4 - HOUR ANNUITY TRAINING COURSE (2013 EDITION)

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4 - HOUR ANNUITY

TRAINING COURSE

(2013 EDITION)

Researched and Written by:

Edward J. Barrett

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Disclaimer

This course is designed as an educational program for financial

professionals. EJB Financial Press is not engaged in rendering legal or other

professional advice and the reader should consult legal counsel as

appropriate.

We have tried to provide you with the most accurate and useful information

possible. However, one thing is certain and that is change. The content of

this publication may be affected by changes in law and in industry practice,

and as a result, information contained in this publication may become

outdated. This material should in no way be used as an original source of

authority on legal and/or tax matters.

Any laws and regulations cited in this publication have been edited and

summarized for the sake of clarity.

Any names used in this publication are fictional and have no relationship to

any person living or dead.

This presentation is for educational purposes only. The information

contained within this presentation is for internal use only and is not intended

for you to discuss or share with clients or prospects. Financial professionals

are reminded that they cannot provide clients with tax advice and should

have clients consult their tax advisor before making tax-related investment

decisions.

EJB Financial Press, Inc.

7137 Congress St.

New Port Richey, FL 34653

(800) 345-5669

www.EJBfinpress.com

This book is manufactured in the United States of America

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About The Author

Edward J. Barrett CFP®, ChFC®, CLU, CEBS®, RPA, CRPS, CRPC®, began his career in the financial and insurance services back in 1978 with IDS Financial Services, becoming a leading financial advisor and top district sales manager in Boston, Massachusetts. In 1986, Mr. Barrett joined Merrill Lynch in Boston as an estate and business-planning specialist working with over 400 financial advisors and their clients throughout the New England region assisting in the sale of insurance products.

In 1992, after leaving Merrill Lynch and moving to Florida, Mr. Barrett founded The Barrett Companies Inc., Broker Educational Sales & Training Inc., Wealth Preservation Planning Associates and The Life Settlement Advisory Group Inc.

Mr. Barrett is a qualifying member of the Million Dollar Round Table, Qualifying Member Court of the Table® and Top of the Table® producer. He holds the Certified Financial Planner designation CFP®, Chartered Financial Consultant (ChFC), Chartered Life Underwriter (CLU), Certified Employee Benefit Specialist (CEBS), Retirement Planning Associate (RPA), Chartered Retirement Planning Counselor (CRPC) and the Chartered Retirement Plans Specialist (CRPS).

About EJB Financial Press

EJB Financial Press, Inc. (www.ejbfinpress.com) was founded in 2004, by Mr. Barrett to provide advanced educational and training manuals approved for correspondence continuing education credits for insurance agents, financial advisors, accountants and attorneys throughout the country.

About Broker Educational Sales & Training Inc.

Broker Educational Sales & Training Inc. (BEST) is a nationally approved provider of continuing education and advanced training programs to the mutual fund, insurance and financial services industry.

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Preface

On March 28, 2010, the National Association of Insurance Commissioners (NAIC), the voluntary organization of insurance regulators from the 50 states, the District of

Columbia and the five U.S. Territories, adopted and published its 2010 Suitability in

Annuity Transactions Model Regulation. This Model Regulation was adopted to set standards and procedures for suitable annuity recommendations and to require insurers to establish a system to supervise recommendations so that the insurance needs and financial objectives of consumers are appropriately addressed.

In addition, the Model Regulation, specifically Section 7A, requires the producer to have adequate product specific training, including compliance with the insurer’s standards for product training, prior to soliciting an annuity. Also, in Section 7B it requires a one-time, minimum four credit hour general annuity training course offered by an

insurance-department approved education provider and approved by an insurance insurance-department in accordance with applicable insurance education training laws or regulations. For this mandated course, the provider may not train in sales or marketing techniques or product specific information.

As of April 29, 2013, Alaska, California, Colorado, Connecticut, Hawaii, Idaho, Iowa, Illinois, Kansas, Maryland, Michigan, Mississippi, New Jersey, New York, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, Texas, Utah,

Washington, West Virginia, Wisconsin, and the District of Columbia have adopted the 2010 NAIC Model Regulations and training requirements.

Note: All states must come into compliance with The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Public Law Number 111-203, 111th Cong., 2d sess. (July 21, 2010) which requires all states to meet the requirements of the 2010 NAIC Model Regulation by June 16, 2013 2013.

To help you, the producer, meet the training requirement of Section 7B, this book:

4-Hour Annuity Training Course has been written and submitted to the various state’s

Department of Insurance for approval as a correspondence self-study course that meets the outline of minimum required topics set forth in Section 7B(3) of the Model

Regulation.

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CHAPTER 1 ANNUITY BASICS

Overview

Did you know that annuities have been in use for more than 2,000 years and date back to the Roman Empire? Today, the appeal of the annuities is broad. Some annuities are extremely safe and conservative; others range from moderate-risk to quite risky, offering the potential of higher returns.

In this chapter, we will review how an annuity is defined, the history of the annuity, and discuss the outlook for annuities sold in America. We will also review the various classifications of the annuity, the purchase options, the date annuity benefit payments begin, the investment options, and the various payout options.

Annuity Defined

In general terms, an annuity is a mathematical concept that is quite simple in its most basic application. Start with a lump sum of money, pay it out in equal installments over a period of time until the original fund is exhausted, and you have an annuity.

Expressed differently, an annuity is simply a vehicle for liquidating a sum of money. But of course, in practice, the concept is a lot more complex. An important factor missing from above is interest. The sum of money that has not yet been paid out is earning interest, and that interest is also passed on to the income recipient (the “annuitant”). Anyone can provide an annuity as long as they can calculate the payment based upon three factors:

 A sum of money

 Length of payout period, and

 An assumed interest rate

However, there is one important element absent from this simple definition of an annuity, and it is the one distinguishing factor that separates insurance companies from all other financial institutions. While anyone can set up an annuity and pay income for a stated period of time, only an insurance company can do so and guarantee income for the life of the annuitant.

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survivorship factor provides insurers with the means to guarantee annuity payments for life, regardless of how long that life lasts.

Don’t get confused between an annuity and a life insurance contract. Annuities are not life insurance contracts. Even though it can be said that an annuity is a mirror image of a life insurance contract—they look alike but are actually exact opposites. Life insurance is concerned with how soon one will die; life annuities are concerned with how long one will live.

