Fixed Income Annuities American Pathway Deferred Income Annuity (DIA) Qualified Longevity Annuity Contracts (QLAC)

Transcription

1 Fixed Income Annuities American Pathway Deferred Income Annuity (DIA) Qualified Longevity Annuity Contracts (QLAC) Presenter: Charles Samuel, Internal Wholesaler for AIG Life and Retirement Annuities issued by American General Life Insurance Company (AGL) All guarantees are backed by the claims-paying ability of the issuing insurance company.

2 Introduction Fixed income annuities are an increasingly popular option for pre-retirees and retirees interested in generating predictable income without the inherent market and volatility risks. 1

3 Income insurance comparison AIG companies offer a range of annuities DIA SPIA Index with GLWB VA with GLWB INCOME LEVEL HIGHER LOWER Income protection Guaranteed lifetime income Immediate income Min. 13 month wait Income with growth potential* Increase option available Increase option available Access to principal Limited liquidity available Limited liquidity available (Withdrawal charges may apply) (Withdrawal charges may apply) Market participation QLAC eligible NEW! Subject to market conditions. Guarantees are backed by the claims-paying ability of the issuing insurance company. 2

4 Qualified Longevity Annuity Contracts (QLAC) topics Background, overview & conditions American Pathway DIA: QLAC vs Non-QLAC Case studies Prospecting and marketing tools Quoting resources How to do QLAC business Q&A 3

5 Background Policymakers response to retirees concern about outliving one s retirement savings Historically, required minimum distributions (RMDs) generally had to begin from all retirement accounts by age 70½ Treasury Department and the Internal Revenue Service (IRS) sought ways to provide income at an advanced age On July 2, 2014, the IRS and Treasury Department released final QLAC regulations 4

6 Overview QLAC IRAs impact on RMDs DIA issued as a traditional IRA can be classified as a QLAC and excluded from RMD calculations DIA purchasers must designate DIA as a QLAC at time of purchase Contract must include QLAC language in the contract or endorsement 5

7 Conditions Premiums limited to the lesser of: The applicable IRS QLAC premium lifetime dollar limitation ($125,000 in 2014 subject to IRS cost-of-living increases in future years) less premiums previously paid for any other contract intended to be a QLAC; or, 25% of the aggregate account values for all traditional IRAs as of December 31 of last year less premiums previously paid for any other IRA contract intended to be a QLAC Income payments must begin by first of month following 85th birthday Payment types can be single or joint, life only or life with cash refund Pre-commencement death benefits can be either return-of-premium (ROP) or no death benefit. ROP plus interest is not permitted All increase options: CPI-U, 1%-5% simple, compounded or flat dollar Commuted value and/or cash surrender value provisions not permitted Issuers will be required to file information annually with the IRS As with any deferred income annuity, income payments under a QLAC can be higher because a QLAC permanently converts premium to a future income stream that is guaranteed for life 6

8 Premium limits example 1 1 QLAC Maximum Premium Worksheets will be made available as a courtesy only. These examples are for training purposes. Agents should not obtain or retain any QLAC calculations or worksheets and the Company will not accept any such calculations. Neither the Company nor any of its agents or employees are allowed to provide legal or tax advice, or calculate maximum premium limits. 7

9 Premium limits example 2 1 QLAC Maximum Premium Worksheets will be made available as a courtesy only. These examples are for training purposes. Agents should not obtain or retain any QLAC calculations or worksheets and the Company will not accept any such calculations. Neither the Company nor any of its agents or employees are allowed to provide legal or tax advice, or calculate maximum premium limits. 8

