Annuities
Chapters in this video
- 0:00 Follow the risk: fixed vs variable annuities
- 1:56 Equity-indexed annuities: participation rate, cap rate, and floor
- 3:07 Variable annuity registration and the two phases
- 3:55 LIFO taxation and the 10% early withdrawal penalty
- 5:17 Mortality and expense (M&E) risk charge and other fees
- 6:14 Annuitization payout options and the survivor trade-off
- 7:33 Rapid-fire exam recap
What this video covers
- Why fixed annuities are not securities: the insurance company bears all investment risk and guarantees the return
- How equity-indexed annuities blend index-linked upside with a guaranteed floor, and why they are generally regulated as insurance products, not securities
- Why variable annuities are securities: the contract owner selects subaccounts and bears the investment risk, requiring SEC registration, a prospectus, and dual licensing
- How LIFO (last in, first out) taxation works for early withdrawals from nonqualified variable annuities, and why earnings are taxed as ordinary income first
- When the 10% additional IRS early withdrawal tax applies on top of ordinary income tax for pre-age 59 1/2 distributions
- Why the mortality and expense (M&E) risk charge is unique to variable annuities among annuity types
- How payout options trade off periodic payment size against beneficiary protection, with life only paying the most and joint and survivor paying the least
Read the full lesson, free
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