Ensuring The Best of Your Retirement Income

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Richard Reed
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1 Ensuring The Best of Your Retirement Income Guaranteed Lifetime Income Rider 403(b) / 457(b) Flexible Premium Policies Guarantees are based on the claims paying ability of the issuing Company. The Guaranteed Lifetime Income Rider is Rider Form No For Tax-Sheltered Annuities

3 Underfunded Teacher Pension Plans: It s Worse Than You Think Manhattan Institute for Policy Research, Civic Report No. 61, April 2010

4 Employee Benefit Research Institute, ebri.org March 2010 Issue Brief 2010 Retirement Confidence Survey

5 A New Solution for Retirement The Guaranteed Lifetime Income Rider Guarantees* Guarantees you a withdrawal payment from your annuity for the rest of your life income you cannot outlive Control and Access You decide when and how much retirement income you receive. You continue to have control of your money and access through free partial withdrawals, systematic and lump-sum withdrawals It s Your Money At death, LSW will pay the remaining Accumulation Value of your Policy to your beneficiaries. (if Accumulation Value is greater than $0) *Guarantees are based on the claims paying ability of the issuing Company. Policies and Riders issued by Life Insurance Company of the Southwest (LSW).

6 How Do We Calculate Income? Life Insurance Company of the Southwest uses a formula to determine the Guaranteed Withdrawal Payment from your annuity x Income Calculation Base Guaranteed Withdrawal Percentage (based on your attained age) Guaranteed Withdrawal Payment

7 Income Calculation Base Measure used solely to determine the initial Guaranteed Withdrawal Payment At Issue it is equal to the Policy s Accumulation Value; it is NOT a policy value Additional premiums paid into the policy increase the Income Calculation Base Any withdrawals from the policy decrease the Income Calculation Base The Income Calculation Base increases at an annual rate known as the Roll-up Rate until the earlier of: (a) the first Guaranteed Withdrawal Payment (b) the 30 th Policy Anniversary

8 Rollup Rate Before Election of Guaranteed Withdrawal Payments: Individual premiums are tracked in the Income Calculation Base using a bucket approach During the Rollup Rate Period, each separate premium in the Income Calculation Base increases at the guaranteed annual Rollup Rate in effect at the time of receipt for 10 years. After the 10 th year, the rollup rate will be set annually in advance until the earlier of: the election of income payments or the 30 th policy anniversary Rollup Rate is currently 7%* *Rollup Rate in effect as of publication, subject to change at any time. Please contact LSW to find the guaranteed Rollup Rate that is in effect for new premiums. Rollup Rates are guaranteed never to be less than 3%.

9 Rollup Rate Period Since Rollup Rates are set for each premium payment using a bucket approach, the Rollup Rate Period continues for each premium payment bucket until the earlier of: 30 th Policy Anniversary Election of Guaranteed Withdrawal Payments Example: Three Premium Payments into Policy Premium Paid Year 25 Premium Paid Year 10 Roll-up Rate in effect for 10 years Roll-up Rate in effect for 5 years Roll-up Rate Set Annually in Advance Premium Paid Year 1 Initial Roll-up Rate for 10 years Roll-up Rate Set Annually in Advance

10 Guaranteed Withdrawal Table Annuitant s Attained Age at Time of Election Single Life Income Percentage Enhanced Benefit Joint Life Income Percentage* Annuitant s Attained Age at Time of Election Single Life Income Percentage Enhanced Benefit Joint Life Income Percentage* % 6.50% 3.00% % 6.70% 3.20% % 6.90% 3.40% % 7.10% 3.60% % 7.30% 3.80% % 7.50% 4.00% % 7.60% 4.10% % 7.70% 4.20% % 7.80% 4.30% % 7.90% 4.40% % 8.00% 4.50% % 8.10% 4.60% % 8.20% 4.70% % 8.30% 4.80% % 8.40% 4.90% % 8.50% 5.00% % 8.60% 5.10% % 8.70% 5.20% Joint Life Income Percentage Based on Age of Youngest Spouse. Enhanced Benefit Not Available In All States. Enhanced Benefit Not Available after Election of Joint Life Income and above 5.80% 8.80% 5.30% 5.90% 8.90% 5.40% 6.00% 9.00% 5.50% 6.10% 9.10% 5.60% 6.20% 9.20% 5.70% 6.30% 9.30% 5.80% 6.40% 9.40% 5.90% 6.50% 9.50% 6.00% 6.60% 9.60% 6.10% 6.70% 9.70% 6.20% 6.80% 9.80% 6.30% 6.90% 9.90% 6.40% 7.00% 10.0% 6.50% 7.10% 10.1% 6.60% 7.20% 10.2% 6.70% 7.30% 10.3% 6.80% 7.40% 10.4% 6.90% 7.50% 10.5% 7.00%

