Building financial freedom using the Freedom Builder fixed indexed annuity

Transcription

1 Building financial freedom using the Freedom Builder fixed indexed annuity Products and financial services provided by American United Life Insurance Company a OneAmerica company One American Square, P.O. Box 368 Indianapolis, IN (317) OneAmerica is the marketing name for the companies of OneAmerica I-23645C Solicitation of insurance. An insurance agent will contact you.

2 When preparing for retirement you may want protection from market volatility, opportunity for increased income and the ability to create a guaranteed stream of income you can t outlive. Take steps today. Establish guaranteed income for your tomorrow. 2

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4 Building freedom into your retirement future Freedom Builder and Freedom Builder Plus are designed to help you achieve your growth objectives for retirement income and provide you with confidence that your assets are protected and guaranteed not to lose value due to market performance. You may potentially grow your nest egg through either a fixed interest rate or by linking the interest potential to the S&P 500 Index using four distinct strategies. Additionally, you may have the opportunity to receive increased guaranteed lifetime income payments tied to future interest rates. Understanding the advantages Freedom Builder and Freedom Builder Plus can provide guaranteed lifetime income benefits giving you confidence that you won t outlive your assets. Income you can t outlive You can enjoy the opportunity for tax-deferred growth based on the market index performance and the ability to convert this growth to a guaranteed lifetime income stream. Building in guarantees Additionally, Freedom Builder Plus gives you the security of guaranteed growth that can be used to determine your income payments. If you are concerned about purchasing an annuity in a low interest rate environment, Freedom Builder Plus also adapts to changes in the interest rate environment. Based on the 10-year U.S. Treasury rate, if rates have increased by the time you begin your lifetime income payments, a guaranteed multiplier will increase your income payment. The Freedom Builder fixed indexed annuity, issued by American United Life Insurance Company (AUL), can help you establish a foundation for retirement freedom and security knowing that you are supported by a company that supports your goals. 4

5 Freedom Builder Fixed Indexed Annuity Understanding the difference Freedom Builder and Freedom Builder Plus are fixed indexed annuities that let you grow your nest egg through either a fixed interest rate or by linking the interest potential to the S&P 500 Index using four distinct strategies. Let s discuss the differences and similarities of fixed annuities, market investments and fixed indexed annuities. Fixed indexed annuities combine features of a traditional fixed annuity and a market investment. Tax deferral may not be available in all cases. Options Consider your alternatives Fixed annuities are designed for a more conservative investor to help protect and preserve their retirement nest egg. Market investments are designed for investors who are willing to trade principal protection for access to the market. Type of growth Tax-deferred growth using a guaranteed fixed, but Offers principal protection Has ability to create an income stream for life potentially modest, interest rate return. 3 3 Allows the client to take advantage of the ups and downs of the market which could result in wide fluctuations in account value. Fixed indexed annuities are designed for conservative investors seeking more growth by linking their contract to a market index. Tax-deferred growth using either: A guaranteed fixed interest rate. A link to a market index that can give you interest based on market performance. 3 3 Understanding your link to the index Widely regarded as the best single gauge of the U.S. equities market, this world-renowned index includes 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 focuses on the large cap segment of the market, with approximately 75 percent coverage of U.S. equities, it is also an ideal proxy for the total market. Risk and reward spectrum The interest credited to the Freedom Builder fixed indexed annuity can be linked to the S&P 500 Index. The risk is less with traditional fixed annuities, but so is the reward potential. Greater Market Investments The account value of the Freedom Builder fixed indexed annuity is not invested directly in the S&P. The index is used as the basis for determining how interest will be credited to the account value. Even if the S&P 500 declines in value, your account value will not decrease due to market performance. It is also important to know that all guarantees are subject to the claims-paying ability of the issuing insurance company. Risk Less Fixed Indexed Annuities Traditional Fixed Annuities Less Reward Greater 5