10 Overview Income Payment Options American Pathway Deferred Income Annuity (DIA) NON-QLAC Version Premiums: $20,000 - $1,000,000 Issue ages: NonQual/Roth 0-90; Qualified 0-69 Deferral period: > 12 months 40 years Benefit commencement: >12 months up to age 91 (maximum income start for qualified is age 70½) Single life, joint & survivor, or joint & contingent: lifetime income only, lifetime income with period certain, lifetime income with cash (lump sum) refund or installment refund, or period certain only American Pathway Deferred Income Annuity (DIA) QLAC Version Premiums: $20,000 - $125,000 lifetime (lesser of $125,000 or 25% of aggregated IRA account values) Issue ages: Qualified 0-83 Deferral period: > 12 months 40 years Benefit commencement: >12 months up to age 85 (payments must begin by first day of month following 85 th birthday) Single life, joint & survivor, or joint & contingent: lifetime income only, lifetime income with cash (lump sum) refund Payment Increase Options Death Benefit Prior to Commencement Income Start Date Adjustment Consumer Price Index (CPI-U) inflation adjustment: adjusted each January 1 after payments begin Annual payment increase: 1% to 5% on each income start date anniversary (simple or compounded interest, flat dollar increase) Return of premium Return of premium + compounded interest No death benefit (only available on single or joint lifetime income only options) Return of premium No death benefit (only available on single or joint lifetime income only options) Client can accelerate or defer the first payment date within five years of the original income start date once during the life of the annuity contract. Not available with any life only payout option. Advance Payment Option Once payments commence, the owner can elect a lump-sum advance of six months worth of payments. This feature may be elected twice during the life of the annuity. Must be at least 59½. Only available on nonqualified annuities with monthly payment frequency. NA Payee Choice The entire income payment, or a partial amount, can be directed to an alternate party, such as a charity, institution, family member or other individual. 9

11 Case studies* * Not actual cases, and are hypothetical representations for illustrative purposes only.

12 DIA QLAC Case Study 1 Client profile: John 70 male Savings (IRA) as of 12/31 prior year: $500,000 Wants to withdraw inflation-adjusted $25,000 per year from this account In good health and may live long Worried about outliving assets Wants to ensure his retirement won t suffer from another market downturn 11

13 DIA QLAC Case Study 1: More future income, guaranteed for life ASSUMPTIONS IRA Beginning Balance $ 500,000 IRA Growth Rate 5.00% Desired Income $ 25,000 Income Inflation Adjustment 3.00% QLAC Premium $ 125,000 QLAC Annuity Start Age 80 QLAC Annuity Income $ 25,695 Market Age 75-10% IRA Only Income IRA with QLAC Desired Income As with any deferred income annuity, income payments under a QLAC can be higher because a QLAC permanently converts premium to a future income stream that is guaranteed for life. Remember: if the contract owner dies before the QLAC start age, no income payments will be made and a death benefit will be payable only if the return-of-premium death benefit is chosen at time of application. Male, 70, Life only with no death benefit. As of 09/24/14. 12

