Table of Contents. Acknowledgements...iii About the Author...iv

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1 Acknowledgements...iii About the Author...iv Chapter 1: Variable Annuities: A Staple for Investors and Savers...1 Annuity Sales on the Increase...1 Retirement Income is Up to Them...3 Maintaining Purchasing Power...4 A Measure of Safety...5 Control of Investment Selection...6 When to Pay Taxes...7 Looking for Help...7 Variable Annuities Have It All...8 Convenient to Purchase...8 Offer a Multitude of Choices to Maintain Buying Power...9 Name Recognition...10 Control of Investment Allocation...11 Tax Paying Control...11 Income Amount and Timing Control...12 In the Following Chapters...13 Chapter 2: Markets for Variable Annuities...15 Building on Mutual Fund Awareness...15 Inside the Variable Annuity Wrapper...16 Composition of Households...18 Changes in Retirement Income Composition...20 Social Security...20 Employer Retirement Plans...21 One s Own Assets...23 Not Saving What Is Needed...24 Population Segments by Size...26 Self-Employed: IRA and SEP...27 Self-Employed with Employees...28 Supplementing Employer Plans...28 Timing the Tax...29 Maximizing Income...30 Receiving Large Sums...32 Chapter 3: Approaching Markets...35 Primary or Supplementary Market?...35 Supplementary Marketing...35 Primary Marketing...36 Targeting Markets...37 Characteristics in Common...37 Market Research...39 Survey Information...40 Analyzing the Data...42 v

2 As a Member of the Group...43 Other Markets...44 Smaller Employers...45 Tailoring the Sales Process...47 Tips on Seminar Selling...49 Invitation List...50 Sponsored Seminars...51 Keep Promotion Going...52 Designing the Seminar...53 Absolute Must: Response Card...54 Seminar Length and Speakers...55 On Building Your Sales Presentation...56 Need and Motivation to Act...56 Chapter 4: Selling Ideas...59 Finding the Dominant Appeal...59 Building Retirement Income...62 Variable Annuities as IRAs: Building Retirement Income with Efficiency...62 Children s Education...66 Variable Annuities as IRAs: More Help for Children s Education...66 Regular Saving and Investing...69 Importance of Regular Saving and Investing: Cost of Delay...69 Importance of Regular Saving and Investing: Dollar Cost Averaging...71 Tax Deferral...73 Maximizing Accumulation: Taking Advantage of Tax Deferral...73 Maintaining Control...74 Exercising and Maintaining Control: Having Many Choices...74 Exercising and Maintaining Control: Changing Investments...76 Exercising and Maintaining Control: Timing Income Taxes...77 Maintaining Purchasing Power...78 Maintaining Purchasing Power: Investing in Equities...78 Diversification...79 Dealing with Risk: Using Diversification to Advantage...79 Using Guarantees...80 Cementing Your Successes: Strategic Use of the Guaranteed Interest (or Money Market) Account...80 Cementing Your Successes: Availability of the Death Benefit and Optional Death Benefits...81 Cementing Your Successes: Availability of Guaranteed Living Benefits...82 Income Planning...83 Effective Income Planning: Defer, Withdraw, Annuitize...83 Penalty Tax Perspective...84 vi

3 Keeping the Penalty Tax in Perspective: Don t Be Put Off by It...84 Large, One-Time Amounts...86 Handling Large, One-Time Amounts: Take the Pressure Off but Put the Money to Work...86 Social Security Benefits Taxation...87 Annuity Buildup Not Counted for Social Security Benefits Taxation...87 Annuity Payouts and Life Insurance...88 Annuity Payout and Life Insurance Combination...88 Small Employer Retirement Planning...89 IRAs for Smaller Employers...89 Providing for Supplemental Retirement Income...89 After the Sale...90 Chapter 5: Chapter 6: Marketing and Sales Support...93 Achieving Customer Satisfaction...93 Expectations for the Future...94 Timing the Market...95 Dollar Cost Averaging...95 Asset Allocation...97 Asset Allocation Model...98 Performance Histories Third Party Sources Insurance Company Rating Services The Prospectus Risk Disclosure Document Sales Illustrations Account and Balance Summaries Periodic Reports Product Features Licensing, Compliance and Ethics Federal and State Regulation Registered Products Broker/Dealer Products Only Federal-State Regulatory Matters Fund-Level Disclosure and Certification Securities Licenses Supervisor Licensing Registered Investment Advisor Compliance Meetings Continuing Education Supervision and Designated Offices Sales Presentations and Practices Sales Literature Suitability Statement Proposed Additional Suitability Rule vii