6 Making crediting strategy decisions When you purchase Freedom Builder or Freedom Builder Plus you can elect to have your premium deposited into various crediting strategies that will determine how interest is applied to your account value. You can choose to allocate 100 percent of your premium in one crediting strategy or in various percentages across all of the crediting strategies. You will have the option of updating your crediting strategy every year before your contract anniversary date. Crediting strategy choices Using a fixed account strategy With this option, your contract is credited interest monthly based on the fixed interest rate declared by AUL. This interest rate will be communicated annually prior to your contract anniversary and will be in effect for the upcoming contract year. Crediting strategies linked to the S&P 500 Index Annual point-to-point strategy (PTP) The point-to-point strategy credits interest annually based on the starting and ending points of the S&P 500 Index. You have the opportunity to take advantage of positive market returns in some years while knowing that your account value is protected from declines in other years due to market performance. Any percentage gain is credited to the indexed account value subject to the declared cap rate or participation rate. Monthly average strategy (MA) The monthly average strategy credits interest annually based on the monthly average value of the S&P 500 Index. Interest credited is determined by the index values at the close of business on the 14th of every month from the previous 12 months. If the 14th falls on a weekend or holiday the value from the next business day is taken. As you can see in the chart below, these values are taken throughout the year. This average is compared to the beginning value of the index and any percentage gain is credited to the indexed account value subject to the declared cap rate or participation rate. 120 Annual point-to-point strategy (PTP) 120 Monthly average strategy (MA) Index 100 Index Month Month 6

7 Freedom Builder Fixed Indexed Annuity Crediting strategies linked to the S&P 500 Index Consider if you would prefer to capture 100 percent of gains up to a cap, or a portion of the entire gain. The following two options provide you with strategies that align with your risk tolerance and perspective of how the market will perform. Using a cap rate A cap allows you to earn 100% of the index return up to the cap limit. For example, if your contract has a cap of 3% and the S&P 500 Index increased 4% for the year, the maximum cap amount of 3% would be interest credited to your indexed account value. If, on the other hand, your contract had the same 3% cap but the index only increased 2%, your account value would be credited 2% interest since it is less than the cap. Using a participation rate A participation rate provides you the ability to earn a percentage, or portion, of the index increase during the 12-month term of your contract. For example, if the S&P 500 Index increased by 4% for the year and your contract had a 30% participation rate, your indexed account value would be credited with 1.2% interest (4% increase times 30% participation rate). Cap rate Participation rate 4% 3% Cap rate Index return 4% 3% Index return 2% 1% 2% 1% Participation rate 1.0% 2.0% 3.0% 4.0% Index Return 1.0% 2.0% 3.0% 4.0% Index Return Year 1 Year 2 Year 3 Year 4 7

8 Understanding how Freedom Builder Plus works The components of Freedom Builder Plus Account Value Your Account Value continues to perform based on market performance and the crediting strategies you ve selected. Income Base Freedom Builder Plus gives you an alternative account that can be considered when you begin taking income payments, called your Income Base. Your Income Base is initially equal to your premium (plus any applicable bonus) and grows at a guaranteed annual enhancement rate of 5 percent for the first 10 years and then becomes level. Benefit Base When you re ready to begin taking lifetime income payments, your benefits are calculated from the greater of your Account Value or Income Base. This value is called the Benefit Base. Income Rate Your Income Rate is determined by your attained age when you begin taking income and the income option chosen. Index Multiplier The Index Multiplier, used to calculate your income payment, is what ties your payment to the current interest rates. The chart on the next page shows how your income payment may be multiplied depending on the current 10-year U.S. Treasury rate when you begin taking payments. Note: Freedom Builder Plus is available for an annual fee of 0.45% 8

