The Annuities tab allows you configure the income attributes of products already owned by clients as well as model the purchase of annuity products at a future date. Projected cash values over time for the products will be modeled and visible in the Balances view of the Assets tab.
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Depending on whether the product is currently owned for the client or if it a planned future purchase, the annuity will appear in the Existing Annuity or Planned Purchases table respectively.
Existing Annuities
Existing annuity contracts owned by the client appear in this table and must have their income attributes configured for the system to consider them in plan calculations. If an annuity account has been imported or manually created, it will appear in this table in an error state until income is configured.
Clicking the 👁️ icon in a row will toggle whether the annuity account is included or excluded from the plan scenario.
Clicking the ⚙️ icon will open the annuity account window for editing. Here you can edit attributes of the underlying account which are common between all annuities regardless of their income configuration. These attributes are the same as those available for segmented accounts, except for Internal Rate of Return. Because annuities are non-segmented accounts, they have their own ROR assumption for the duration of the plan and do not inherit ROR attributes of segments.
By highlighting a row and clicking Remove Income Configuration, you can strip the underlying annuity account of the associated income options and assign a new set. These income configurations are specific to the plan scenario you are currently editing which allows you to assign and compare the outcomes of different income configurations on the same annuity between scenarios.
Planned Purchases
Annuities that you are considering for acquisition in the future appear under the Planned Purchases table. Planned purchases require the assignment of a Source Account from which funds will be modeled as transferred to cover the premium. The owner and registration type of the source account will be used to assign owner and registration type to the annuity. If the source account is jointly owned, you will be prompted to assign a single owner for the annuity.
If there are projected to be insufficient funds to complete the planned purchase, the annuity purchase will not be assumed to take place, no income will be modeled, no funds will be extracted from the source account, and a warning will appear in the table.
If the original future purchase date as passed, the annuity will appear in an error state until either the purchase date is adjusted to a new future date or an underlying annuity account is associated with it in light of the sale having occurred.
When you click Configure Income for a future purchase that has an elapsed purchase date, you will be prompted to either acknowledge that the purchase has occurred and link an account, or postpone the purchase date.
Income Configuration
Clicking the Configure Income button will open a window where the attributes associated with the income, or lack of income, generated by the annuity can be edited. These attributes vary by which type of income stream has been assigned. The six types of annuity income configurations are:
- Lifetime Income (Full Annuitization)
- Period Certain Income
- Withdrawals (As Needed)
- Withdrawals (Fixed Amounts)
- Income Rider (Lifetime)
- No Income / Tax Shelter
Read on to learn about the various attributes associated with each of the six income configuration types available.
Lifetime Income (Full Annuitization)
Annuities that will have their cash value converted into a steady stream of lifetime payments should be assigned this type. The value of annuity will be assumed to drop to $0 on the specified income Start date. For qualified annuities because the cash value is assumed to be zero, income from this type of annuity is not treated as going towards satisfying IRA type RMDs.
Contract Label is a free-form field to name the product.
Source Account is the account from which the assets for the product purchase will be modeled as coming from. If the source account is non-qualified, the annuity is assumed to be non-qualified as well, whereas a qualified source account will assume to be used to purchase an annuity within an IRA.
Owner will automatically be set if the source account has a single owner. If funding from a jointly held account, the option to choose an owner will be given.
Purchase Date is the month/year in which the purchase will be modeled and the funds withdrawn from the Source Account.
Purchase Price is the amount of assets assumed to be used in buying the product. This will be used as the initial cash value and for non-qualified products, the cost basis.
Internal RoR (after fees) is the rate of return assumed on the cash value of the product starting from the purchase date onwards. The estimated rate of return entered should be net of assumed internal fees as they are not independently modeled.
Monthly Payment is the recurring payment that will be modeled.
COLA (0-100%) is the annual Cost of Living Adjustment for the payment that will be modeled as taking place on the anniversary of the payment start date.
Start is the month/year during which the payment stream will begin. You can also assign this to a plan event to keep it in sync should that plan event date change.
Exclusion Ratio is the percentage of each income payment that will be treated as tax-free return of principal, applicable only to non-qualified annuities.
% Income for Survivor allows you to simulate the continuation of payments to the surviving spouse after the annuity owner is deceased. The percentage entered will be applied to the Monthly Payment figure.
Period Certain
Annuities with period certain payment schedules can be set up to provide income to meet the needs of a specific segment. The projected cash value of period certain annuities will amortize down to exactly $0 at the end of the specified payout period regardless of the monthly income amount to avoid orphaned balances being shown later in the plan.
Contract Label is a free-form field to name the product.