History of Annuities

As mentioned above, annuities can actually trace their origins back to Roman times. Back then, dealers sold contracts called annua, or “annual stipends”—yearly payouts for life. Roman citizens would make a one-time payment to the annua, in exchange for lifetime payments made once a year. Annuity comes from the Latin word annuus, meaning yearly.

During the 17th century, annuities were used as fundraising vehicles. In Europe, governments were constantly looking for revenue to pay for massive, on-going battles with neighboring countries. The governments would then create a “tontine”, promising to pay for an extended period of time if citizens would purchase shares today.

The United Kingdom, locked in many wars with France, started one of the first group annuity contracts called the State of Tontine of 1693. Participants in these early government annuities would purchase a share of the Tontine for ₤100 from the UK Government. In return, the owner of the share received an annuity during the lifetime of their nominated person (often a child). As each nominee died, the annuity for the remaining proprietors gradually became larger and larger. This growth and division of wealth would continue until there were no nominees left. Proprietors could assign their annuities to other parties by deed or will, or they passed on at death to the next of kin.

Annuities in the United States

Annuities made their first mark in America during the 18th century. In 1759, a company in Pennsylvania was formed to benefit Presbyterian ministers and their families. Ministers would contribute to the fund, in exchange for lifetime payments. It wasn’t until 1912 that Americans could buy annuities outside of a group. The Pennsylvania Company for Insurance on Lives and Granting Annuities was the very first American company to offer annuities to the general public.

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Flexible payment deferred annuities, which permit investors to save and accumulate assets as well as draw down principal, grew rapidly in this period. Second, the group annuity market for corporate pension plans began to develop in the 1930s.

The entire country was experiencing a new emphasis saving for a “rainy day.” The New Deal Program introduced by President Franklin D. Roosevelt (FDR) unveiled several programs that encouraged individuals to save for their own retirement. Annuities benefited from this new-found savings enthusiasm.

By today’s standard, the first modern-day annuities were quite simple. These contracts guaranteed a return of principal, and offered a fixed rate of return from the insurance company during the accumulation period (Fixed Annuity). When it was time to withdraw from the annuity, you could choose a fixed income for life, or payments over a set number of years. There were few bells and whistles to choose from. What was always proved to be attractive about annuities was their tax-deferred status because they were issued by insurance companies.

That all changed beginning in 1952, when the first variable annuity was created by the

College Retirement Equities Fund (CREF) to supplement a fixed-dollar annuity in

financing retirement pensions for teachers. Variable annuities credited interest based on the performance of separate accounts inside the annuity. Variable annuity owners could choose what type of accounts they wanted to use, and often received modest guarantees from the issuer, in exchange for greater risks they (the owner) assumed. This type of annuity was then made available to any individual, when the Variable Life Insurance

Company (VALIC) in 1960, began to market its own nonqualified variable annuity. It

was the variable annuity that boosted the popularity of annuities. Then in 1994, Keyport Life Insurance Company introduced a new type of a fixed annuity called an index annuity. And the rest is history.

Annuity Sales

For 2012, annuity sales dropped 8 percent, according to LIMRA’s fourth quarter “2012 U.S. Individual Annuity Sales” survey, which represents data from 95 percent of the market. Fourth quarter sales were also down 8 percent, suggesting the downward trend continues.

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14 Table 1.1

Total U. S. Individual Annuity Sales and Assets 2000 – 2012 ($ billions)

YEAR SALES ASSETS

2000 $190.0 $1,278.5 2001 187.6 1,236.8 2002 218.3 1,216.6 2003 215.8 1,483.9 2004 217.6 1,634.2 2005 212.6 1,721.3 2006 232.9 1,893.7 2007 255.0 1,996.2 2008 265.0 1,682.8 2009 238.6 1,973.7 2010 210.0 2,035.2 2011 240.3 2,444.1 2012 219.4 2,765.4

Source: Morningstar Inc. and LIMRA International, Windsor, Conn (Estimate from a survey of 60 insurers that account for 95 percent of

Total U.S. annuity sales, March 2013).

Annuity Buyers

In another survey conducted by LIMRA, more than three-quarters of recent annuity buyers are satisfied with their purchase of an annuity. LIMRA published this finding in a summary of results from a survey of 1,200 consumers age 40 or over who purchased a retail deferred annuity within the past three years. The study was conducted in the third quarter of 2011.

Nearly 9 in 10 buyers of traditional fixed annuities are happy with their purchase, new research reveals. The survey reveals that 86% of traditional fixed annuity buyers are satisfied with their deferred annuity purchase. Likewise, most buyers are variable annuities (75%) and indexed annuities (83%) are also satisfied with the purchases, the survey reveals.

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Primary Uses of Annuities

The top reason consumers give for buying an annuity is to supplement their Social Security or pension income. The second most popular reason is to accumulate assets for retirement; this is especially true for individuals under age 60 (see Table 1.2).

Table 1.2

Intended Uses for Annuities

Source LIMRA Study, the “Deferred Annuity Buyer Attitudes and Behaviors” 2012

Receiving guaranteed lifetime income is also a concern, especially for buyers aged 60 and older, the survey says. Annuity buyers’ single most important financial objective is to have enough money to last their and/or their spouse’s lifetime.

Classification of Annuities

Annuities are flexible in that there are a number of classifications (options) available to the purchaser (contract holder/owner) that will enable him or her to structure and design the product to best suit his or her needs. They are:

 Purchase options

 Date income payments begin  Investment options

 Income payout options

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Purchase Option

An annuity begins with a sum of money, called principal. Annuity principal is created (or funded) in one of two ways; immediately with a single premium or over time with a series of flexible premiums.

Single Premium

A single premium annuity is basically just what the name implies; an annuity that is funded with a single, lump-sum premium, in which case the principal is created immediately. Usually, this lump sum is fairly large.

Periodic (Flexible) Premium Payments

But not everyone has a large lump sum with which to purchase an annuity. Annuities can be funded through a series of periodic (flexible) premiums payments that, over time, will amass an amount large enough to buy a significant annuity benefit. At one time, it was common for insurers to require that periodic annuity premiums be fixed, and level, much like insurance premiums. Today, it is more common to allow contract owner’s flexibility as to allowing premiums of any size (within certain minimums and maximums, such as none less than $25 or more than $2,000,000) and at virtually any frequency.