14 DIA QLAC Case Study 1: Less strain on IRA later in life Age Scenario 1: IRA without QLAC Required Minimum Distribution (RMD) Actual Withdrawal from Account Desired IRA Balance Income 70 $ 500,000 $ 25,000 $ 18,248 $ 25, $ 498,750 $ 25,750 $ 18,821 $ 25, $ 496,650 $ 26,523 $ 19,400 $ 26, $ 493,634 $ 27,318 $ 19,985 $ 27, $ 489,631 $ 28,138 $ 20,573 $ 28, $ 415,344 $ 28,982 $ 18,137 $ 28, $ 405,681 $ 29,851 $ 18,440 $ 29, $ 394,621 $ 30,747 $ 18,614 $ 30, $ 382,068 $ 31,669 $ 18,821 $ 31, $ 367,918 $ 32,619 $ 18,868 $ 32, $ 352,064 $ 33,598 $ 18,827 $ 33, $ 334,389 $ 34,606 $ 18,681 $ 34, $ 314,773 $ 35,644 $ 18,408 $ 35, $ 293,085 $ 36,713 $ 17,981 $ 36, $ 269,190 $ 37,815 $ 17,367 $ 37, $ 242,944 $ 38,949 $ 16,415 $ 38, $ 214,195 $ 40,118 $ 15,191 $ 40, $ 182,781 $ 41,321 $ 13,640 $ 41, $ 148,533 $ 42,561 $ 11,696 $ 42, $ 111,271 $ 43,838 $ 9,273 $ 43, $ 70,805 $ 45,153 $ 6,211 $ 45, $ 26,935 $ 46,507 $ 2,494 $ 26, $ - $ 47,903 $ - $ - 93 $ - $ 49,340 $ - $ - 94 $ - $ 50,820 $ - $ - 95 $ - $ 52,344 $ - $ - 96 $ - $ 53,915 $ - $ - 97 $ - $ 55,532 $ - $ - 98 $ - $ 57,198 $ - $ - 99 $ - $ 58,914 $ - $ $ - $ 60,682 $ - $ - Scenario 2: IRA with QLAC Required Minimum Distribution Actual Withdrawal from IRA Balance Desired Income QLAC Amount Desired Withdrawal Amount (RMD) Account Total Income $ 375,000 $ 25,000 $ - $ 25,000 $ 13,686 $ 25,000 $ 25,000 $ 367,500 $ 25,750 $ - $ 25,750 $ 13,868 $ 25,750 $ 25,750 $ 358,838 $ 26,523 $ - $ 26,523 $ 14,017 $ 26,523 $ 26,523 $ 348,931 $ 27,318 $ - $ 27,318 $ 14,127 $ 27,318 $ 27,318 $ 337,693 $ 28,138 $ - $ 28,138 $ 14,189 $ 28,138 $ 28,138 $ 278,600 $ 28,982 $ - $ 28,982 $ 12,166 $ 28,982 $ 28,982 $ 262,099 $ 29,851 $ - $ 29,851 $ 11,914 $ 29,851 $ 29,851 $ 243,860 $ 30,747 $ - $ 30,747 $ 11,503 $ 30,747 $ 30,747 $ 223,769 $ 31,669 $ - $ 31,669 $ 11,023 $ 31,669 $ 31,669 $ 201,705 $ 32,619 $ - $ 32,619 $ 10,344 $ 32,619 $ 32,619 $ 177,540 $ 33,598 $25,695 $ 7,903 $ 9,494 $ 9,494 $ 35,189 $ 176,448 $ 34,606 $25,695 $ 8,911 $ 9,857 $ 9,857 $ 35,552 $ 174,920 $ 35,644 $25,695 $ 9,949 $ 10,229 $ 10,229 $ 35,924 $ 172,925 $ 36,713 $25,695 $ 11,018 $ 10,609 $ 11,018 $ 36,713 $ 170,002 $ 37,815 $25,695 $ 12,120 $ 10,968 $ 12,120 $ 37,815 $ 165,776 $ 38,949 $25,695 $ 13,254 $ 11,201 $ 13,254 $ 38,949 $ 160,148 $ 40,118 $25,695 $ 14,423 $ 11,358 $ 14,423 $ 40,118 $ 153,012 $ 41,321 $25,695 $ 15,626 $ 11,419 $ 15,626 $ 41,321 $ 144,255 $ 42,561 $25,695 $ 16,866 $ 11,359 $ 16,866 $ 42,561 $ 133,759 $ 43,838 $25,695 $ 18,143 $ 11,147 $ 18,143 $ 43,838 $ 121,397 $ 45,153 $25,695 $ 19,458 $ 10,649 $ 19,458 $ 45,153 $ 107,036 $ 46,507 $25,695 $ 20,812 $ 9,911 $ 20,812 $ 46,507 $ 90,535 $ 47,903 $25,695 $ 22,208 $ 8,876 $ 22,208 $ 47,903 $ 71,744 $ 49,340 $25,695 $ 23,645 $ 7,473 $ 23,645 $ 49,340 $ 50,504 $ 50,820 $25,695 $ 25,125 $ 5,550 $ 25,125 $ 50,820 $ 26,648 $ 52,344 $25,695 $ 26,649 $ 3,099 $ 26,648 $ 52,343 $ - $ 53,915 $25,695 $ - $ - $ - $ 25,695 $ - $ 55,532 $25,695 $ - $ - $ - $ 25,695 $ - $ 57,198 $25,695 $ - $ - $ - $ 25,695 $ - $ 58,914 $25,695 $ - $ - $ - $ 25,695 $ - $ 60,682 $25,695 $ - $ - $ - $ 25,695 13

15 DIA QLAC Case Study 2 Client profile: David 70 male Savings (IRA) as of 12/31 prior year: $500,000 Wants to withdraw inflation-adjusted $25,000 per year from this account In good health Wants to enjoy a long retirement without becoming a burden on his family Concerned about rising costs of healthcare 14

16 DIA QLAC Case Study 2: More future income, guaranteed for life ASSUMPTIONS IRA Beginning Balance $ 500,000 IRA Growth Rate 5.00% Desired Income $ 25,000 Income Inflation Adjustment 3.00% QLAC Premium $ 125,000 QLAC Annuity Start Age 85 QLAC Annuity Income $ 50,838 Market Age 75-10% IRA Only Income IRA with QLAC Desired Income As with any deferred income annuity, income payments under a QLAC can be higher because a QLAC permanently converts premium to a future income stream that is guaranteed for life. Remember: if the contract owner dies before the QLAC start age, no income payments will be made and a death benefit will be payable only if the return-of-premium death benefit is chosen at time of application. Male, 70, Life only with no death benefit. As of 09/24/14. 15