Source Account is the account from which the assets for the product purchase will be modeled as coming from. If the source account is non-qualified, the annuity is assumed to be non-qualified as well, whereas a qualified source account will assume to be used to purchase an annuity within an IRA. The projected cash value will then be used in the calculation of the owner’s projected RMDs.
Owner will automatically be set if the source account has a single owner. If funding from a jointly held account, the option to choose an owner will be given.
Purchase Date is the month/year in which the purchase will be modeled and the funds withdrawn from the Source Account.
Purchase Price is the amount of assets assumed to be used in buying the product. This will be used as the initial cash value and for non-qualified products, the cost basis.
Internal RoR (after fees) is the rate of return assumed on the cash value of the product starting from the purchase date onwards. The estimated rate of return entered should be net of assumed internal fees as they are not independently modeled.
Monthly Payment is the recurring payment that will be modeled.
COLA (0-100%) is the annual Cost of Living Adjustment for the payment that will be modeled as taking place on the anniversary of the payment start date.
Start is the month/year or plan event at which time the payment stream will begin.
End is the final month/year or plan event at which time the final payment will be made.
Exclusion Ratio is the % of the income that will be excluded from ordinary income taxation, applicable only to non-qualified annuities.
Withdrawals (As Needed)
Annuities that do not have a contractual income stream established, but rather are available for distributions at the discretion of the annuity owner can use this configuration. The system will determine month to month how much should be distributed from this annuity to satisfy income needs after any other income sources have been accounted for.
Contract Label is a free-form field to name the product.
Source Account is the account from which the assets for the product purchase will be modeled as coming from. If the source account is non-qualified, the annuity is assumed to be non-qualified as well, whereas a qualified source account will assume to be used to purchase an annuity within an IRA. The projected cash value will then be used in the calculation of the owner’s projected RMDs.
Owner will automatically be set if the source account has a single owner. If funding from a jointly held account, the option to choose an owner will be given.
Purchase Date is the month/year in which the purchase will be modeled and the funds withdrawn from the Source Account.
Purchase Price is the amount of assets assumed to be used in buying the product. This will be used as the initial cash value and for non-qualified products, the cost basis.
Internal RoR (after fees) is the rate of return assumed on the cash value of the product starting from the purchase date onwards. The estimated rate of return entered should be net of assumed internal fees as they are not independently modeled.
Delay Withdrawals Until allows you to set a preferred date or event prior to which assets would only be distributed from this annuity if it was either the only available source of IRA RMDs, or it was the last remaining asset available for funding income. Withdrawals may still not begin on this date if there are other income sources that are already fully satisfying or exceeding the income need.
Surrender Terms allow you to simulate the impact of a surrender period on income availability.
- Purchase Date will automatically populate from the Purchase Date entered above if this is modeled as a future purchase. If it is an existing annuity, enter the original purchase date.
- Surrender Period Duration (years) is the number of years following the purchase date where withdrawal penalties beyond the penalty-free withdrawal limit would apply.
Penalty-Free Withdrawals captures the necessary information for the system to restrict any projected distributions from this annuity during the surrender period to avoid penalties. Unless distributions are delayed beyond the surrender end date, the system will automatically take the penalty-free withdrawals if needed for income.
- Penalty-Free Withdrawal type gives you the option of applying the Free Withdrawal % to either the Original Premium or Current Value.
- Purchase Price appears when Original Premium is selected. The Free Withdrawal % applies to this value every year of the surrender period consistently.
- Value at Last Anniversary appears when Current Value is selected. The Free Withdrawal % will initially apply to this value and then be recalculated each contract anniversary for the remainder of the surrender period which may cause the withdrawal limit to fluctuate over time.
- Free Withdrawal % is used to calculate the maximum distribution that the system would attempt to take during each year of the surrender period.
Survivorship options allow you to specify an Additional Death Benefit. This benefit will increase the projected annuity cash value of the annuity by either a set % rate or a fixed $ amount at the time of the owners death. The surviving spouse automatically inherits the annuity and can continue distributing income from it. If the owner lives to the end of the plan, the Ending Balance will incorporate the additional death benefit.
Withdrawals (Fixed Amounts)
Annuities that do not have a contractual income stream established, but rather are available for distributions at the discretion of the annuity owner can use this configuration. The exact amount and timing of the monthly payments can be specified to create a steady stream of distributions.
Contract Label is a free-form field to name the product.
Source Account is the account from which the assets for the product purchase will be modeled as coming from. If the source account is non-qualified, the annuity is assumed to be non-qualified as well, whereas a qualified source account will assume to be used to purchase an annuity within an IRA. The projected cash value will then be used in the calculation of the owner’s projected RMDs.