Date Income Payments Begin

The annuity is the only investment vehicle that has two phases based upon when the income payment begins. The phases are:

 Deferred (Accumulation Phase); or  Immediate. (Pay-out/Distribution Phase)

The main difference between deferred and immediate annuities is when annuity payments begin. Every annuity has a scheduled maturity or annuitization date (usually age 90 or

age 95), which is the point the accumulated annuity funds are converted to the payout

mode and benefit payments to the annuitant are to begin.

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17 Table 1.3

Annuity Industry Total Sales Deferred vs. Immediate Annuities

2000-2012 ($ billions)

YEAR DEFERRED IMMEDIATE TOTAL

2000 $ 181.1 $ 8.8 $189.9 2001 175.0 10.3 185.3 2002 208.6 11.3 219.9 2003 207.5 8.3 215.8 2004 209.2 11.6 220.8 2005 204.9 11.5 216.4 2006 226.3 12.4 238.7 2007 243.8 13.0 256.8 2008 250.6 14.4 265.0 2009 225.4 13.2 238.6 2010 209.0 13.5 221.3 2011 227.1 13.2 240.3 2012 207.0 12.4 219.4

Source: Morningstar Inc. and LIMRA International, March, 2013; Includes Structured Settlements reporting sales of $5.1billion

Deferred Annuities

Deferred annuities are designed for long-term accumulation and can provide income payments at some specified future date. A deferred annuity can be funded with either periodic payments, commonly called flexible premium deferred annuities (FPDAs), or funded with a single premium, in which case they’re called single premium deferred

annuities, or SPDAs. While a deferred annuity has the potential of providing a

guaranteed lifetime income at some point in the future, the current emphasis in a deferred annuity is on accumulating funds rather than liquidating funds. An advantage that deferred annuities have over many other long-term savings vehicles is that there are no taxes (tax-deferral) paid on the accumulated earnings in an annuity until withdrawals are made.

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Immediate Annuities

An immediate annuity is designed primarily to pay income benefit payments one period after purchase of the annuity. Since most immediate annuities make monthly payments, an immediate annuity would typically pay its first payment one month (30 days) from the purchase date. If, however, a client needs an annual income, the first payment will begin one year from the purchase date. Thus, an immediate annuity has a relatively short accumulation period. As you might guess immediate annuities can only be purchased with a single premium payment and are often called single-premium immediate

annuities, or SPIAs. These types of annuities cannot simultaneously accept periodic

funding payments by the owner and pay out income to the annuitant. The average age of a SPIA buyer is 73.

A once-snubbed annuity product—the income annuity—appears to be gaining a foothold in the broad annuity marketplace and in the practices of advisors who serve the boomer and retirement income markets. However, for 2012, SPIA sales were $7.7 billion vs. $8.1 billion in 2011, a decline of 5 percent (see Table 1.4).

Table 1.4

Total Sales of Immediate Annuities 2000-2012 ($ billions)

YEAR VARIABLE FIXED TOTAL

2000 $ 0.6 $ 8.0 $ 8.6 2001 0.6 9.6 10.2 2002 0.5 10.7 11.2 2003 0.5 4.8 5.3 2004 0.4 6.1 6.5 2005 0.6 6.3 6.9 2006 0.8 6.3 7.1 2007 0.3 6.7 7.0 2008 0.4 8.6 9.0 2009 0.1 7.5 7.6 2010 0.1 7.6 7.7 2011 0.1 8.0 8.1 2012 0.1 7.6 7.7

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Investment Options

An annuity can be classified by two types of investment options. They are:  Fixed Annuity (FA)

 Variable Annuity (VA)

The most popular type of annuity sold is the variable annuity. In 2012, we saw variable annuity sales decrease 7 percent to $147.4 billion from sales of $159.3 billion in 2011. Sales of fixed annuities decreased to $72 billion from $80.5 billion, a decrease of 11 percent. Overall, total annuity sales decreased to $219.4 billion from $238.4 billion, a decrease of 8 percent (see Table 1.5).

Table 1.5

Annuity Industry Total Sales Variable vs. Fixed 2000 – 2012 ($ billions)

YEAR VARIABLE FIXED TOTAL SALES

2000 $ 137.3 $ 52.7 $ 190.0 2001 113.3 74.3 187.6 2002 115.0 103.3 218.3 2003 126.4 84.1 215.8 2004 129.7 86.7 217.6 2005 133.1 77.0 212.6 2006 157.3 74.0 235.6 2007 182.2 66.8 255.0 2008 155.6 106.7 264.1 2009 128.0 110.6 238.6 2010 140.5 81.9 222.4 2011 159.3 80.5 238.4 2012 147.4 72.0 219.4

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Income Payout Options

Another way to classify an annuity is the payout option chosen. Once an annuity matures and its accumulated fund is converted to an income stream, a payout schedule is

established (see Table 1.6). There are a number of annuity payout options available:  Straight life income,

 Cash refund,  Installment refund,  Life with period certain,  Joint and survivor, and  Period certain.

Straight (Single) Life Income Option

A straight life income option (often called a life annuity or single life annuity) pays the annuitant a guaranteed income for his or her lifetime. This is the purest form of life annuitization. The straight life income option pays out a higher amount of income than any other life with period certain or a joint and survivor option, but they might not be higher than other options (such as cash refund, installment refund, or pure period certain). At the annuitant death, no further payments are made to anyone. If the annuitant dies before the annuity fund (i.e., the principal) is depleted, the balance, in effect, is “forfeited” to the insurer. It is used to provide payments to other annuitants who live beyond the point where the income they receive equals their annuity principal.

Cash Refund

A cash refund option provides a guaranteed income to the annuitant for life and if the annuitant dies before the annuity fund (i.e., the principal) is depleted, a lump-sum cash payment of the remainder is made to the annuitant’s beneficiary. Thus, the beneficiary receives an amount equal to the beginning annuity fund less the amount of income already paid to the deceased annuitant.

Installment Refund Option

Like the cash refund, the installment refund option guarantees that the total annuity fund will be paid to the annuitant or to his or her beneficiary. The difference is that under the installment option, the fund remaining at the annuitant’s death is paid to the beneficiary in the form of continued annuity payments, not as a single lump sum.

Life with Period Certain Option

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the same payments for four more years. Of course, if the annuitant died after receiving monthly annuity payments for ten or more years, his or her beneficiary would receive nothing from the annuity.

Joint and Full Survivor Option

The joint and full survivor option provides for payment of the annuity to two people. If either person dies, the same income payments continue to the survivor for life. When the surviving annuitant dies, no further payments are made to anyone.

