Date posted: May 20, 2013
The basic purposes for annuities and life insurance are straightforward; the first offers a steady stream of income in retirement and the second pays death benefits to your heirs to help them survive after you are no longer around. But according to Paul Sullivan of The New York Times, insurance companies are now touting the tax benefits of these two products. In “Getting the Full Picture on Annuities,” Sullivan says there is more to it than just the simple tax benefits offered and wants to make sure that everyone knows the full picture. Just as the money in your retirement accounts grows without taxes, your annuity and life insurance money grows the same way. With an annuity, you will pay ordinary income taxes when you start receiving payments. Permanent life insurance pays your heirs death benefits without any income taxes owed.
Sullivan wants to make sure that everyone is aware of some of the downsides associated with these insurance products as well. Some types of products have high management or upfront fees and most offer stiff penalties if you try taking the money out right away. So of course it goes to say that you should compare purchasing an annuity or life insurance policy with other options out there. The tax benefits are important right now because of all of the current tax issues in the government. This is similar to annuities being sold for their guaranteed high returns just a few years ago when people were worried about getting high returns. With changing times, the desirable benefits change as well.
It’s important to weigh the tax and other benefits of annuities and life insurance against the costs to see if they are a good product for you or not. The article says that annuities are important for people who are scared they will run out of money in retirement. Those who have between $250,000 and $500,000 in savings are good candidates. They can purchase an annuity to make up for the difference between their Social Security payments and their necessary expenses in retirement. If you think you’ll need to access your money in the next few years, deferred annuities or life insurance are not good options for you. Sullivan goes as far as to call them awful at separating people from their money. But annuities are meant to provide a guaranteed lifetime stream of income, not to be a savings account from which you can withdraw whenever you choose. Those won’t last over your lifetime.
Two of the favored annuities in the article are older products that still offer great guarantees and low-cost deferred annuities. Newer annuity companies offer these low cost products that take advantage of tax-deferral and offer low management costs by eliminating a lot of the extras. Jefferson National is one of the companies offering these low-cost annuities. They found that once annuity management fees go over 1%, the benefit of deferring taxes is nullified. Their fees are only around .10% and they don’t pay commissions to the advisors selling their annuity products. Clients who have maxed out other tax-deferred retirement savings vehicles and those in states like New York with very high taxes can also benefit from the tax benefits of annuities. Balance the benefits versus the costs for your annuity and life insurance purchases before simply buying them for one benefit like tax deferral.
Written by Rachel Summit
Follow Rachel, aka Finance Mama, on Twitter and Google+
Date posted: December 30, 2012
The title of this article, “Variable Annuity Outlook 2013: Tough Road Ahead,” seems to say it all. But there is more than meets the eye for variable annuities next year and you need to delve into the industry to really see what is ahead. Advisor One’s John Sullivan says that two of the changes to expect are a move to RIA compensation models and a change in the focus of the benefits. The variable annuity market is definitely in a transition phase, causing former top players Sun Life Financial, Hartford, and Genworth to exit the industry altogether.
The living benefits and guaranteed income features that made variable annuities popular ended up putting some top life insurance companies in a dismal financial spot. Unfortunately, a lot of products did not hedge their market exposure in a way to protect themselves in the markets. So when the markets tanked in 2008 and investors opted for their guaranteed income streams, many companies nearly became insolvent. Some companies just said forget it and decided to exit the variable annuity market after picking up the pieces. But others have realized that they just have to make some changes to the way they offer variable annuities and these products can still work for both investors and insurers.
Moving to a fee-based model seems to be one of the biggest changes coming into this industry. And while the companies shying away from variable annuities see the benefit of changing to this model, they aren’t willing to put in the effort to build their business plans from the ground up again. Jefferson National’s CEO says that while some companies have tried to change their existing infrastructure to fit the fee-based model, building from the ground up is probably the best way to ensure success changing models. Jefferson’s Monument Advisor was one of the first flat-fee variable annuities to come into the market.
The fiscal cliff has everyone talking about taxes and that holds true in the variable annuity industry as well. Advisors are more concerned about asset location and asset selection to get their clients the best use of tax-deferral benefits. Sometimes the basis points for tax-deferral are too high and the benefit almost becomes null and void. 2013 will likely bring about more focus on getting the best tax-deferral benefits for investors. Another continuing trend will be the issue of fiduciary responsibility when it comes to annuities. This issue is affecting all financial products and is especially relevant with someone new heading the SEC. Keep watch here for all of the variable annuity happenings heading into 2013.
Written by Rachel Summit
Follow Rachel, aka Finance Mama, on Twitter http://twitter.com/#!/financemama
Date posted: April 10, 2011
The management at Inviva Inc. left the life insurance business five years ago because they thought the annuity business at subsidiary Jefferson National Financial Corp. would be more lucrative. They were right. According to Business First’s Kevin Eigelbach, sales of variable annuities at Jefferson National have been increasing every year. His article “Annuity product boosts sales, employment at Jefferson National” says that the ability to hire more workers has been another positive side effect of the decision Inviva made to focus on annuities rather than life insurance.
Chief operating officer David Lau says that Jefferson National is excited about their growth and forecasts sales of $360 million this year. Their 2010 sales of $200 million were a 54% increase from the sales in 2009. They expect their annuities to help the company reach sales of $600 million by next year, almost doubling this year’s expectations. Skyrocketing sales have helped the local Dallas economy as well. Jefferson National has been consistently hiring for years now and has no plans to slow down anytime soon. They are helping fuel employment and hiring locally and nationally as well.
The Monument Advisor variable annuity offered by Jefferson National was the first of its kind with a flat insurance fee. It charges $20 a month and that amount doesn’t change as your annuity value grows. Compare annuities from other companies and it is difficult to find another product without increasing fees. Some other benefits to the Monument Advisor include no other insurance charges, no paid sales commission, more investment options than other products, a better potential for tax-deferred growth, and an excellent online investing platform. Speak with one of our experts if you have any questions about Jefferson National’s Monument Advisor.
Date posted: July 7, 2009
According to Investment Weekly News, the Monument Advisor variable annuity from Jefferson National has the most Five-Star Morningstar Rating subaccounts. Their flat-insurance fee variable annuities offer over 175 tax-deferred investment options with 50 of those having a Five-Star Morningstar Rating. Jefferson’s closest competitors are Schwab’s One Source with 28 Five-Star ratings, Best Of America Advisor from Nationwide with 22, and Ameritas with 13 of the highest rated subaccounts. On average, variable annuities only offer 4 of the Five-Star subaccounts so these companies offerings are significant.
Jefferson National’s President and CEO, Laurence Greenberg, is proud of his company’s products, especially since they are so hard to find currently in the variable annuity industry. In addition to their Five-Star Rating subaccounts, Jefferson also has 46 Four-Star Morningstar Rating subaccounts. Greenberg stressed the importance of Monument Advisor’s quality and range of options, especially in difficult market conditions. It also carries one of the lowest costs in the industry. An expert can determine if one of these variable annuities is the best annuity for you.