17 DIA QLAC Case Study 2: Less reliance on IRA later in life Age Scenario 1: IRA without QLAC Required Minimum Distribution (RMD) Actual Withdrawal from Account Desired IRA Balance Income 70 $ 500,000 $ 25,000 $ 18,248 $ 25, $ 498,750 $ 25,750 $ 18,821 $ 25, $ 496,650 $ 26,523 $ 19,400 $ 26, $ 493,634 $ 27,318 $ 19,985 $ 27, $ 489,631 $ 28,138 $ 20,573 $ 28, $ 415,344 $ 28,982 $ 18,137 $ 28, $ 405,681 $ 29,851 $ 18,440 $ 29, $ 394,621 $ 30,747 $ 18,614 $ 30, $ 382,068 $ 31,669 $ 18,821 $ 31, $ 367,918 $ 32,619 $ 18,868 $ 32, $ 352,064 $ 33,598 $ 18,827 $ 33, $ 334,389 $ 34,606 $ 18,681 $ 34, $ 314,773 $ 35,644 $ 18,408 $ 35, $ 293,085 $ 36,713 $ 17,981 $ 36, $ 269,190 $ 37,815 $ 17,367 $ 37, $ 242,944 $ 38,949 $ 16,415 $ 38, $ 214,195 $ 40,118 $ 15,191 $ 40, $ 182,781 $ 41,321 $ 13,640 $ 41, $ 148,533 $ 42,561 $ 11,696 $ 42, $ 111,271 $ 43,838 $ 9,273 $ 43, $ 70,805 $ 45,153 $ 6,211 $ 45, $ 26,935 $ 46,507 $ 2,494 $ 26, $ - $ 47,903 $ - $ - 93 $ - $ 49,340 $ - $ - 94 $ - $ 50,820 $ - $ - 95 $ - $ 52,344 $ - $ - 96 $ - $ 53,915 $ - $ - 97 $ - $ 55,532 $ - $ - 98 $ - $ 57,198 $ - $ - 99 $ - $ 58,914 $ - $ $ - $ 60,682 $ - $ - Scenario 2: IRA with QLAC Required Minimum Distribution Actual Withdrawal from IRA Balance Desired Income QLAC Amount Desired Withdrawal Amount (RMD) Account Total Income $ 375,000 $ 25,000 $ - $ 25,000 $ 13,686 $ 25,000 $ 25,000 $ 367,500 $ 25,750 $ - $ 25,750 $ 13,868 $ 25,750 $ 25,750 $ 358,838 $ 26,523 $ - $ 26,523 $ 14,017 $ 26,523 $ 26,523 $ 348,931 $ 27,318 $ - $ 27,318 $ 14,127 $ 27,318 $ 27,318 $ 337,693 $ 28,138 $ - $ 28,138 $ 14,189 $ 28,138 $ 28,138 $ 278,600 $ 28,982 $ - $ 28,982 $ 12,166 $ 28,982 $ 28,982 $ 262,099 $ 29,851 $ - $ 29,851 $ 11,914 $ 29,851 $ 29,851 $ 243,860 $ 30,747 $ - $ 30,747 $ 11,503 $ 30,747 $ 30,747 $ 223,769 $ 31,669 $ - $ 31,669 $ 11,023 $ 31,669 $ 31,669 $ 201,705 $ 32,619 $ - $ 32,619 $ 10,344 $ 32,619 $ 32,619 $ 177,540 $ 33,598 $ - $ 33,598 $ 9,494 $ 33,598 $ 33,598 $ 151,139 $ 34,606 $ - $ 34,606 $ 8,444 $ 34,606 $ 34,606 $ 122,360 $ 35,644 $ - $ 35,644 $ 7,156 $ 35,644 $ 35,644 $ 91,051 $ 36,713 $ - $ 36,713 $ 5,586 $ 36,713 $ 36,713 $ 57,055 $ 37,815 $ - $ 37,815 $ 3,681 $ 37,815 $ 37,815 $ 20,202 $ 38,949 $50,838 $ - $ 1,365 $ 1,365 $ 52,203 $ 19,779 $ 40,118 $50,838 $ - $ 1,403 $ 1,403 $ 52,241 $ 19,295 $ 41,321 $50,838 $ - $ 1,440 $ 1,440 $ 52,278 $ 18,748 $ 42,561 $50,838 $ - $ 1,476 $ 1,476 $ 52,314 $ 18,135 $ 43,838 $50,838 $ - $ 1,511 $ 1,511 $ 52,349 $ 17,455 $ 45,153 $50,838 $ - $ 1,531 $ 1,531 $ 52,369 $ 16,720 $ 46,507 $50,838 $ - $ 1,548 $ 1,548 $ 52,386 $ 15,931 $ 47,903 $50,838 $ - $ 1,562 $ 1,562 $ 52,400 $ 15,087 $ 49,340 $50,838 $ - $ 1,572 $ 1,572 $ 52,410 $ 14,191 $ 50,820 $50,838 $ - $ 1,559 $ 1,559 $ 52,397 $ 13,264 $ 52,344 $50,838 $ 1,506 $ 1,542 $ 1,542 $ 52,380 $ 12,307 $ 53,915 $50,838 $ 3,077 $ 1,519 $ 3,077 $ 53,915 $ 9,692 $ 55,532 $50,838 $ 4,694 $ 1,275 $ 4,694 $ 55,532 $ 5,248 $ 57,198 $50,838 $ 6,360 $ 739 $ 5,248 $ 56,086 $ - $ 58,914 $50,838 $ - $ - $ - $ 50,838 $ - $ 60,682 $50,838 $ - $ - $ - $ 50,838 16