9 Freedom Builder Fixed Indexed Annuity Calculating your lifetime income Benefit Base x Income Rate x Index Multiplier = Annual Income Income Base vs. Account Value 1 Benefit Base = Greater of your Income Base or Account Value Income Base Growth Income base receives guaranteed 5% annual enhancement rate Account Value Account Value growth is based on crediting strategies chosen and market performance Policy year Note: This hypothetical example is based on a female, age 59 who chose a 7-year surrender charge period and a 100% allocation to a cap rate crediting strategy. References for income payment calculation 2 3 Freedom Builder Plus Income Rates Age when payments begin Life only 4.10% 4.60% 5.20% 5.90% 6.70% 7.60% Life and 10-year certain 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% Joint life only 3.75% 4.00% 4.25% 4.85% 5.50% 6.25% Joint life and 10-year certain 3.75% 4.00% 4.25% 4.75% 5.25% 5.75% Index Multiplier values 10-year U.S. Treasury rate <3.00% % % 5.00% If the 10-year U.S. treasury rate increases to 4.5% when you begin taking payments, your income would be multiplied by 1.2, or increased by 20%. 9

10 Freedom Builder Plus in action Consider the hypothetical example of two couples who purchased a fixed indexed annuity with $250,000 when they were both 60 years old. They are now 70 years old and retiring. One of the couples, see example 1, purchased Freedom Builder while the other couple, see example 2, chose Freedom Builder Plus to optimize their opportunity for increased income payments due to changes in interest rates and provide guaranteed growth that can be used to provide income if their crediting strategies do not perform as expected. Each couple has decided to begin taking income payments at age 70 to provide lifetime income for both of their lives. Both couples want this sense of security so they know their loved one will continue to have an income that can help provide for their needs. The couple in the first example did not choose Freedom Builder Plus and their actual credited interest was modest, they start receiving an annual income of $17,617. The couple in example 2 receive an increased income payment thanks to Freedom Builder Plus of $19,594 based on the increased 10-year U.S. Treasury rate of 3.40%. The couple in example 1 have a higher Account Value/ Surrender Value in this example, but their guaranteed income payments are lower based on today s payout rates. The couple in example 2 have a slightly lower Account Value/Surrender Value, but Freedom Builder Plus gives them a higher guaranteed income payment and the opportunity for increased income payments if interest rates improve. 10

11 Freedom Builder Fixed Indexed Annuity Two hypothetical examples Example 1 Freedom Builder purchased at age 60 At age 70, a joint lifetime annuitization is chosen They received an annual check of $17,617 One retiree dies at age 73 $17,617 annual income payment continues for spouse s lifetime Initial Value = $250,000 Account Value = $290,135 Account Value x Payout Rate = Annual Income With Freedom Builder, the retirees have a higher Account Value/Surrender Value but lower income payments based on today s payout rates. Example 2 Freedom Builder Plus purchased at age 60 At age 70, a joint lifetime annuitization is chosen They received an annual check of $19,594 One retiree dies at age 73 $19,594 annual income payment continues for spouse s lifetime Initial Value = $250,000 Income Base = $375,000* Account Value = $277,526 * (includes 5% annual enhancement rate for first 10 years) Benefit Base x Income Rate x Index Multiplier = Annual Income Index Multiplier values 10-year U.S. Treasury rate <3.00% % % 5.00% With Freedom Builder Plus, income payments have been positively affected by receiving an annual enhancement rate of 5% for 10 years. In this example, the income also received a boost from the index multiplier because the 10-year U.S. Treasury rate increased from the time the annuity was purchased. Note: Both examples are hypothetical and all numerical examples are for explanatory purposes only. Calculations based on joint lifetime with 10-year period certain. Account value growth is calculated using an assumed growth of 1.5% per year from indexing strategies. The income rate for scenario 1 is based on annuitization rate as of May The Index Multiplier assumes a 10-year U.S. Treasury rate of 3.40%. 11