4 Contract Exchanges and Bonus Annuities Market Timing Disclosure Contract Delivery Ethical Practices Customer Focused In-Office Documentation Remember Something Will Go Wrong Chapter 7: Product Features and Characteristics Annuity Classifications Premiums Issue and Maturity Ages Accumulation Units Variety of Variable Accounts Choices Popular Guaranteed Interest Accounts Death Benefits Guaranteed Living Benefits Allocation to Accounts Transfers Among Accounts Automatic Rebalancing Dollar Cost Averaging Among Accounts Surrender Charges Charge-Free Withdrawals Periodic Withdrawal Program Waiving Surrender Charges Payout Options Fixed Amount Payout Option Fixed Period Payout Option Life Annuity Payout Option Life Income with Period Certain Payout Option Life Income with Refund Payout Option Joint and Survivor Annuity Payout Option Joint and Survivor with Period Certain Payout Option Changing the Payout Option Variable Payouts Immediate Variable Annuities Bonus Annuities Payments to Impaired Risks Market Value Adjustment Equity-Indexed Annuity Group Annuities Developing New Products Chapter 8: Charges and Fees: Pricing Good Value, Adequate Return Securities Markets Imrpovement Act Contract Fees viii

5 Guaranteed Interest Account: Interest Margin Mortality and Expense Charge Investment Management Fees Charges for Optional Benefits Proprietary Accounts Transfer Fees Surrender Charges Group Annuity Pricing Operational Differences Comparisons and Customer Value Chapter 9: Distribution of Products Variety of Distribution Outlets Producer Compensation Paid to Other Distributors Percentages Paid Increasing Compensation Variable Annuity Replacements Making a Profit Chapter 10: Other Financial Services Products Stocks and Bonds Selecting Investments Income Tax Derivative Investments Mutual Funds Variable Annuity Features Wrap Accounts Limited Partnerships, Unit Investment Trusts and Hedge Funds Real Estate Savings Accounts and Certificates of Deposit In Conclusion Chapter 11: Variable Annuities in Business and Estate Planning Qualified Retirement Plans Contribution Limitations Plan Requirements Required Minimum Distributions (k) Plan SIMPLE 401(k) Plans Using Variable Annuities in Qualified Plans Individual Retirement Annuities Contributions Distributions SIMPLE IRA Simplified Employee Pension Roth IRA ix

6 Tax Sheltered Annuities (403(b) Plans) Plans Nonqualified Retirement Plans Executive Equity Plans Education Funding From Personal Resources Tax Credits and Deductions Tax-Favored Education Savings Role of Annuities Gifts of Annuities Gifts to Charity Charitable Trusts Chapter 12: Taxation of Variable Annuities Federal Income Tax Withdrawals Premature Distributions Section 1035 Exchanges Complete and Partial Surrenders Sale of an Annuity Taxation of Payouts Fixed Payout Variable Payout Death of an Owner Federal Estate Tax Federal Gift Tax Annuities as Gifts Planning Considerations Appendix A: Actuarial Tables for Taxing Annuities Frequency of Payment Adjustment Table Table V Ordinary Life Annuities One Life Expected Return Multiples Table VI Ordinary Joint Life and Last Survivor Annuities Two Lives Expected Return Multiples Table VIA Annuities for Joint Life Only Two Lives Expected Return Multiples Table VII Percent Value of Refund Feature Duration of Guaranteed Amount Index x