Myth, Busted


It’s an old rule of thumb (emphasis on the word old) that investors shouldn’t buy annuities in their retirement accounts. It was a good rule when tax deferral was the only goal. But these days, clients most often buy annuities for their retirement income or principal guarantees —these guarantees can make sense anywhere clients are worried about their retirement assets, including IRAs. 

The guarantees might either provide for current guaranteed income or secure a guaranteed base of lifetime income for future distributions.   

In fact, it appears consumers were already figuring out the irrelevance of the “don’t buy annuities inside of retirement accounts” rule all by themselves. According to LIMRA, in 2012 more than 60 percent of deferred variable and fixed indexed annuity purchases were being funded with IRA dollars!

Similarly, the emergence of guaranteed living benefit riders on fixed indexed annuities has arguably made them even more popular as a potential fit within retirement accounts, both for the risk/return characteristics of the annuity as an investment and the guaranteed income features for retirement income.

Nonetheless, the reality — as evidenced by the incredibly high election rate for buyers of annuities with guaranteed living benefit riders, and the rise of fixed indexed annuities as well — is that the majority of annuity purchases are still about buying access to guarantees and/or for unique investment opportunities (e.g., the risk/return profile of an equity-indexed annuity or a compelling yield in a fixed annuity). They’re NOT for tax deferral!

The Bottom Line: Given these changes, it is perhaps time to abolish the “annuities should never go into an IRA” rule and recognize that it has become more a myth than sound advice in today’s environment.



The great debate: CDs vs. Annuities


When looking for safe investment options, many investors look to CDs, especially when equity investments are on the downturn. Many seem to think CDs are the only option that can provide safety and guaranteed growth. However, tax-deferred annuities compare very favorably to CDs, and investors should review both products’ features to help determine which is best suited for their financial situation:

  • Tax Savings – Annuity gains grow tax-deferred, while interest earned on CDs is taxed and reported annually as ordinary income. Taking advantage of tax deferral will increase your earning power by continued annual earnings on your tax savings.

    Earnings on annuities are taxed as ordinary income when withdrawals are made. However, you do have an option to spread out the tax burden for non-qualified money through guaranteed income payments, where payments are partly return of non-taxed cost basis.

  • Earning Power – As of October 2014, the average return on a one-year CD was 0.26 percent, and the average for a five-year CD was 0.83 percent. 1 At the same time, the average five-year fixed annuity rate was 1.63 percent2 – a tax equivalent yield of 2.26 percent, based on a 28 percent tax bracket.  

    Investors could also take advantage of tax-deferred indexed annuities to provide even more earning potential. These products include many indexing options, including un-capped strategies, with no downside risk to principal.

  • Lifetime Income Options – Tax-deferred annuities offer guaranteed lifetime income payments through annuitization or lifetime income riders. These are great retirement planning tools that generate income that you can’t outlive. CDs can be liquidated as they mature, but there’s no guarantee the funds will last a lifetime.

  • Liquidity – Annuities allow up to 10 percent of the value to be withdrawn without penalty. With CDs, withdrawals prior to maturity are generally subject to penalties.

  • Payment at Death – Annuities can help avoid probate by paying funds directly to the beneficiary. CDs, however, are subject to probate, along with possible costs and delays.

The Bottom Line: CDs aren’t the only safe investment option available. Make sure your clients see how the features of an annuity compare and can potentially offer them more benefits. 



CDs Annuities

Don’t let clients settle for inefficiency


The first advisor your client is going to call after they’ve been in a personal injury accident is likely their lawyer – not you. Don’t be offended. However, it’s important that you let them know you have the power to help make a big difference in the outcome of their case. 

The average person’s knowledge of structured settlements likely comes from horrible weekday afternoon TV commercials. That’s because most people don’t want to think about being involved in a personal injury, wrongful death, workers’ compensation or other claims case. However, it’s important to understand that these annuitized options can make a significant difference for your clients – whether they’re claimants or defendants.

In addition to the guaranteed payment stream a structured settlement provides, there are several advantages: 

  • For the claimant, payments are exempt from federal and state income taxes
  • For the defendant, the arrangement transfers full responsibility of future payments to an independent third party
  • Structured settlements improve case resolution times – potentially reducing overhead costs and outside legal fees

Don’t worry if you’re not a lawyer or structured settlement expert. Ash Brokerage has a team that can help your clients benefit from this efficient option for their claims case. Call us at 1-800-589-3000. 


structure settlement

Sales and customer service


For most of my life, my father was an executive with Sears-Roebuck. One of his favorite sayings was, “We are a sales organization; nothing happens until something is sold.” Truer words were never spoken, and if you are a financial advisor, those words resonate loud and clear. 

The process and resulting sale made by a financial advisor is much different than selling a washing machine or a refrigerator. While these sales are transactional in nature, the decision to purchase an annuity or life insurance policy is based by and large on the strength of the relationship between the advisor and the client. 

Regardless, making a sale in our business is imperative to survival. But what happens after the sale might very well distinguish you as an advisor, build and strengthen the relationship, and create easy referrals.

Here are the magic words: customer service. Your clients are craving it! So, how can we offer exceptional customer service?

First, and foremost, make sure you are utilizing annual checkups. These are a perfect opportunity to be front and center and serve. Next, have your client’s favorite drink ready for them, and ask about their family and hobbies. 

Between appointments, reach out to your clients with articles and resources that speak directly to them. This will add to the personal touch. Remember, your client can get information online all day – information directly from someone they trust is different. Send a birthday card or any other card you feel is appropriate. Just remember to write a little note and sign it personally.

These are just ideas to get started. I’m sure there are many more ways to provide great customer service. 

I would agree with my Dad, that nothing happens until something is sold … but great customer service happens after the sale!


Retirement for savers AND investors


In today's financial environment, what it would take to generate $10,000 in annual income? I see two main consumer categories here: savers and investors.


The savers aren’t risk takers, and they focus mainly on fixed products. The risk for the saver is the uncertainty of future rates. Looking at the current average rates from, let's see what lump sum would be required to generate $10,000 of annual income. 

Type of strategy

Current interest rate*

Lump sum needed

1-year CD



5-year CD



5-year annuity



10-year treasury note





Now let's look at an investor who may have a combination of fixed, bond and equity investments. Assuming a higher rate of return than the fixed products, the lump sum required for them is even smaller. But even though they need less money up front compared to the savers, investors risk the uncertainty of rate of return and longevity.  



Here are two alternatives that eliminate return and longevity risks AND require smaller lump sums: 

1.  A fixed index annuity with an income rider would need only $181,818 to generate $10,000 a year for a 65-year-old. 

2.  An immediate annuity would take approximately $160,000 to generate $10,000 a year with 10-year term certain for a 65-year-old. 

The income from these solutions would be guaranteed for the rest of the client’s life, regardless of interest rates or how long they live.


The Bottom Line: You can secure your clients’ retirement income many different ways. However, both savers and investors can benefit from annuity solutions … and they would potentially save money up front. 


*As of Oct. 8, 2014