There are other joint arrangements offered by many companies:

 Joint and Two-Thirds Survivor. This is the same as the above arrangement, except that the survivor’s income is reduced to two-thirds of the original joint income.

 Joint and One-Half Survivor. This is the same as the above arrangement except that the survivor’s income is reduced to one-half of the original joint income.

Period Certain

The period certain option is not based on life contingency; instead it guarantees benefit payments for a certain period of time, such as 5, 10, 15, or 20 years, whether or not the annuitant is living. At the end of the specified term, payments cease.

Table 1.6

Comparison of Monthly Settlement Options

Income Payment Options

Male Estimated

Monthly

Income Cash Flow

Female Estimated

Monthly

Income Cash Flow

Single life income no payments to

beneficiaries $567 6.80% $517 6.20% Single life w/10 years certain $545 6.54% $505 6.06% Single life w/20 years certain $487 5.84% $460 5.52% Single Life w/Installment Refund $515 6.18% $483 5.80%

Income Payment Options Estimated Monthly Income

Cash Flow

Joint Life 100% Survivor (no payments to

beneficiaries) $473 5.68%

Joint Life 100% Survivor (10 year certain) $470 5.64% 5-Year Period Certain $1,691 20.29% 10-Year Period Certain $907 10.88%

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Chapter 1 Review Questions

1. Annuity comes from the Latin word “annuus” which means: ( ) A. Yearly

( ) B. Stipend ( ) C. Payment ( ) D. Guaranteed

2. In 1952, the first variable annuity was created by: ( ) A. The Romans

( ) B. College Retirement Equities Fund (CREF) ( ) C. Presbyterian ministers

( ) D. Variable Annuity Life Insurance Company 3. What is the average age of a SPIA buyer?

( ) A. 55 ( ) B. 73 ( ) C. 60 ( ) D. 63

4. Which type of annuity will begin to make annuity payments one month after the purchase payment?

( ) A. Deferred annuity ( ) B. Period certain annuity ( ) C. Immediate annuity ( ) D. Temporary annuity

5. According to LIMRA, what is the major reason a consumer purchases an annuity? ( ) A. Pay for LTC premiums

( ) B. Pay for emergencies only ( ) C. Leave an inheritance

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CHAPTER 2 FIXED ANNUITIES

Overview

A fixed annuity is an investment vehicle offered by an insurance company that guarantees to pay a stated rate of interest for a specified period of time. The investor (contract owner) has the choice to accumulate the interest on a tax-deferred basis or take it as income. With a fixed annuity, the insurer, not the insured, accepts the investment risk.

In this chapter we will review the fixed annuity market, the various types of fixed annuities, and their advantages and disadvantages.

The Fixed Annuity Market

Premiums made to a fixed annuity are invested in the insurance companies’ general

account. The company then invests the premiums it receives in a manner that will allow

it to credit the rates it has stated it will pay. The interest rate chosen by the insurance company during the first year is meant to be competitive with rates currently offered on other financial vehicles. Of course, one of the major features of a “fixed” annuity is safety. Safety of principal and also safety in that the rate of return is certain.

However, with the low interest rate environment over the past few years we have seen an overall decline in the sales of fixed annuities. According to LIMRA and IRI/Beacon Research, total sales of fixed annuities reached a ten year low of $72.0 in 2012, down 11 percent from $81.0 billion in 2011, (see Table 2.1).

On the bright side, index annuities hit a record high of $33.9 billion—a five percent increase compared to sales in 2011. And, fourth quarter sales of deferred fixed annuity sales reached $390 million, which is almost 150 percent higher than sales in the first quarter ($160 million). But, they are still a very small part of the overall market.

Types of Fixed Annuities

The basic types of deferred fixed annuities can be broken down into the following categories. They are:

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interest, net of any charges. Book value products are the predominant fixed annuity type sold in banks.

 Market value adjusted annuities are similar to book value deferred annuities but the surrender value is subject to a market value adjustment based on interest rate changes.

 Index annuities guarantee that a certain rate of interest will be credited to premiums paid but also provide additional credited amount based on the performance of a specified market index (such as the S&P 500®).

 Income Payout Annuities guarantee life of the annuitant (or joint annuitant) either immediately or deferred.

Table 2.1

Fixed Annuity Sales and Net Assets 2000-2012 ($ billions)

YEAR TOTAL SALES NET ASSETS

2000 $ 52.7 $ 322.0 2001 74.3 351.0 2002 103.3 421.0 2003 84.1 490.0 2004 86.7 510.0 2005 77.0 534.0 2006 74.0 537.0 2007 66.6 511.0 2008 106.7 556.0 2009 104.3 620.0 2010 81.9 659.0 2011 81.0 685.5 2012 72.0 545.0 e

Source: LIMRA International and Morningstar, Inc. February 2013. Net Assets are estimated.

Types of immediate (fixed income) annuities:

 Structured settlement annuities are used to provide ongoing payments to an injured party in a lawsuit.

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As reported by LIMRA International, traditional book value and market value adjusted (MVA) annuity sales were hit hard by the decline in interest rate spreads in 2011 and 2012. Book value sales decreased another 29 percent to $21.2 billion in 2012 from $29.9 billion in 2011, while market-adjusted products also decreased another 13 percent to $4.5 billion from $5.2 billion in 2011. The bright spot was a 5 percent increase in index annuities to $33.9 billion from $32.2 billion in 2011. Immediate fixed annuities decreased 5 percent to $7.7 billion compared to sales of $8.1 billion in 2011 and structured

settlements saw a 8 percent decrease to total sales of $4.7 billion from sales of $5.1 billion in 2011 (see Table 2.2).

Table 2.2

2012 Fixed Annuity Sales

$25.7 $21.2 $4.5 $33.9 $7.7 _$4.7 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 Fixed Rate Deferred

Book Value Market Value adjusted

Indexed Immediate Annuity

Structured Settlements

Source: U.S. Individual Annuities Survey, LIMRA, Windsor, Conn March 2013.

Crediting Rates of Interest

Typically, a fixed annuity contract will offer two interest rates: a guaranteed rate and a current rate. The guaranteed rate is the minimum rate that will be credited to funds in the annuity contract regardless of how low the current rate sinks or how poorly the issuing insurance company fares with its investment returns. A typical guaranteed interest rate is between 1.5% and 3%.

