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Annuities vs IUL for Younger Clients

Aaron Levy

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Question: 1. I would like to start selling Annuities and would like to start by selling myself my Annuity where I would like to start with 50K in an index annuity for highest potential return. I was born in 1979.


Answer: I am happy to provide some growth annuities for you, but you will get considerably more bang for your buck by dropping the 50K into an IUL or whole life policy.  Would you like to see both or just stick with the annuity?  Please advise. 

Attached please find Allianz’s IUL using their premium deposit account so you can single pay the policy without creating a MEC (Modified Endowment Contract).  It is essentially an internal side fund that earns interest and pays the premiums into the policy on an annual basis.  We assumed a crediting rate of 6.9% and a blend of the three indicies that have performed the best over the last 20 years.

 For the annuity, we used DE Life’s Retirement Stages 7.  It’s a good product for accumulation and offers a return of premium rider in the event you need your money back during the 7 year contract period.  We used the S&P annual point to point with a 5.80% cap.  There are other options, but lately clients want the S&P.  American Equity offers a good growth annuity, the Choice 10 with no income rider using the S&P with a 54% participation rate.  You are 1 year too young for the Athene Agility.  Integrity offers the Indextra line of products that include a 3 year Goldman Sachs index.  All of these are good choices.


However, annuities are tax deferred, life insurance policy loans are tax free.  Allianz offers several uncapped strategies with high participation rates.  Your money also buys a nice death benefit should your heirs ever need it and it has chronic illness rider.  If LTC is important, we could look at John Hancock’s new Accumulation IUL that should look similar to this, but with a true LTC rider.


In my opinion, there is nothing wrong with buying an annuity at your age and rolling it into new products at the end of the contract periods and eventually adding an income rider when the time is right.  However, at age 39, I am confident overfunding life insurance is a better call.  As a side note, the commission on this life design is almost double that of the annuity.


I hope you find this helpful.  Please let me know if you have any questions or concerns.


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