TheUltimateAnnuityBuyer sguide. dddd. 7Sure-FireTipsToGeneratingMoreIncome, Growth,AndPreservationOfPrincipal. ProvidedBy:

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1 TheUltimateAnnuityBuyer sguide dddd 7Sure-FireTipsToGeneratingMoreIncome, Growth,AndPreservationOfPrincipal ProvidedBy:

2 7 Key Tips For Purchasing Annuities In Today s Market TIP #1 Company Ratings Matter! In light of the current economic condition both globally and domestically, it is more important than ever to select insurance companies that have strong histories and track records. A lot of sales pitches are being used these days that talk about legal reserve systems and other factors that supposedly make the strength rating not as important. This is a sales gimmick to be extremely wary of. Strength ratings are there for a reason. Use them! Don t let an agent talk you into a B- rated company when A or A+ rated options are available! Two of the more helpful rating systems are A.M. Best, and the Comdex Score system. These can be found at and/or by doing an internet search on whatever the name of the insurance company is that you are researching followed by Comdex Score. Example: ABC Insurance Company Comdex Score. TIP #2 Suitability Part One: % of Assets Annuities, for the most part, represent long- term commitment vehicles that can carry some substantial surrender penalties for early termination of the contract. Because of this, it is very important that proper thought and determination goes in to deciding how much of your overall net worth should be placed inside of an annuity. While annuities can provide valuable features for your retirement, such as safety of principal and a lifetime income stream you can never outlive, they can also create significant problems if too much money is tied up inside of an annuity without leaving sufficient liquid assets outside of the contract to be used for emergencies or other investment opportunities. Be extremely careful of any agent who recommends that you put any more than around 60% of your total assets into an annuity. This is a potential major red flag that could indicate an effort on the agent s part to simply maximize his or her own commissions instead of providing a truly beneficial solution to your needs. Very seldom is it ever appropriate for more than 60% of your total investable portfolio to go into annuities. Copyright 2015 Annuity Gator 2

3 TIP #3 Suitability Part Two: When Income Begins One of the most popular forms of annuities being marketed today is an income rider annuity. Also referred to as hybrid annuities, deferred income annuities, or lifetime income annuities. Typically these annuities come with an attractive bonus interest rate up front for signing up, then a guaranteed growth rate or roll- up rate while the product is being held in deferral, and lastly a guaranteed payout rate based on your age or you and your spouses age depending on whether you select a single life or joint lifetime payout option. While these products can provide wonderful lifetime income benefits, be cautious of these products if you are in need of income right away or within just a year or two of deferred growth. Typically, it takes a minimum of 5-7 years worth of deferred growth, BEFORE income is turned on, for it to really provide a truly beneficial mathematical result. Otherwise, if you turn on the income within the first 1-4 years, you haven t given the product enough time to accumulate at good enough returns to avoid being stuck with a lifetime internal rate of return of usually around 1% - 1.5%, which of course is very low. So just remember, if you are 55 years old and want to grow money in an income rider annuity until age 65, this could be an excellent option. But if you are 64 and need income to begin at 65, you might want to consider either an immediate annuity or a different retirement income option all together! TIP #4 Always Ask About Agent Commissions This tip is a great way to separate the ethical agents from the rest. An ethical agent will never have a problem or hesitate in answering your questions about what the commission rate is of the product that he or she is recommending. Most fixed, indexed, and income rider annuity companies pay the agent directly out of their own pocket based on a percentage of the assets you invest. Many of the more heavily marketed annuity products out there these days pay commissions anywhere from 5-9%. This means if you invest $300,000 in an annuity paying an 8% commission, the agent stands to receive a $24,000 lump sum commission from that sale. While this may not necessarily in and of itself be a red flag, it is always important to ask the agent what the commission rate is, and to judge their response accordingly. What you are looking for, of course, is a scenario where an agent might be recommending a B rated company with a 9% commission, instead of an A+ rated company with maybe only a 6% commission. There is nothing wrong with an agent getting paid, but your best interest has to come first!! Copyright 2015 Annuity Gator 3

4 TIP #5 Work With A Fiduciary Not A Broker When choosing a financial representative to work with, it is so important to work with an individual who is held to a fiduciary standard and not just a suitability standard. What is the difference? Well, a fiduciary is legally bound to act in the client s best interest at all times. This means that they are never allowed to let their own compensation influence their recommendations, and are required to give advice and make recommendations that are truly aligned with a client s needs and objectives. Under a suitability standard, while an agent or broker is required to follow certain broad guidelines, they are still allowed a tremendous amount of flexibility when it comes to using products that provide higher compensation for themselves, even if they are not in the best interest of the client. Therefore, when selecting an advisor, it is very helpful to look for investment advisors or Certified Financial Planners that are bound to a fiduciary standard and not merely a suitability standard. For a more in depth description of this, you can research fiduciary vs. suitability on the internet. TIP #6 Annuity Portfolios Vs. Annuity Products With so many products available today that contain a plethora of living benefits, and with so many agents giving pitches about how they have the one perfect annuity for all your needs, it is no wonder that many consumers begin to buy into the idea that they might actually be able to achieve all the things they want in retirement within one specific annuity product purchase. The truth is, ALL annuities have good parts and they ALL have bad parts at the same time. There is not one single annuity on the market today that is contractually designed in such a way that it can provide growth, and income, and preservation of principal, and safety, and liquidity ALL AT THE SAME TIME. However, if you were to combine or blend several different types of annuities together in a portfolio- type format, you can significantly increase your ability to achieve multiple retirement objectives at the same time, without many of the frustrating trade- offs that come with locking in to just a single, stand- alone annuity product. While this concept can be extremely simple and effective it is important to understand than not all annuity agents are skilled in (or even familiar with) the concept of an annuity portfolio, and therefore you must take care in making sure that you are working with an agent that is competent in this kind of a strategy. Copyright 2015 Annuity Gator 4

5 TIP #7 A Better Annuity Strategy (The Power of Laddering) So you want income? You want growth? You want preservation of principal? You want inflation adjustments and flexibility? You want all of those things at the same time? What kind of an annuity can give you all those desirable results at the same time? None of them!! That is no SINGLE annuity product can do all that for you. BUT, a laddered annuity portfolio is capable of doing all those things! How does it work? Simple! You spread your money into several different lifetime income annuities that are each designed to turn on income at different intervals. You can play with the numbers to determine how much money needs to go into each annuity. But ultimately the idea is that one main annuity kicks in at 65, then another one at 70, 75, 80, etc. This way, every few years of your retirement you can produce an additional stream of income that layers down on top of your initial annuity income streams, thereby providing an automatic inflation adjustment to your lifetime cash flow needs. You can even place a final growth annuity at the very end of the ladder that is designed to regrow some or all of your original retirement principal by the time you end up there, thereby giving you a recovery/preservation of principal element that can greatly solve the fear of running our of money. Again, it is important to note that many annuity agents and advisors are not intimately familiar with or experienced in constructing and implementing laddered annuity plans, so it is important to research and interview and advisor that has a track record of success in managing laddered annuity portfolios. We hope you ve enjoyed this brief guide and that it will help you make educated and confident decisions about annuities and your retirement. If you have any additional questions, or would like to learn more about some of the concepts highlighted in this course, please feel free to contact us by clicking here or send us an at gator@annuitygator.com. Copyright 2015 Annuity Gator 5 Annuity product guarantees rely on the financial strength and claims-paying ability of the issuing insurer. Annuity riders may be available for an additional annual premium that can provide additional benefits and incomeguarantees. By contacting us you may speak with an insurance licensed agent in your state, and you may be offered insurance products for sale.