Non-forfeiture Interest Rate

In 2003, the National Association of Insurance Commissioners (NAIC) adopted a new annuity Standard Non-forfeiture Law (SNFL) that ties the minimum interest rate that must be paid by fixed annuities to current yields. Prior to this, the state-mandated minimum interest rate was 3% in most states. During times of extremely low interest rates, this made profitably crediting an interest rate above 3% difficult and sometimes impossible. As a result, many companies had no choice but to pull specific products or interest rate guarantee periods from the market.

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two types of relief—either in the form of a 1.5% minimum guaranteed interest rate, or a rate that moves with prevailing interest rates.

Current Rate of Interest

The current interest rate (excess rate) varies with the insurance company’s returns on its investment program. Some annuity contracts revise the current rate on a monthly basis; others change the current interest rate only one time each year.

As mentioned earlier, today’s low credited interest rates in fixed annuities has caused a major decline in sales. Rates for 2012 however, are even lower than a year ago.

According to the Fisher Index (see Table 2.3 below and on the following page), the Index tracks average fixed annuity rates over one-year periods and “CD” type of annuities.

For Example: As of February 7, 2012, the average first year fixed rate for a fixed annuity on the high norm was 2.84% and the low norm was 0.89%. That’s for nearly 590 products issued by almost 75 carriers.

But a similar pattern holds for five-year CD rates and treasury bonds, with interest rates in both products lower than a year ago. So fixed annuity rates are tracking with trends in the overall environment.

As of March 8, 2013, fixed annuity rates continued to remain below 3 percent. The highest-paying five-year fixed annuity was crediting 1.60 percent at the beginning of March 2013, according to the Fisher Annuity Index.

Table 2.3

Interest Rate Trends on Fixed Annuities

1st_{Year Interest Rate Trends On Traditional Fixed Annuities}

Report

Date: Companies # of Annuities # Of Lowest Rate

Normal Annuity Range

Highest

Rate Deviation Std. Low

Norm Average Rate Norm High

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27 Table 2.3 Cont.

Average Rates for “CD” Type or Multi-Year Guarantee (MYG) Annuities Note: Averages and number of annuities count each band/tier as a separate

annuity for this summary.

Years 1 2 3 4 5 6 7 8 9 10 # of Companies 0 2 15 8 49 17 36 14 15 22 # of Annuities 0 3 26 16 105 47 94 34 29 42 04/08/13 1.13% 1.46% 1.52% 1.65% 1.60% 1.78% 2.06% 2.27% 2.18% 04/01/13 1.13% 1.46% 1.52% 1.63% 1.60% 1.76% 2.08% 2.29% 2.20% 03/11/13 1.13% 1.46% 1.52% 1.63% 1.60% 1.75% 2.06% 2.28% 2.19% 10/08/12 1.10% 1.13% 1.49% 1.39% 1.62% 1.54% 1.72% 1.99% 2.15% 2.09% 04/09/12 1.10% 1.08% 1.61% 1.55% 1.75% 1.85% 1.98% 2.30% 2.46% 2.49%

Source: Fisher Annuity Index, 13140 Coit Rd #102 Dallas, Texas 75240

Once the interest rate on an annuity contract has been set, there remains at least one other item to understand regarding the method in which the interest will be credited to the funds placed in the annuity. This item is the method of interest rate crediting that the insurance company will apply to the specific annuity contract. Generally, there are two methods of crediting interest:

 Portfolio (average) Rate Method, and  New Money Rate Method.

Portfolio Rate

The portfolio (average) rate method credits policyholders with a composite of interest that reflects the company’s earnings on its entire portfolio of investments during the year of crediting. During periods of rising interest rates, the interest credited to the “new” contribution received during the year will be heavily influenced by the interest earned on investments attributable to “old” contributions those received and invested 5, 10, 15 or more years earlier. The interest credited will therefore be stabilized.

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Illustrative Comparison of Increasing and Decreasing Portfolio Rates Increasing Rates

Year Year 1 Year 2 Year 3

One 3% 4% 5%

Two 4% 5%

Three 5% Decreasing Rates

One 5% 4% 3%

Two 4% 3%

Three 3%

New Money Rate

Under the new money rate (sometime referred to as the “banding approach”, or investment year method of crediting interest), the contributions made by all contract holders in any given period are banded together and credited with a rate of interest consistent with the actual yield that such funds obtained during the period. Thus, even though a company’s average return on all money may be only 5% in a given period, the contributions made by all participants during the current period may be credited with the 5.0% if the company was able to make new investments that, on average, returned in excess 5.0% interest. Moreover, the interest rate credited on those contributions should continue to earn 5.0% until the monies are reinvested. After reinvestment, the interest on these contributions will change and the rate credited to contributions banded in the following period could be higher or lower.

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Illustration 2.5

Illustrative Comparison of Increasing and Decreasing Portfolio Rates

Increasing Rates

One 5.00% 5.25% 5.50%

Two 6.00% 6.25%

Three 7.00%

Decreasing Rates

One 5.00% 4.50% 4.50%

Two 4.00% 4.00%

Three 3.00%

Note: The higher rates were used for the new money rate illustration. That is because the portfolio rate includes the return on investments made in earlier years at lower rates. The illustrations points out three things. First and most important, it is deceptive to compare the current interest rate between two companies using different approaches. Second, the new money rate method is advantageous to the participant when interest rates are increasing. Third, in a declining interest rate period, the portfolio method has merit. Another consideration in analyzing the products of tax-deferred annuity companies that use the new money approach is how funds are treated when a participant makes a partial withdrawal of funds. There are three approaches that are used: LIFO, FIFO and HIFO. “Last In, First Out” (LIFO) means that the sum withdrawn will be taken from the most recent contribution band. “First In, First Out” (FIFO) means that the sum withdrawn will be taken from the earliest contribution band. “Highest In, First Out” (HIFO) means that the sum withdrawn will be taken from the band that is being credited with the highest interest rate.

Keep in mind that, although interest rates are very important, they are but one of several items to be considered when selecting a fixed annuity.

Calculating the Rate

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Trends

In valuing the rate of interest credited (rate of return) on their investments, a number of insurance companies have moved from the calendar year to a quarterly approach. Some have even adopted techniques for valuing the return on a daily basis. The objective of such a move is twofold:

 The insurance company can move quickly if it believes the spread between the rate of return actually being earned on its investment and the rate credited to the contract is moving in a direction disadvantageous to its best interests, and  Competitive position in the marketplace can be maintained, especially when

interest rates increase sharply.