12 Frequently asked questions The questions and answers below help provide additional details to give you the insight needed to help make a good decision. Q: Does my account value go down if the S&P 500 Index goes down? A: No, if the S&P 500 Index goes down, your indexed account value doesn t decrease due to market performance. Q: Does my account earn interest if the S&P 500 Index goes up? A: If the S&P 500 Index goes up, you have the opportunity to receive interest. The amount of interest will depend on several factors including: how much the index value has changed, the crediting strategy(s) selected and the participation or cap rate declared by the company. Q: Is interest credited monthly or annually? A: That depends on the crediting strategy you choose. Index-linked interest is credited annually and fixed account interest is accrued daily and credited monthly. Q: Once the interest is credited, do I get to keep it? A: Yes, once credited, these additions to your account value cannot be lost; however, they are still subject to surrender charges. Q: Can I make changes to my crediting strategies? A: Yes, you can make changes to your strategies at any time during the calendar year for the next year of your contract. At that time you can elect to renew or reallocate your crediting strategy. You will be notified when your crediting strategies need to be revisited. Q: Can I elect to take money out of my contract? A: Yes, you can access your account value anytime you need to; however, a surrender charge may apply. You can take up to 10 percent of your account value every year without being assessed a surrender charge. Ordinary income taxes will apply, and if you are under age 59½, there may be an additional 10 percent tax penalty. If you have Freedom Builder Plus, withdrawals will reduce the Income Base and Account Value proportionately, therefore lowering your Benefit Base. Q: Does Freedom Builder or Freedom Builder Plus provide a death benefit? A: Yes, in the event of your death before income payments have begun, we ll waive surrender charges for your beneficiaries and your account value will be returned. In addition, Freedom Builder Plus guarantees the death benefit will be no lower than your premiums paid less any withdrawals you have taken. Q: Is there a premium bonus? A: Yes, Freedom Builder offers a 2 percent premium bonus on the nine-year surrender charge product. Q: Can I access my account value if I become ill? A: Yes, Freedom Builder and Freedom Builder Plus offer you a long-term care/nursing home waiver and terminal illness waiver in which surrender charges are waived. Note: May vary by state or may not be available in all states. Q: Can I withdraw money from my Income Base in Freedom Builder Plus? A: No, your Income Base is considered only when you want to annuitize or begin taking payments. It does not have any cash value. Only your Account Value can be surrendered. Q: How often can I choose to receive lifetime income payments? A: You may choose to receive payments annually, quarterly or monthly Note: All guarantees are subject to the claims-paying ability of AUL. 12

13 Freedom Builder Fixed Indexed Annuity Q: What happens to my Income Base when the Annual Enhancement Rate stops after year 10? A: Your Income Base does not receive any additional enhancements after year 10. Your Income Base will be used to calculate your guaranteed lifetime income payments until the Account Value exceeds it. Q. What are the surrender charges? A: Your surrender charge period is the number of years your contract is subject to a surrender charge. This charge applies if you opt to take a withdrawal in excess of the 10 percent free-out amount. The chart to the right details the surrender charge schedule for each product: Charges 7-year surrender period 1 9-year surrender period 1 Year 1 9% 9% Year 2 8% 8% Year 3 7% 7% Year 4 6% 6% Year 5 5% 5% Year 6 4% 4% Year 7 3% 3% Year 8 2% Year 9 1% Year In CA, the first year surrender charge is 8% 13

