Simple is as Simple Does


Sounds like a line from Forrest Gump, doesn’t it? That may be the case, but the phrase also serves as an apt description for one of the major benefits of fixed annuities: simplicity. I’ve never a client complain because their portfolio or financial plan was “not complex enough.” Have you? 

Couple simplicity with tax deferral, liquidity, low to no fees, and guaranteed rates, principal and income, and you have a very desirable product for your conservative clients and those looking to build a solid foundation under a more aggressive portfolio.

Oh, and how about two more benefits that may be the most important of all, especially in today’s economic environment? Correction protection and increasing future income.

A market correction is imminent – perhaps not this month or this year, but potentially next year or shortly after. Existing or soon-to-be-realized market gains are increasingly in jeopardy if they’re not locked in soon. A fixed indexed annuity can protect those gains and give your clients the chance to participate in near term gains, yet to be, before the correction. 

Concerning income: If generating income now is important, will is be any less so in the future? No, it will be more critical in the future. Increasing income riders on fixed indexed annuities can guarantee future income increases for minimal cost compared to other alternatives.

The Bottom Line: Simplicity has value and is only one of the many benefits that fixed annuities provide. With a market correction on the horizon, staying in place and not going backwards is progress.


market income taxes deferral

Buy high and reset low!


In a traditional investment, the goal is to buy low and sell high. However, most investors end up buying high and selling low. With the stock market at an all-time high, you should have a conversation with your clients about a fixed indexed annuity. 

When talking about a fixed indexed annuity, please remember: 

  • Money in a fixed indexed annuity will not suffer from a market decline (principal protection)
  • If there is a market decline, the client will receive a 0% rate of return for that year, and the starting point for the upcoming anniversary year will be at the new lower point 
  • Taxes on growth are deferred
  • The client has penalty-free access to a portion of the account value each year
  • Annuities offer the opportunity to create a guaranteed income for life

The Bottom Line: Ash Brokerage has a diverse lineup of fixed indexed annuities for clients looking for ways to get better yields without risk to principal. Let us help you provide solutions tailored to meet your clients’ needs.   


Retirement in a Post-'82 NQ World


For those of you who’ve been in the business quite some time, the date Aug. 13, 1982, is hardwired into your memory. For those of you who haven’t, it was the day the taxation of nonqualified (NQ) deferred annuities changed from FIFO (first in, first out) to LIFO (last in, first out).  

The planning point of a pre-'82 NQ annuity was that you could recover your basis first before any taxable event occurred. For post-'82 annuities, it’s interest out first, until you get to basis, then it’s return of basis.

Believe it or not, this strategy still exists with NQ monies, with a few caveats. In a world where income planning and taxation is paramount, this strategy may be huge for an income planning case. 

Here is how this concept works. Say a client, age 55 with a spouse also age 55, has $100,000 of NQ money to invest. They plan on retiring at age 65, so they have 10 years until income is needed from this deposit. They would place this in a fixed, deferred annuity with an indexed minimum guaranteed withdrawal benefit. The annuity isn’t designed for accumulation, only income. Therefore, in the 10th year, should they decide to walk away, the value would still only be $100,000.  

But therein is the positive of this concept. In year 11, the guaranteed income for life is $7,988 over two lives. This is about the equivalent of a 6 percent compounded rollup with a 4.5 percent payout rate. Here’s the home run: Since it’s a deferred annuity with a guaranteed minimum withdrawal benefit, the withdrawals are FIFO since there’s no additional cash value in the contract. Therefore, the first 10 years of income are return-of-premium and tax-free.  

Once the principal is recovered, it’s all taxable. But think of the planning possibilities here! If you could have your first 5-10 years of retirement income-tax-free, think of the possibility of converting some of your qualified monies to Roth IRA, as well as the possibility of delaying Social Security to age 70 to maximize benefits.  

Throw in the fact you can now move up to 25 percent of your IRA money to a Qualified Longevity Annuity Contract and avoid required minimum distributions to age 85, and now you have some pretty creative income planning scenarios to work with – not just putting monies into an annuity with an income rider and turning it on at 65!

The Bottom Line: A lot changed in 1982, and a lot has changed since then. Talk to your clients about strategies to maximize their income and minimize their taxes in retirement. 


Rollovers Now Restricted


Be aware: An IRS clarification that took effect Jan. 1, 2015, now restricts IRA rollovers. Your clients can make only one rollover from any of their IRAs to another (or the same) IRA in a 12-month period, regardless of the type or number of IRAs they own.  This one-per-year limit applies across all IRAs in the aggregate including traditional, Roth, SIMPLE and SEP IRAs. 

Before Jan. 1, the one-per-year limit applied on an IRA-by-IRA basis. This change in the IRS’s interpretation of the one-per-year rule comes from the U.S. Tax Court’s decision in Bobrow v. Commissioner. 

If your clients make more than one rollover in a 12-month period, the improper rollovers may be subject to the following tax consequences:

  • Any previously untaxed amounts may be taxable
  • If you are under age 59 ½ when you took the distribution, you may be subject to an additional                 10% early withdrawal tax
  • All or a portion of the improper rollover may be treated as an excess contribution and be subject to an additional penalty tax of 6% per year for each year that the excess contribution remains in the IRA

Your clients can still continue to do as many of the following transactions in a 12 month-period as they want: 

  • Trustee-to-trustee transfers between IRAs
  • Rollovers from traditional IRAs to Roth IRAs (i.e., “conversions”)
  • Rollovers between qualified plans and IRAs

The Bottom Line: Make sure you understand the new IRS rules before you make any client recommendations this year. Your Ash Brokerage annuity team is here to help. 


Don’t forget this solution for businesses


We all know annuities are a great solution for retirement. But have you ever considered annuities as a retirement solution for businesses? If you’re working with business owners and executive-level clients, ask if their company has a defined benefit pension plan. 

Why? Traditional pension plans have become a thing of past as 401(k) and other contributory plans have overtaken the retirement landscape. As a result, many businesses have decided to do two things: 

  • Freeze and eventually terminate an existing defined benefit pension plan
  • Shift all or a portion of their plan benefit obligations to a third party 

Here’s how it works: Businesses with a defined benefit pension plan can remove plan liabilities from their books by transferring the risk to a group annuity issued by a top-rated insurance company. This transfer allows the company to eliminate premiums paid to the Pension Benefit Guaranty Corporation along with significant cost savings in the plan administration. These cost savings can be reinvested in their business. Most importantly, the transfer allows the company to make good on the benefit promises made to their employees.

Plan participants benefit from the transfer because it ensures payment of the plan benefits promised to them at retirement that may include guaranteed income, the ability to provide ongoing income for a joint annuitant, and options such as payment frequency or cost-of-living adjustments.

You don’t have to be an expert to help your business clients execute this unique solution – Ash Brokerage has a dedicated team who can do it for you. You should call us – (800) 589-3000 – to learn more or to start identifying opportunities today. 



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