Finance

SECRET #1:

YOUR CHILD COULD QUALIFY FOR FINANCIAL AID EASIER IF REPOSITION CASH ASSETS INTO AN ANNUITY OR PERMANENT LIFE INSURANCE.

Here’s How:

Although many scholarships reward scholastic merit, most financial aid is based on need. If a student can get into the college of his choice, financial aid may be available. To receive financial assistance, a family or a student must complete the Free Application for Federal Student Aid (FAFSA), used by accredited colleges and universities in the United States. Information on FAFSA is analyzed using the federal methodology formula, which mathematically calculates a family’s need based on factors such as income, assets and the number of children in the family who are in college. The federal formula also determines the expected family contribution (EFC)— what the family is expected to contribute toward the student’s college education. Money in retirement accounts (such as 401(k)s, IRAs, 403(b)s, SIMPLE plans and annuities) and in permanent life insurance is protected and not factored into the federal methodology formula. There are easy ways to reposition assets, protect them from risk, and reduce the amount of EFC so that one could become more easily eligible. Call the Nesteggsperts to find out how.

SECRET #2:

FIXED INDEXED ANNUITIES CAN NEVER LOSE MONEY DUE TO A MARKET DECLINE, BUT CAN ACHIEVE MARKET LIKE GAINS IF THE MARKET RISES!

Here’s How:

Because any gains that you earn inside of a FIA are classified as tax deferred INTEREST, there is no possibility of a loss simply because there is no such thing as negative interest. Interest is always a positive number or none at all. The interest you earn is calculated using a crediting method. Different companies and plans use different calculation formulas (crediting methods) to calculate interest. Most plans allow you to re-allocate portions or all of your funds to different crediting methods yearly. Some methods make more than other in certain years. However, there is NO WAY to tell which crediting method will yield the most interest prior to the coming year. Further, the sales representative who helps you choose which crediting method may be right for your situation makes NO MORE OR NO LESS commission, depending on which method you use. Unlike many brokerage firms, who make higher commissions on certain mutual funds or stocks, this eliminates a potential conflict of interest.

SECRET #3:

FIXED INDEXED ANNUITIES AVOID A HOST OF TAX TRAPS

Here’s How:

The ownership of mutual funds may require the mutual fund owner to pay estimated taxes. Tax-deferred accumulation inside a Fixed Index Annuity does not create the same tax problem. Fixed Index Annuities are easy to position so that, at the owner’s death, the annuity will not be subject to either estate or income taxes. The same tax reduction techniques do not work nearly as well with mutual funds. There are numerous, often costly, tax traps associated with the timed buying and selling of mutual fund shares, traps that do not apply to Fixed Index Annuities. Additionally, mutual fund ownership can result in the loss of tax exemptions, tax deductions, and tax credits, and mutual funds (except those held in an IRA) are usually subject to state and local income taxes in those states that have such taxes. These losses do not occur with Fixed Index Annuities because they grow tax-deferred, FIAs are not subject to state and local income taxes during their accumulation phase. Finally, mutual fund ownership, specifically the annual distributions made by such mutual funds, can subject the fund owner to taxation under the Alternative Minimum Tax (AMT). The AMT always results in increased income taxes. Fixed Index Annuity ownership cannot trigger the AMT in the same manner as mutual funds.

SECRET #4:

NO LOAD AND NO SURRENDER CHARGES DOESN’T MEAN IT DOESN’T COST YOU!

Here’s Why:

Because of the growing popularity of indexed annuities, brokerage firms are having to get real creative in order to meet their quota of variable annuities….they just can’t compete with them. The average variable annuity has up to 4% in annual fees. About 2% of that is used to purchase life insurance within the plan in order to meet the death benefit guarantees if the cash balance drops due to a market decline. That fee is called an M&E Charge (mortality and expense) The other fees are charged to manage the underlying mutual funds within the plan. Even though the terms NO LOAD and NO Surrender are accurate, you will be getting hit every year with fees….and usually higher than those with surrender charges or sales charges. Bottom line, if you have just 3% annual fees and have a $100,000 account, you will pay $30,000 in fees if you stay with them for 10 years and the cash value doesn’t drop. If your cash value goes down, your fees will too. In the case of the crash of 08, most accounts went down 40%. Yes you pay 40% less fees, but you have 40% less to pay them on. This can’t happen with a fixed indexed annuity.
Indexed Annuities have NO FEES…period. You can purchase a lifetime income rider for a small fee (usually ½% annually) but it is an optional separate part of the base annuity. There are also no SALES CHARGES….period. Because most of the indexed annuity plans offer cash bonuses that are added to your deposit, there has to be a deterring factor from getting the bonus and leaving after a short period of time. There are always surrender charges for that purpose. Most all indexed annuities charge no surrender charges on the first 10% you need to withdraw per year…and some allow you to accrue carryover percentages from year to year. This means if you don’t withdraw 10% this year, you can access 20% next year without a charge if you want. Some plans do this…but not all.

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