Interest Rate Projections

Most companies’ sales literature will show projections for the guaranteed interest rate, however, these types of data provide little, if any, information to help select an annuity. Since projected values are hypothetical, their use as an instrument of prediction is significantly flawed. Only when a company has established a trend of consistently high historical current interest rates do projections of future accumulations become significant.

Bonus Annuities

Some insurance companies declare a “bonus” rate of interest that will be paid on top of a current or “base” rate offered on an annuity contract. This bonus is designed to attract new business to the insurance company. The bonus amount offered by many insurance companies can range from one percent to five percent of the original single premium payment. For example, if an applicant purchases an annuity with a single premium of $100,000, and the extra credit sign-up bonus is 5 percent, the account value will be $105,000. Some insurers may credit the bonus with the initial premium payment and or may credit the premium payments made within the first year of the annuity contract. Under some annuity contracts, the insurer will take back all bonus payments made to the annuity holder within the prior year or some other specified date, if the annuity holder makes a withdrawal, if a death benefit is paid to the annuity holder’s beneficiaries upon the annuitant’s death, or in other circumstances.

Though this feature is attractive, there might be some hidden costs. Some companies charge extra fees and/or extend surrender periods. Some contracts may impose higher mortality and expense (M&E) charges, while others may impose a separate fee specifically to pay for the bonus feature. As the insurance producer, it is your

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Two-Tiered Annuities

A two-tiered annuity is basically a dual-fund, dual-interest rate contract. The two funds are the accumulation account and the surrender value. There is a permanent increasing surrender charge.

The interest rate offered is a relatively high interest rate, but only if the owner holds the contract for a certain number of years and then must annuitize the contract. If the annuity is surrendered at any point prior to the contract period, the interest credited to the contract is recalculated from the contract’s inception using a lower tier of interest rates.

The higher tier of rates is designed to reward annuitization and to make the product more attractive than competing annuities, the lower tier of rates generally makes the contract very unattractive compared to other alternatives. And the interest penalty applies under some contracts even if the annuity is surrendered due to the death of the owner. This type of fixed annuity contract has come under scrutiny by state insurance departments in how they are marketed and sold especially to seniors.

Fixed Annuity Fees and Expenses

Fixed annuity fees and expenses generally cover the insurance company's administrative expenses, the cost of offering the annuitization guarantee and profits to the insurance company and sales agent. This may be called the Mortality and Expense (M&E) charge. A fixed annuity does not have separate account management (as a variable annuity). Instead, they are claims on the general fund of the insurance company. As such, they don’t have “expense ratios.” But they do have other expenses such as: Contract Charge: The rate quoted is the rate paid. Some fixed annuities may assess an annual contract fee, typically around $30 to $50.

 Interest Spread: Just like other investments fixed annuities have fees and expenses. Most fees and expenses of a fixed annuity are factored into the stated annual percentage rate (APR) the investor is quoted, this is known as the interest spread.

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Disadvantages of Fixed Annuities

Like everything else in life, even though fixed annuities offer several advantages, they also have their disadvantages. Probably the most significant disadvantage is that by locking in the fixed annuity’s fixed rate of interest, the policyholder might lose out on any potentially greater gains that could be realized if the same funds were invested in the stock market.

A second potential disadvantage of the fixed annuity involves the fact that the benefit payout amount will be a fixed amount. While this fixed payout amount will be viewed by some annuity holders as a decided advantage, others will realize that, over time, the fixed benefit amount will lose ground against inflation with the potential reduction of spending power over time. For example, if we have annual inflation of 4 percent, the purchasing power of the fixed monthly payment would be halved in 18 years.

Fixed Annuitization: Calculating Fixed Annuity Payments

Another aspect of the fixed annuity that is “fixed” is the amount of the benefit that will be paid out when the contract is annuitized. Fixed annuity payments are determined by insurance company annuity tables that give the first payment value per $1,000, which depends on:

 The age of the annuitant,  The sex of the annuitant,  The payout options chosen, and  Deductions for expenses.

Thus, if an annuitant has $100,000 in his/her account, and the value is $5 per $1,000, then the first payment will be $500. For a fixed annuity, this will be the value of all

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Chapter 2 Review Questions

1. In a fixed annuity, who assumes the investment risk?

( ) A. Owner ( ) B. Annuitant

( ) C. Insurance company ( ) D. Beneficiary

2. Which of the following is an advantage of investing in a fixed annuity? ( ) A. Safety of principal

( ) B. Protection against inflation ( ) C. Returns tied to the stock market ( ) D. Invest in sub-accounts

3. What type of fixed annuity’s account value is subject to a market value adjustment based on interest rate changes?

( ) A. Bonus Annuity ( ) B. Two-tiered Annuity ( ) C. Index Annuity

( ) D. Market Value Adjusted Annuity

4. Which type of interest rate crediting method reflects the company’s earnings on its entire portfolio during the year of crediting?

( ) A. Old Money Rate ( ) B. Portfolio Rate ( ) C. New Money Rate ( ) D. Current Money Rate

5. Which method is used when taking a withdrawal from an annuity from funds recently contributed?

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CHAPTER 3 VARIABLE ANNUITIES

Overview

Variable annuities have become part of the retirement and investment plans of many Americans. In this chapter we will define a variable annuity—what they are, the market, their features and benefits, as well as the various charges and fees. At the end of the chapter we will review the future trend of VAs and their regulation.

VA Defined

A variable annuity (VA) is a long-term tax-deferred contract between an investor (contract owner/holder) and an insurance company, under which the insurer agrees to make periodic payments, either immediately or at some time in the future. A VA offers a range of investment options, known as sub-accounts (discussed below). Opposite a fixed annuity, it is the investor (contract owner/holder) who assumes all of the investment risk.

The VA Market

As previously discussed in Chapter 1, the first variable annuity in the U.S. was created back in 1952 for teachers who participated in the College Retirement Equities Fund (CREF) of the Teachers Insurance and Annuity Association (TIAA).

Soon after CREF established its variable annuity, financial planner John D. Marsh conceived a variable annuity that would be available to the general public. Mr. Marsh began his quest in 1955 when he and a group of associates established the Variable Annuity Life Insurance Company (VALIC). However, it wasn’t until May 13, 1960, that the first commercial variable annuity prospectus became available in the United States, and, with it, the first insurance company separate account. And the rest is history. For most of this decade, VAs has been one of the most popular investment products offered by insurers. The attractions of tax-deferred growth, guarantees and a broad range of investment choices made VAs one of the fastest growing products in the insurance industry.

