Retirement Income: Annuity or Life Insurance?
Retirement financial planning utilizes two very important financial tools. Firstly, there is the Fixed or Indexed Annuity. Secondly, there is the Fixed or Indexed Universal Life Insurance policy. But which tool should you use? Or instead, maybe you should use a combination of both? Or conversely, maybe neither are appropriate for you? The following table performs a brief side-by-side comparison of the two retirement financial tools. For a more detailed understanding of the tax considerations of annuities and life insurance products, please consult your tax advisor.
FIXED OR INDEXED ANNUITY (NOT VARIABLE)
General Attributes
- Funds are either Qualified (Q) or Non-Qualified (NonQ)
- Premiums are tax-deferred (Trad) or taxed (NonQ, Roth)
- Premium (principal) is protected from market loss
- Interest is tax-deferred (Trad, NonQ) or tax-free (Roth)
- Interest rate is fixed or market-indexed (never < 0%)
Retirement Income
- Includes Annuitization or Lifetime Income option
- Lifetime Income has premium and interest bonus (some)
- Lifetime Income has anti-inflation increases (some)
Death Benefit
- Includes Death Benefit of account balance (unless annuitized)
- Has no option for additional Term Insurance Death Benefit
- Death Benefit is taxed (Trad) or partially taxed (NonQ, Roth)
- Death Benefit has no extra cost
Health Benefit
- Includes Long-Term Care Insurance coverage option (some)
- Lifetime Income increases for chronic illness (some)
FIXED OR INDEXED UNIVERSAL LIFE INSURANCE (NOT VARIABLE)
General Attributes
- Funds are Non-Qualified (NonQ)
- Premiums are taxed
- Premium (principal) is protected from market loss
- Interest is tax-deferred (withdrawal) or tax-free* (loan)
- Interest rate is fixed or market-indexed (never < 0%)
Retirement Income
- Includes tax-free* loans (loan repayment is optional)
- Includes interest bonus (some)
- Has no anti-inflation increases (manually increase as needed)
Death Benefit
- Includes Death Benefit amount much larger than premiums
- Includes option for additional Term Insurance Death Benefit
- Death Benefit is generally tax-free*
- Death Benefit has an extra cost (Cost of Insurance)
Health Benefit
- Includes Long-Term Care Insurance coverage option (some)
- Has Living Benefit for critical, chronic or terminal illness
* Only a careful review of a client's specific situation would determine this tax advantage. A client should consult with his or her tax advisor.
Allianz 222 Annuity Example
Like all Fixed Index Annuities (FIAs), the Allianz 222 Annuity offers principal protection from market downturns. Also, it offers interest earnings (based on chosen allocation options), tax deferral, and a death benefit.
Additionally, the Allianz 222 Annuity goes even further:
- Firstly, you get 2 ways for a bonus. Initially, the Allianz 222 Annuity credits the Protected Income Value with a premium bonus in contract year one. Then, the Protected Income Value receives an interest bonus equal to 50% of any interest earned from the chosen allocations.
- Secondly, you get 2 ways for income increases. Subsequently, income withdrawals increase based on earned interest plus an interest bonus. Also, confinement to an eligible hospital, nursing facility, or assisted-living facility doubles the income withdrawals.
- Lastly, you get 2 ways for a death benefit. Certainly, beneficiaries get full accumulation value as a lump sum. Or instead, beneficiaries get full Protected Income Value as annuity payments over 5 or more years.
Allianz Life Pro+ Advantage Example
The Allianz Life Pro+ Advantage Indexed Universal Life Insurance provides more features than standard life insurance:
- Firstly, a death benefit offers generally tax-free* funds to beneficiaries.
- Secondly, the Life Insurance account accumulates a tax-deferred cash value. Furthermore, an interest bonus increases the account accumulation (available on certain index allocation options).
- Thirdly, Index Lock provides the ability to capture indexed interest rate. Also, this feature helps protect against a zero-interest credit.
- Fourthly, fund options help meet future financial needs with the ability to access available cash value when you want, for what you want.
- Fifthly, additional Term Insurance adapts coverage amount as needed.
- Lastly, health provision protects against chronic or terminal illness.
Retirement Income Insurance Companies
The above highlighted Allianz products are examples of feature-rich annuities and life insurance. As a result, they are flexible to meet general purpose needs. However, there are other less costly products available that correspondingly have less features. Consequently, these products allow paying only for specific features that a client needs. So, at SET, we take the time to understand our client's needs. Consequently, we can recommend an income product best matched to those needs.
SET services the southwest region of the United States. The following insurance companies are available within this region (some variance may exist between the specific states of the region):
ANNUITIES
AIG (MSG)
American Equity
American National
Athene
Annexus Athene (IA)
Baltimore Life
Delaware Life
Fidelity and Guaranty Life
Global Atlantic
Global Atlantic - Elite
Great American
Legacy Marketing Group
Life of the Southwest
Mutual of Omaha
National Western
Nationwide - Annexus
North American
Pacific Life
Security Benefit
Transamerica - Annexus
LIFE INSURANCE
AIG
Ameritas
Life of the Southwest
Lincoln National
Minnesota Life
Mutual of Omaha
National Guardian Life
Nationwide Life
New York Life
North American
One America
Protective Life
Symetra Life
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