Maximum Income Now – Digging Deeper Into the Study

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Last week, a large number of advisors sought more information on the retirement income solution we presented in the BUA Retirement Income Case Study: Maximum Income Now. This week we wanted to dive a little deeper providing additional insight into why this solution worked for this case.

To Review:
In the case study, we looked at a couple, both 76 years old, with $120,000 in non-qualified money. Their objective was to maximize the income they could immediately create without giving up access to their principal. After considering several products and product types, we recommended a fixed index annuity from ING with the guaranteed minimum withdrawal benefit rider (GMWB).

Why This Solution Worked:
There were several reasons we gravitated to ING in this situation. However, there were a couple of key factors we really thought made the ING product work well for this client:

• The couple was somewhat risk adverse and was concerned about loss of principal. While they still had money in the market, they wanted to make sure this money was protected from downside market risk should they need some or all of their contract value later.
• The 5% immediate premium bonus increased their contract value to $126,000 at issue.
• The ING GMWB allowed for the client to start receiving income immediately.
• The ING contract allowed for them to take income of 5.5% of their income value per year. This translated into $577 a month or $6,924 annually. This amount was significantly higher than other contracts we looked at which allowed an immediate income stream.
• Since the clients were not required to annuitize the contract in order to receive this income, liquidity and access to principal were preserved.

Advisor Considerations:
• Loss of Asset: The advisor was initially hesitant to consider a fixed product due to concern that once the money went into the contract it would essentially become a “dead asset”. However, by utilizing the GMWB to create income for the clients, we were able to preserve the asset and provide the advisor with liquidity options should the client’s needs change.
• Loss of Income: Understandably, the advisor was concerned about loss of income as a result of moving this money under management into an annuity product. Many annuity products offer multiple advisor commission options. In this case, even with the advanced issue age of these clients, the advisor could choose from:
o Option One: 5.25% paid at time of contract issue based on clients age
o Option Two: 2.25% paid in the first year, and then 0.50% for the life of the contract based on Account Value based on clients age.

BUA Provides Fixed Retirement Income Solutions:
As this case study demonstrates, the BUA Annuity Team takes the needs of both the client and the advisor into consideration when developing fixed retirement income solutions. Give us a call at 1.800.792.6795 and leverage our expertise to your advantage.

Please Note:
• Not all products approved in all states.
• Rates subject to change without notice.
• All annuity products are issued and administered by an insurance company, not Business Underwriters Associates. For additional information regarding a products benefits, features and limitations, please consult the company materials.
• Registered Advisors may receive different compensation depending upon contractual relationships with their Broker Dealer. Please contact your Broker Dealer for a copy of the Broker Dealers approved product listing and compensation grid.