Purchasing or Exchanging Variable Annuities

What this video covers

• The core distinction between deferred annuities (accumulation phase, future payouts) and immediate annuities (single lump sum, no accumulation phase, payouts begin within one period)
• Every major charge layered into a variable annuity contract: mortality and expense (M&E) risk charge, administrative fees, subaccount expenses, rider charges, 12b-1 fees, and the contingent deferred sales charge (CDSC)
• How surrender charges decline over 6-8 years and how the 10% free withdrawal allowance works to avoid them
• The double penalty trap: why surrender charges (insurance company) and the 10% federal tax penalty (IRS) are completely independent and can both apply to the same withdrawal
• Exceptions to the 10% early withdrawal penalty: death, disability, terminal illness, and substantially equal periodic payments (SEPP), also known as 72(t) distributions
• Right of accumulation (ROA) breakpoints and how they reduce fees based on cumulative purchases or account value
• The strict one-way flow of 1035 exchanges: life insurance to life insurance, endowment, or annuity; endowment to endowment or annuity; annuity to annuity only
• Why constructive receipt destroys tax-free status and why the 36-month lookback rule exists to prevent churning of deferred variable annuities