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Then in 2008, the financial market crisis led to a downturn in VA sales. Total gross VA sales in 2008 were $154.8 billion, representing a 15 percent decrease in sales from 2007. VA sales also showed a further decline in 2009, with sales of $125.0 billion, representing a 19 percent decrease from 2008 sales.

Beginning in 2010 and 2011, we saw the economy recover and demand for guaranteed income riders surged. VA gross sales increased 13 percent in 2011 to $159.3 billion from 2010 sales of $140.5 billion. Total VA assets at the end of 2011 were $1.5 trillion. However, for 2012, total VA sales decreased 7 percent to $147.4 billion from $159.3 billion in 2011. Unlike historical trends mentioned above, VA sales did not follow equity market growth, which increased 13 percent in 2012. Table 3.1 illustrates the trends in VA gross sales over time from 2000 to 2012.

Table 3.1

U. S. Sales of Variable Annuities and Net Assets 2000-2012 ($ billions)

YEAR TOTAL SALES ASSETS

2000 $ 137.3 $ 956.5 2001 113.3 885.8 2002 115.0 795.6 2003 126.4 999.3 2004 129.7 1,124.0 2005 133.1 1,187.3 2006 157.3 1,356.7 2007 182.2 1,485.2 2008 154.8 1,126.8 2009 125.0 1,353.7 2010 140.5 1,505.0 2011 159.3 1,502.3 2012 147.4 1,659.5

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VA Product Features

Just as there are characteristics of the fixed annuity that are consistent from product to product, as discussed in Chapter 2, so too there are certain features shared by all variable annuities. Let’s begin our discussion with some of the basic features of the variable annuity and then, we will review the optional protection benefits (riders) that are used to design the new versions of the variable product.

Separate Accounts

The variable annuity is characterized by a separate account (also known as sub-accounts) that holds all of the variable account options. The separate account receives its name because it is not part of the general account assets of the insurance company. Instead they are investment fund options or sub-account that make-up the variable annuity. Actually, the separate account is maintained solely for the purpose of making investments for the contract owner. This transfers the risk from the insurer to the contract owner. The separate accounts are not insured (guaranteed) by the insurance company, except in the event of the owner or annuitant’s death. Account values will fluctuate, depending specifically on the performance of the underlying investment of the separate account. All profits and losses, minus fees, are passed along to the contract owner. In the event the insurance company becomes insolvent, separate accounts are not attachable by the insurer’s creditors and are normally distributed immediately to the contract owners. A wide variety of funds are available to the contract owner in the separate account.

Investment Options

As mentioned above, in a variable annuity, investment choices are offered through

sub-accounts, which invest in a selection of funds, similar to mutual funds that are sold to the

public. The value of the funds will fluctuate over time, and the variable annuity’s return is based on the investment performance of these funds. Variable annuities have, on average, 49 sub-accounts.

A variable annuity contract will generally permit the contract owner to choose from a range of funds (asset classes) with different investment objectives and strategies. The basic asset classes include:

 Money market fund  Equity

 Fixed accounts  Balanced  Bonds

 Alternative Investments

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insurance companies may calculate the fixed rate payable differently (based on either the portfolio rate or new money rate as discussed in Chapter 2).

Under some variable annuity contracts, the various sub-accounts are managed by the insurance company (single management), while others are often managed by different investment advisors (multi-managers), who may or may not be affiliated with the insurance company. In fact, a number of well-known mutual fund companies offer funds that serve as investment options for variable annuities.

Recently, a growing number of insurers have added a number of new sub-accounts that will use alternative investments and dynamic asset allocation strategies to the investment options available to VA investors. In 2011, insurers added 102 VA sub-accounts that use alternative strategies which include currencies, long-short, market neutral and precious metals, according to Morningstar Inc. That’s up from 63 new additions in 2010. Those numbers don’t include commodities which have been included in several VAs in 2012. In fact, in a recent survey by one of the leading VA insurers, they reported that more than nine out of 10 advisers expect to increase their use of alternative asset classes over the next year. Among those advisors who anticipate an increase, more than half said they would increase their use of alternatives by 15 percent or more in the next 12 months. Nearly a third will boost their use of alternatives by 20 percent or more. Of the small percentage of advisors who have not used alternative assets classes to date, more than 90 percent say they are now considering using them.

The major goal of using these types of alternative sub-accounts—real estate holdings, hedge funds, commodities and the like--in the pursuit of diversification is to allow investors to have tactical management strategies without suffering the tax consequences of frequent trading. It would allow small investors to have access to alternatives that otherwise would be available only to more affluent investors. And most importantly will provide the tax efficiency (tax-deferral).

Accumulation Units

Once invested into the sub-account, the amount invested is then converted into

accumulation units. The use of accumulation units is simply an accounting measure to

determine a contract owner’s interest in the separate account during the accumulation period of a deferred annuity.

Not all purchase payments (gross payments) made by a contract owner goes toward the purchase of accumulation units. Before units can be purchased, the various charges and fees (discussed later in this chapter) are deducted. The money to buy accumulation units is then the net purchase payment.

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the risk of oversimplification, the value of one accumulation unit is reached by dividing the value of the separate account by the number of accumulation units outstanding.

As the contract owner continues to buy accumulation units, these are added to those already purchased. The dollar value of all the units owned by the contract owner equal the number of units the contract owner owns times the value one accumulation unit. The following example illustrates how this works out in practice:

 Initial Value of Accumulation Unit on 01/01 = $5  Monthly Premium Payment = $100  Initial Number of Units Purchased = 20

Subsequent Accumulation Unit Values Number of Units Purchased 02/01 $5.05 19.80 03/01 $4.87 20.53 04/01 $4.94 20.24 05/01 $4.99 20.04 06/01 $5.12 19.53

At the end of the six-month period, the annuity holder would have a total of 120.14 accumulation units. As stated above, the value of these units will continue to fluctuate according to the unit’s market value. With each premium payment, the annuity owner adds to the total accumulation units. The accumulation unit price will probably continue to fluctuate. When the annuity matures, the annuity owner will have been credited with a specified number of accumulation units.

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VA Charges and Fees

The charges and fees levied under variable annuity contracts, while somewhat similar to those charged by fixed annuity contracts, are subject to a greater degree of regulation due to the fact that variable annuities are considered to be securities. (Remember: charges and fees must be disclosed in the annuity’s prospectus). With a variable annuity, the fees are calculated on either an annual basis and/or an asset basis.