11 How Does GLIR Work? 45 year-old purchases $500 a month Index Annuity with the 403(b)/457(b) GLIR LSW Indexed Annuity Accumulation Value Day One - $ %* Average Interest Credited Annually Net Of Rider Charges (*This is a hypothetical rate, and it is not guaranteed. The rate will vary.) Guaranteed Lifetime Income Rider Income Calculation Base Day One % Roll Up Rate on Initial Premium 5.5% Rollup Rate on Subsequent Premium and at Renewal AV End of Year 20 - $186,546 End of Year ,612

12 How Does GLIR Work? Guaranteed Withdrawal Payments are elected at age 65 Indexed Annuity Accumulation Value (example only) End of Year 20 $186,546 GWP - $ 10,780 AV after Withdrawal $175,766 5% interest* + $ 8,788 (*Hypothetical rate) $184,554 Rider Charge -$ 1,199 Accumulation Value $183,355 at end of year 21 Guaranteed Lifetime Income Rider Income Calculation Base End of Year ,612 Lifetime Income Calculation 215,612 X 5.0% (Guaranteed Withdrawal age of 65) $10,780 Guaranteed Income for Life

13 The Enhanced Benefit* To Qualify: Only available on the Annuitant Policy must be in force 5 years Cannot have premiums paid in the prior 3 years Must be unable to perform, without substantial assistance from another individual, at least 2 of the 6 Activities of Daily Living due to a permanent loss of functional capacity Don t have to be in a long-term care facility to qualify Subject to verification by independent health care professional *Enhanced Benefit Not Approved in All States.

14 The Enhanced Benefit If the Annuitant Qualifies for the Enhanced Benefit: Before Election of Income: Enhanced Benefit Withdrawal Percentage is used to calculate the Guaranteed Withdrawal Payment After Election of Income: LSW recalculates the payment. LSW will multiply the Policy s Accumulation Value by the annuitant s Enhanced Benefit Withdrawal Percentage at their attained age to determine the Guaranteed Withdrawal Payment. If it is higher, then LSW will increase the Guaranteed Withdrawal Payment to the larger amount.

15 Rider Charge Charge is 0.65% of the Policy Accumulation Value for the first 20 Policy years beginning on the 1 st Policy Anniversary Charge is 0.75% of the Policy Accumulation Value for Policy years 21+ Charge occurs annually until the accumulation value is depleted Charge is frozen at the time of election of Guaranteed Withdrawal Payment

16 Spousal Continuation* Before Election of Income: Spouse can continue as annuitant with rider still in effect After Election of Income: Guaranteed Withdrawal Payments may continue until Accumulation Value equals $0 Rider Charge Ceases at Death of the Annuitant *Spouse must be named as primary beneficiary and deceased spouse must be owner/annuitant

17 Ensuring The Best of Your Retirement Income Guaranteed Lifetime Income Rider 403(b) / 457(b) Flexible Premium Policies Guarantees are based on the claims paying ability of the issuing Company. The Guaranteed Lifetime Income Rider is Rider Form No For Tax-Sheltered Annuities

Get Guaranteed CONSUMER GUIDE. Life Insurance Company of the Southwest

Get Guaranteed CONSUMER GUIDE. Life Insurance Company of the Southwest Life Insurance Company of the Southwest member of CONSUMER GUIDE For Flexible Premium Deferred Indexed Annuities Get Guaranteed Income forlife! True Innovation from LSW the Trusted Leader in Flexible Premium