Annuities

What this video covers

• Why the default exam assumption is nonqualified (after-tax funding), and how that changes taxation, required minimum distribution rules, and cost basis treatment
• The two phases of every annuity: accumulation phase (tax-deferred growth) versus annuitization or payout phase (periodic income), and what triggers each
• Why fixed annuities are NOT securities: the insurer bears investment risk through the general account, so state insurance departments regulate them exclusively
• Why variable annuities ARE securities: the contract owner bears investment risk through separate account subaccounts, triggering dual registration under securities laws and investment company laws, plus prospectus delivery requirements
• How indexed annuities use participation rates, cap rates, and spreads to limit upside, and why the guaranteed floor means they remain state-regulated insurance products despite their market link
• The LIFO last in, first out tax rule for nonqualified withdrawals during accumulation, and why annuitization switches to the exclusion ratio two-buckets method instead
• The 59 and a half age rule, the 10% early withdrawal penalty, and the strict exceptions including death, disability, and substantially equal periodic payments
• Why annuities inside employer-sponsored retirement plans or individual retirement accounts are generally unsuitable due to redundant tax deferral layered with high fees and surrender charges