 Annual fees are fixed expenses that are deducted from the contract and average about $35 to $50 a year. (Many contracts waive the annual fee at certain account values, for example $50,000.)

 Asset-based fees are percentages of the total value of the annuity, deducted on a regular basis, usually daily, monthly, or annually. All owners of the same contract pay the same percentage of their assets in these fees, but different dollar amounts.

Mortality and Expense (M&E) Charge

The asset-based mortality and expense risk fee, also called the M&E charge, on all variable annuity contracts pays for three things:

 The guaranteed death benefit,  The option of a lifetime of income,

 The assurance of fixed insurance costs including the M&E fee itself, which are guaranteed (frozen) for the life of the contract.

In most cases, the fee is subtracted proportionately from each of the variable portfolios that funds are invested in. According to 2013 Morningstar data, the average annual mortality and expense charge was 1.27% in 2012.

Management (Fund Expense) Fees

The asset-based management fees (fund expenses) that are paid to the sub-account manager for managing sub-account assets are debited from the annuity unit value and are reflected in the investment return. These fees are described in the prospectus, and are sometimes broken down into an investment advisory fee and an operating expense fee. They’re often aggregated under the management fees (fund expenses) heading.

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compare apples to apples: in this case, similar equities to equities sub-accounts and similar bonds to bonds sub-accounts.

Total Fund Expense Averages in 2011, as calculated by Morningstar Inc., was 0.96 basis points--41 basis points lower than the comparable figure for publicly available mutual funds. These figures show that the lower expense ratios of underlying funds in some variable annuities may actually offset part of the additional insurance charges.

Contract (Account) Maintenance Fees

A yearly contract (account) maintenance fee is commonly assessed to cover the administrative expenses associated with the variable annuity contract. This charge (usually a flat dollar amount), which covers the cost of issuing the contract and providing administrative services, is usually applied at each contract anniversary date and upon a surrender of the contract. The annual flat dollar fee ranges from $25 to $50 dollars. Most insurers waive this fee if the contract value is greater than a certain amount (usually $50,000 to $100,000) depending upon the contract.

The average Administrative and Distribution Fee in 2012, as calculated by Morningstar, remained at 0.29%.

Summary of Above Fees

Based on its averages for Mortality and Expense Risk Charge, Administrative Fees, Annual Records Maintenance Fees and Total Fund Expense Averages, Morningstar calculated the Total Weighted Average Expenses for the year of 2012 was 2.51%. According to Morningstar, the average annual expense ratio for publicly available equity mutual funds was 1.32%, while the typical bond fund charges 1%. The comparable figures show for underlying funds in variable annuities was 0.96%—0.36% lower. These figures show that the lower expense ratio of underlying funds in some VAs may actually offset part of the additional insurance charges and suggest that, on average, the actual cost differential of the two products is about 1.19% (see Table 3.2).

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42 Table 3.2

Mutual Funds vs. VA Expense Comparison 2012

Mutual Funds Variable Annuities

Fund Expense 1.32% 0.96% M & E 1.27% Administrative charges 0.19% Distribution 0.09% Total 1.32% 2.51% Difference 1.19%

Source: Morningstar and LIMRA International 2013; Insured Retirement Institute (IRI) 2012 Fact Book

The potential for variable annuity underlying fund expense ratios to be lower than publicly available mutual funds is an important factor to keep in mind when considering whether to invest in a variable annuity. By choosing carefully and comparing the costs of the investment funds in a variable annuity to those of publicly available mutual funds, the additional cost of the variable annuity may be partially offset by the cost savings offered by the annuity sub-accounts. The point to remember is this—although there will be charges for the valuable insurance features of a variable annuity, depending on the product selected and the underlying investment options offered, the total cost differential between the variable annuity and publicly available mutual funds may be less than one might think.

Surrender Fees

Variable annuity contracts also have a charge, or surrender fee, when an owner withdraws part or all of their annuity contract value during the early years of the contract. These surrender fees are usually calculated as a percentage of the amount of the withdrawal and generally decline each year until the fee disappears, typically seven years after the purchase. With some contracts, the surrender fee period begins with the purchase of the contract. With others, a new surrender fee period begins with each new purchase payment.

Surrender fees serve several purposes. First, they make people think of their long-term retirement account. The fee also benefits the insurance company issuing the contract, since the charge can help to offset any losses it may incur in the liquidating holdings or changing investment strategy to pay out the cash. In addition, since the company has significant up-front costs in issuing the contract and is expecting to receive asset-based fees or interest margins over a period of years, the surrender fees cover this loss of income that results when the annuity is surrendered.

4 - HOUR ANNUITY TRAINING COURSE (2013 EDITION)

4 - HOUR ANNUITY

TRAINING COURSE

(2013 EDITION)

Researched and Written by:

Edward J. Barrett

Disclaimer

This course is designed as an educational program for financial

professionals. EJB Financial Press is not engaged in rendering legal or other

professional advice and the reader should consult legal counsel as

appropriate.

We have tried to provide you with the most accurate and useful information

possible. However, one thing is certain and that is change. The content of

this publication may be affected by changes in law and in industry practice,

and as a result, information contained in this publication may become

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authority on legal and/or tax matters.

Any laws and regulations cited in this publication have been edited and

summarized for the sake of clarity.

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any person living or dead.

This presentation is for educational purposes only. The information

contained within this presentation is for internal use only and is not intended

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are reminded that they cannot provide clients with tax advice and should

have clients consult their tax advisor before making tax-related investment

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About The Author

Preface

TABLE OF CONTENTS

CHAPTER 1

ANNUITY BASICS

Overview

Annuity Defined

History of Annuities

Annuities in the United States

Primary Uses of Annuities

Classification of Annuities

Purchase Option

Date Income Payments Begin

Investment Options

Income Payout Options

Chapter 1

Review Questions

CHAPTER 2

FIXED ANNUITIES

Overview

The Fixed Annuity Market

Types of Fixed Annuities

Crediting Rates of Interest

Fixed Annuity Fees and Expenses

Disadvantages of Fixed Annuities

Fixed Annuitization: Calculating Fixed Annuity Payments

Chapter 2

Review Questions

CHAPTER 3

VARIABLE ANNUITIES

Overview

VA Defined

The VA Market

VA Product Features

VA Charges and Fees