Tanisha & Jr Staton
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These types of policies involve investing money for growth without owing future taxes on that growth, even when it is withdrawn.
Tax Free Retirement
Annuities in the U.S. are primarily purchased for two reasons. First, if someone wants to move a lump sum and they don't need it until retirement, they move this lump sum into an account that can never lose money. Over time, they turn 65 or 70. At that point, they can elect to get a monthly check guaranteed every single month, or until they die. This is called lifetime income. There are all kinds of lifetime income benefit riders that you can attach to annuities.
The second main way to use an annuity is to keep a bucket of money safe from market risk. Typically, the way annuities work is you are incentivized with a bonus to move your money. Let's say that your product does have a bonus, so that is kind of a signing bonus, so whatever the percentage is they'll give you a signing bonus for you letting them have your money for retirement. Let's say that you're meeting with a client and they roll $100,000 into an annuity. You know the company might hold onto their money for 10 years and then they'll give them a 5% signing bonus for trusting them to let them have their money. The reason they're able to do that is because you are basically getting an annuity that is not a liquid play, it's a long-term retirement solution. It is just a way to keep your money safe.
The first way was the lifetime income guaranteed option and the second option is called in college principal protection or moving a bucket of money they can't lose money. In college, they reach the law of 100. That is when you take whatever age you are, and believe that number is the amount of money that you should have into an account that doesn't lose money. For example, if you are 33 years old you want 33% of your money in a relatively safe investment. 100 minus 33 is 67, so 67% of your retirement dollars should be in what is called a risky investment annuity. Annuities are not risky investments.
Typically, people over the age of 50 don't want to lose any money because they don't have the time to take the risk that a younger person does. If you know you don't want to worry about losing money, you put money into either a fixed rate of return or an account that gets a percentage of what the market gets with no downside risk. You are participating in the gains but not in the losses. Zero is your hero.
The bad thing about annuities that you read on the Internet deals with liquidity, so that ability is a terrible investment. Let's say you have $100,000 and you want to get a fair rate of return on that money next month. This is a terrible program because you're signing a long-term commitment that is designed for people that don’t need the money for five years, 10 years or whatever years you are talking about. Because of that, you're being able to lock in interest rates, and you're being able to participate in market gains with no market losses so there's all kinds of annuities. There's fixed, there's index, and there's variable with variable annuities. You can lose money, but The Alliance only does fixed and indexed annuities. Basically, an index means you can't lose any money but you can get a percentage of the gains and fixed, it's just at what the fixed rate is. A lot of people use annuities as a way to diversify their retirement dollars and put it in an account where they can't lose money. They don’t have to worry about it, they can rest easy at night knowing that if the market crashes or another event like 9/11 or the COVID-19 pandemic happens their retirement dollars are safe inside of an annuity.
Index Universal Life
Index Universal Life deals with regular universal life and indexed universal life policies. They are both flexible premium cash accumulating permanent life insurance policies if they are funded correctly.

A lot of times there is a minimum payment that you have that you can pay where there is a maximum payment you can pay. There's a thing called target premium, so as long as you pay target most illustrations will last until age 100 or age 120, which would be called permanent cases. There's also guideline level premium and that means it is the most amount of money that the government will let you pay above targets if you think about target being the recommended amount that the insurance company says, “hey if you pay this the policy will be active until you die,” and there's a maximum amount so if you pay target with any kind of Universal Life, your policy is going to start generating cash as soon as you make your first payment.

Anything you pay over target generates more cash. For example, let's say that you have a client and you sell them a $500 a month case. What they can put in is $1,000 a month, so it costs $500, but they could pay $1000 so that extra $500 helps accelerate the cash accumulation factor inside of the policy.
It's almost like being a bank with your name on it inside of a policy so if you want to borrow money from your bank you can pay yourself back the interest if you want to. A lot of times people pay more than the insurance costs and then they use that bucket of money that's built up over time, and they use that to supplement their retirements a concept called tax for retirement so that's more pop to the tax retirement.
A lot of times people use universal life an indexed universal life as a permanent life insurance play with the flexibility if they want to in the future to use cash to supplement their retirement to pay bills when they get older. It's flexible, so you can you can pay this amount of premium for a certain year, and you can pay this amount if you want to later. Or you can make payments for 20 or 30 years, then just let your cash make go to work.
It's called flexible premium for a reason, so you kind of tell the policy how much money you want to pay. It offers a lot of younger clients the ability to purchase a permanent policy, but it costs less statistically. The most popular universal life that we sell is a smart UL and any of the F&G products are great. F&G Elite has the highest cap so they can generate your cash the fastest. It is built for younger people and older people that want to hide money inside a life insurance policy. They can use it for death benefit, or use it for a supplemental retirement option moving forward.
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Tanisha Staton is an Independent Managing Partner of LMFS, LLC.  All Rights Reserved 2024
We are not connected with or endorsed by the United States government or the federal Medicare program.