18 Prospecting and marketing tools

19 New prospecting tools for QLAC Snapshot FAQs White Paper Brochure 18

20 Marketing Playbook American Pathway Deferred Income Annuity ( 19

21 Quoting resources

22 QLAC quoting resources AIG National Sales Desk Dedicated call center: , Option 2 at: Internal.AnnuitySales@aglife.com 21

23 COMING SOON SPIA/DIA plus QLAC on Foresight 22

24 Quote output 23

25 DIA QLAC sample quotes American Pathway Deferred Income Annuity Male, $100,000 IRA, no death benefit, life only Purchase Age Annual Payout at Age 75 Annual Payout at Age 80 Annual Payout at Age % 33.78% 67.14% % 27.09% 53.93% % 20.42% 40.66% Male, $100,000 IRA, ROP death benefit, life with cash refund Purchase Age Annual Payout at Age 75 Annual Payout at Age 80 Annual Payout at Age % 25.41% 46.01% % 20.05% 35.68% % 15.08% 25.99% In exchange for higher income, deferred income annuities permanently convert principal into a guaranteed payment stream. Annual payout is a percentage of the purchase price paid out each full year and includes both interest and return of principal. It is not an interest rate. Rates as of 09/24/14. 24

26 How to do business SPIA and DIA Complete the SPIA/DIA product specific training Quest CE Obtain QLAC quotes from your AIG Internal Wholesaler ( , Option 2) Application kits (and the QLAC Election Form) can be obtained on Forms Depot Submit a completed QLAC Election Form and copy of the quote with application paperwork Access QLAC marketing pieces on playbook: Do not calculate premium limits or obtain or retain a copy of client's QLAC premium worksheet 25

27 Questions? AIG Annuity Sales Desk Option 2 or Internal.AnnuitySales@aglife.com

28 Tax-qualified contracts such as IRAs, 401(k)s, etc., are tax deferred regardless of whether or not they are funded with an annuity. If you are considering funding a tax-qualified retirement plan with an annuity, you should know that an annuity does not provide any additional tax-deferred treatment of earnings beyond the treatment by the tax-qualified retirement plan itself. However, annuities do provide other features and benefits such as income options. This information is general in nature and may be subject to change. American General Life Insurance Company, its agents and representatives are not authorized to give legal, tax or accounting advice. Applicable laws and regulations are complex and subject to change. Any tax statements in this material are not intended to suggest the avoidance of U.S. federal, state or local tax penalties. For advice concerning your situation, consult your professional attorney, tax advisor or accountant. Annuities issued by American General Life Insurance Company (AGL). Guarantees are backed by the claims-paying ability of American General Life Insurance Company. Issuing company AGL is responsible for financial obligations of insurance products and is a member of American International Group, Inc. (AIG). American General Life Insurance Company 2727-A Allen Parkway Houston, Texas American International Group, Inc. (AIG). All rights reserved. AGLC (10/2014) J94327 AGLC106230, AGLC106377, AGLC106378, ICC14:QLAC, DIA-ISDC-413 May not be available in all states and product features may vary by state. Please refer to your contract. 27