Maximizing Your Annuity

I’ve been riding this topic hard for the last few months and for a good reason!  One of the best funding sources for long term care comes from nonqualified deferred annuities!

And, with the unofficial start of summer a few days ago, we all know that now is not the time to take the foot off the gas.  Over the next couple of weeks, I will be sharing an idea with you that can generate over $1 million in premium between now and Labor Day. 

Before we get in too deep in the discussion, I want to share with you a few statistics to help you visualize the magnitude of this opportunity.

• There is over $3 trillion in nonqualified deferred annuities.¹
• 86% of those annuities were purchased for their tax deferred growth.²
• 73% of them are earmarked as an emergency healthcare fund.³
• Less than 5% of nonqualified deferred annuities are ever annuitized.⁴
• The average age of an annuity owner is over 70.⁵

This is not a MYGA or rate chasing strategy, but a strategy where we are able to transform taxable gain into tax free income if it is utilized for long term care purposes.  There are only a few deferred annuities that provide this benefit.

Here are the parameters of the target market –

• clients between the ages of 75 and 85
• clients owning nonqualified deferred annuities NOT intended for income
• Nonqualified deferred annuities with gain

Here is a little something to consider about that nonqualified deferred annuity that is sitting and growing with no purpose other than to be liquidated in a healthcare emergency or passed on.  A majority of annuity owners are unaware of the cascading liability that has accumulated over all those years of tax deferral.

As you know, when withdrawals or distributions are made, they will likely be on a last-in first-out basis.  And, those distributions could impact more than simply taxes.  Those taxable distributions could impact Medicare premiums via Income Related Adjustment Amount surcharges, taxes to social security benefits, or impacts to other programs that are “means tested”.

What I am getting at here is that at a time when people plan to use their annuities, the impact (taxes, etc) could be negative.  By repositioning that annuity into a Pension Protection Act (PPA) annuity, we can produce tax free distributions when they are made for qualifying long term care services.

I’ve shared these ideas before and I will continue to because they make sense!

Are you interested in learning more? Next week, I will dive into more details.  Until then, here are a 3 things that you need to know …

• this is a long term care planning strategy
• the strategy is focused on clients who own nonqualified deferred annuities
• the key to this being successful is in activity

If there is a weak commitment to working this strategy or an unwillingness to have a meaningful conversation with clients, then this will never work.  Commitment and  willingness to get a little out of the comfort zone will yield results. 

Next week … more on the strategy.

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1 Source: U.S. Individual Annuities, 4th Quarter 2021, LIMRA, 2022.

2 Source:  https://www.annuity-insurers.org/wp-content/uploads/2013/10/2013-Gallup-Survey.pdf ; The Committee of Annuity Insurers, Survey of Owners of Individual Annuity Contracts (The Gallup Organization and Mathew Greenwald & Associates, 2013).” 

3 Source:  https://www.annuity-insurers.org/wp-content/uploads/2013/10/2013-Gallup-Survey.pdf ; The Committee of Annuity Insurers, Survey of Owners of Individual Annuity Contracts (The Gallup Organization and Mathew Greenwald & Associates, 2013).” 

4 Source: https://www.annuity.org/annuities/annuitization/  last modified 5/5/2023

5 Source:  https://www.annuity-insurers.org/wp-content/uploads/2013/10/2013-Gallup-Survey.pdf ; The Committee of Annuity Insurers, Survey of Owners of Individual Annuity Contracts (The Gallup Organization and Mathew Greenwald & Associates, 2013).”