living benefits from one company may cover chronic and terminal illness, but not critical illnesses. That could mean the difference between a stroke being covered by your policy, or not. The two products might be identical in price but one covers critical illnesses and the other does not. I recently helped a couple in California. When I met them, they were unaware that living benefits could allow them to take advances against the face amount of a policy. They were unaware that accelerated benefits are a part of many life insurance policies at no additional cost. When agents sell only price, these things are overlooked. Part of our value is to help people determine exactly what they need and want, and then work backwards to find the best product to match those needs.

    Inside Baseball – what you really need to know.

    No more medical exam! With apply and buy, get up to $5,000,000 of coverage online, in one virtual meeting. There are no doctor records, blood or urine tests, or medical exams that slow down the process. Meetings with agents can be online or in person. The rates for these policies are priced the same as fully underwritten ones. There is no additional cost to apply and buy. Permanent, whole life, universal life or term to 100 can be applied for and issued in an hour.

    More and more term policies do not allow convertibility in all years even though life insurance buyers want long conversion periods. This could be unnecessary risk for most people. Before accepting a policy that cancels the conversion option before the end of the term period, we recommend comparing the rate to policies with a conversion option in all years. Only you can determine if one or two percent of premium is worth cutting out important riders and applications. Our job is to give you the right information to help you make the best possible decisions. Why do conversions matter in a term life insurance policy?

    A Custom Guide.

    Think of a life insurance policy like a brand new Smartphone right out of the box. The phone will have the ability to make calls and do a few other basic things like take photos and go online. I guarantee that your Smartphone and mine do totally different things in addition to those embedded basics. Your phone probably does not have quote engines for life insurance, a NASA photograph app and Tax Facts. Life insurance policies are customized the same way. Basically, they provide a death benefit and some build up equity. But, like the smart phone, that is where the similarities end. My policy includes living benefits, it builds up guaranteed cash values and it pays the death proceeds in guaranteed, equal installments over time. I have different planning goals and objectives than my clients and my life insurance policies and annuities will reflect them.

    There are endless examples that make these same points. There is great value in working with insurance professionals who are committed to staying on the cutting edge of the industry. Our new clients have previous life insurance and annuity coverage that we improve from our experience and from our “inside baseball” knowledge of the industry. For example, life insurance companies often retire products because something about them is too good in today’s market. That can be really good information to know and share with our clients. Most people are not aware of how rapidly innovation is occurring and how quickly it is out-dating their current policies.

    Jumbo Life Insurance Policies – better pricing matters.

    High net worth consumers and ultra high net worth consumers are more likely to buy permanent life insurance to solve liquidity problems upon death and to generate tax free distributions from privately funded pension plans. By far, permanent life insurance is the most economical way to purchase insurance for long term needs. In addition to the superior net cost, it is versatile and flexible. For people buying jumbo life insurance policies, you benefit by being aware of the advantages that were specially designed for jumbo life insurance policies.

    “I’m all set” is one of the most common beliefs people have about their insurance coverage. Most of the time, they’re not.

    A Regular Review is the Key.

    A good life insurance professional is encouraging their clients to review their policies to learn about worthy suggestions and recommendations. A good agent will bring ideas and concepts that might enhance the coverage for their clients. If you are not getting this service currently, you will with us. Please call at 561-771-4647 or email me at TB@LifeCyclePlanners to get started. We offer a complementary conversation about anything on your mind concerning your insurance coverage, succession plan or retirement plan.