Superior Insurance Marketing

Americans are living longer and spending more time in retirement. In fact, the average American will be retired for 18 years. A retirement nest egg is probably the largest amount of money you will ever need to accumulate. How will you do it?

Think about a fixed annuity. Fixed annuities are a safe, risk-free way to plan for a comfortable retirement. You do so, on a tax-deferred basis. The money is protected, and you can get a guarantee that you'll never outlive the income you receive from the annuity.

To find out more information, fill out our no obligation annuity quote form, and one of our friendly agents will contact you.

Although the answer may seem easy for many of us on the surface, it is not so easy when you begin to truly dissect the heart of the question with respect to each individual case. Each case has its own challenges, and the recommendations must meet the needs of that case. For instance, a conservative 30 year old has different needs than a conservative 70 year old.

Below, I have created a short list of guidelines to use as a template. As indicated, each case is unique, and will require attention to the clientýs specific needs, but these guidelines will help narrow the scope of your search. It will also help you target and penetrate a specific market segment.

ý Good in a flat interest rate environment, or for clients anticipating interest rate declines

ý Best for conservative clients anticipating interest rate increases, yet accept rate fluctuations

ý Best for clients that are less conservative, and want higher than average returns without market risk

Equity Indexed Annuities don’t have to be as complicated to explain as they are perceived. Some variations are a bit more complex than others, but the basics are pretty straight forward.

Two Basic Crediting Methods

There are two primary crediting methods when you cut through all of the variations: Point-to-Point and Averaging.

With any type of Point-to-Point strategy, there are going to be two points of reference, a starting index value and an ending index value. In a true point-to-point, the volatility between those points is irrelevant. Whether considering a monthly, annual, or multi-year point-to-point, the concept is the same. The performance is simply based on the difference between the starting index value and the ending index value.

With an averaging strategy, the performance of each period will be combined with all of the other periods within the reset period, and then divided by the total number of periods to arrive at the average performance. For instance, a monthly averaging strategy with an annual reset would have twelve periods that would be added together, dividing by twelve to arrive at the average performance. A two-year reset would have twenty-four periods. Daily averaging would have as many periods as there are days within the reset window.

Crediting Method Variations

Although there are only two primary crediting methods, there are also variations of those crediting methods, such as, High Water Mark and Low Water Mark.

A High Water Mark crediting method looks back at the index values on the annual annuity anniversary, and uses the highest anniversary index value as the ending index value.

A Low Water Mark crediting method looks back at the index values on the annual annuity anniversary, and uses the lowest anniversary index value as the starting index value.

Caps, Spreads, and Participations Rates

Once the index performance is determined, there may be limitations placed on the performance that is passed along to the policy owner. These limitations will come in the form of caps, spreads, and participation rates, or any combination of these. If a cap is applied, the performance will be limited to the maximum allowed by that cap. For instance, if the crediting method indicates an increase of 20%, but the cap limit is 7%, the policy would only be credited 7%. If a spread is applied, the index performance will be reduced by the amount of the spread. For instance, if the crediting method indicates an increase of 20%, and the spread is 1%, the policy would be credited 19%. If a participation rate is applied, the index performance will be credited in the same percentage of the participation rate. For instance, if the crediting method indicates an increase of 20% and the participation rate is 50%, the policy would be credited 10%.

Annual Reset

Another factor that can add tremendous value for the policy owner is the annual reset. At the end of each year, the ending index value is used as a new starting index value to determine the index performance for the new period. This feature can be invaluable in a volatile market, since the annuity can receive the benefits of index performance that may not exist otherwise.