14 Freedom Builder and Freedom Builder Plus features Max issue ages 7-year surrender charge: age 75 for qualified funds, age 85 for non-qualified funds 9-year surrender charge: age 75 Minimum initial premium 9-year surrender charge products: $75,000 7-year surrender charge product: $5,000 qualified money / $10,000 non-qualified money Additional premium accepted 9-year surrender charge products: will accept additional premiums only during the first 12 months 7-year surrender charge product: will accept additional premiums of $1,000 or more for the life of the contract Interest crediting options Fixed account Point-to-point with a cap Point-to-point with a participation rate Monthly average with a cap Monthly average with a participation rate Access options 10% free annual withdrawals, long term care/nursing home waiver and terminal illness waiver. Any withdrawal may be subject to taxation and if taken before age 59½ there may be additional penalties. May vary by state or may not be available in all states. Surrender charge schedule 7-year 9-year Premium bonus 2% premium bonus automatically included on the 9-year surrender charge product Freedom Builder Plus annual fee 0.45% of Benefit Base Freedom Builder Plus annual enhancement rate 5.00% simple interest credited annually for the first 10 years Freedom Builder Plus Income Rates Age when payments begin Life only 4.10% 4.60% 5.20% 5.90% 6.70% 7.60% Life and 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 10-year certain Joint life only 3.75% 4.00% 4.25% 4.85% 5.50% 6.25% Joint life and 10-year certain 3.75% 4.00% 4.25% 4.75% 5.25% 5.75% Note: For joint life payouts, the age is determined by the younger of the annuitants. Freedom Builder Plus Index Multiplier Values 10-year U.S. Treasury rate <3.00% % % 5.00% Choosing Freedom Builder or Freedom Builder Plus can give you the opportunity for positive interest rate performance with protection from downside risk. Minimum guaranteed surrender value 90% of premiums accumulated at 1% annually, compounded daily 14

15 Take the first step; talk with your insurance agent today to discuss the next steps for building a secure financial future. 15

16 Note: The S&P 500 Index is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by OneAmerica Financial Partners, Inc. Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by OneAmerica Financial Partners, Inc. The OneAmerica Freedom Builder is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index. Freedom Builder fixed indexed annuity is issued by American United Life Insurance Company (AUL), a OneAmerica company, Indianapolis, IN, form number series LA-32, ICC11 LA-32, Premium Extension Endorsement form number series LE-295, ICC14 LE-295, Premium Bonus Rider form number series LR-226, LR-226B, ICC15 LR-226B, Indexed Guaranteed Income Rider form number series LR-236, ICC15 LR-236, and Waiver of Contract Withdrawal Charges for Long Term Care Facility and Terminal Illness Benefit Rider form number series LR-172. Not available in all states or may vary by state. Products issued and underwritten by American United Life Insurance Company (AUL), a OneAmerica company. Provided content is for overview and informational purposes only and is not intended as tax, legal, fiduciary, or investment advice. A fixed annuity is a long-term, tax-deferred insurance contract designed to create a fixed stream of income through a process called annuitization while providing a fixed rate of return. Withdrawals from fixed annuities may be subject to surrender charges and ordinary income taxes. If a withdrawal is made prior to age 59½, an additional 10% tax penalty may apply. A fixed annuity contains guarantees and protections that are subject to the issuing insurance company s ability to pay for them. Any individuals used in scenarios are fictitious and all numeric examples are hypothetical and were used for explanatory purposes only. NOT A DEPOSIT NOT FDIC OR NCUA INSURED NOT BANK OR CREDIT UNION GUARANTEED NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY MAY LOSE VALUE Subject to the claims paying ability of AUL. About OneAmerica A national leader in the insurance and financial services marketplace for 140 years, the companies of OneAmerica help customers build and protect their financial futures. OneAmerica offers a variety of products and services to serve the financial needs of their policyholders and customers. These products include retirement plan products and recordkeeping services, individual life insurance, annuities, asset based long-term care solutions and employee benefit plan products. Products are issued and underwritten by the companies of OneAmerica and distributed through a nationwide network of employees, agents, brokers and other sources that are committed to providing value to our customers. To learn more about our products, services and the companies of OneAmerica, visit OneAmerica.com/companies. I-23645C American United Life Insurance Company a OneAmerica company One American Square, P.O. Box 368 Indianapolis, IN (317) The companies of OneAmerica : American United Life Insurance Company, The State Life Insurance Company, OneAmerica Retirement Services LLC, McCready and Keene, Inc., OneAmerica Securities, Inc. and Pioneer Mutual Life Insurance Company, which is a stock subsidiary of American United Mutual Insurance Holding Company 2017 OneAmerica Financial Partners, Inc. All rights reserved. OneAmerica and the OneAmerica banner are all registered trademarks of OneAmerica Financial Partners, Inc. I /20/17