Owner will automatically be set if the source account has a single owner. If funding from a jointly held account, the option to choose an owner will be given.
Purchase Date is the month/year in which the purchase will be modeled and the funds withdrawn from the Source Account.
Purchase Price is the amount of assets assumed to be used in buying the product. This will be used as the initial cash value and for non-qualified products, the cost basis.
Internal RoR (after fees) is the rate of return assumed on the cash value of the product starting from the purchase date onwards. The estimated rate of return entered should be net of assumed internal fees as they are not independently modeled.
Monthly Payment is the recurring amount that will be projected as distributed from the annuity.
CoLA (0-100%) is the annual Cost of Living Adjustment that will be applied to the Monthly Payments on each anniversary of the income start date.
Start is the date or event at which time income distributions will begin.
End is the date or event through which time income distributes will continue.
Surrender Terms allow you to simulate the impact of a surrender period on income availability.
- Purchase Date will automatically populate from the Purchase Date entered above if this is modeled as a future purchase. If it is an existing annuity, enter the original purchase date.
- Surrender Period Duration (years) is the number of years following the purchase date where withdrawal penalties beyond the penalty-free withdrawal limit would apply.
Penalty-Free Withdrawals captures the necessary information for the system to restrict any projected distributions from this annuity during the surrender period to avoid penalties. Unless distributions are delayed beyond the surrender end date, the system will automatically take the penalty-free withdrawals if needed for income.
- Penalty-Free Withdrawal type gives you the option of applying the Free Withdrawal % to either the Original Premium or Current Value.
- Purchase Price appears when Original Premium is selected. The Free Withdrawal % applies to this value every year of the surrender period consistently.
- Value at Last Anniversary appears when Current Value is selected. The Free Withdrawal % will initially apply to this value and then be recalculated each contract anniversary for the remainder of the surrender period which may cause the withdrawal limit to fluctuate over time.
- Free Withdrawal % is used to calculate the maximum distribution that the system would attempt to take during each year of the surrender period.
Survivorship options allow you to specify an Additional Death Benefit. This benefit will increase the projected annuity cash value of the annuity by either a set % rate or a fixed $ amount at the time of the owners death. The surviving spouse automatically inherits the annuity and can continue distributing income from it. If the owner lives to the end of the plan, the Ending Balance will incorporate the additional death benefit.
Income Rider (Lifetime)
Annuities that have a contractual income rider which will provide income from the rider start date through the lifetime of the owner. Payments can be extended to the surviving spouse as well.
Contract Label is a free-form field to name the product.
Source Account is the account from which the assets for the product purchase will be modeled as coming from. Selection is limited to non-qualified type accounts.
Owner will automatically be set if the source account has a single owner. If funding from a jointly held account, the option to choose an owner will be given.
Purchase Date is the month/year in which the purchase will be modeled and the funds withdrawn from the Source Account.
Purchase Price is the amount of assets assumed to be used in buying the product. This will be used as the initial cash value.
Internal RoR (after fees) is the rate of return assumed on the cash value of the product starting from the purchase date onwards. The estimated rate of return entered should be net of assumed internal fees as they are not independently modeled.
Monthly Payment is the recurring amount of rider income projected.
CoLA (0-100%) is the annual Cost of Living Adjustment that will be applied to the Monthly Payments on each anniversary of the income start date.
Start is the date or event at which time income distributions will begin.
Income Tax Treatment allows you to specify how non-qualified annuity rider income will be taxed.
- Annuitized requires you to enter an Exclusion Ratio to treat a set percentage of each monthly payment as tax free return of principal.
- Withdrawal will have the system calculate tax by assuming that earnings are distributed before principal. Once all principal is exhausted, 100% of the rider income will be considered taxable.
Joint Lifetime Payments will continue providing 100% of the monthly rider income payments to the surviving spouse when enabled.
No Income / Tax Shelter
Annuities for which there are no plans to distribute income or convert the balance into a payment stream. This can serve as a placeholder income configuration type if you are not yet sure how you would like to model income. It can also be used to model to avoidance of taxes on passive income that may be generated by dividends in non-qualified accounts were they to remain allocated to segments.
Contract Label is a free-form field to name the product.
Source Account is the account from which the assets for the product purchase will be modeled as coming from. Selection is limited to non-qualified type accounts.
Owner will automatically be set if the source account has a single owner. If funding from a jointly held account, the option to choose an owner will be given.
Purchase Date is the month/year in which the purchase will be modeled and the funds withdrawn from the Source Account.
Purchase Price is the amount of assets assumed to be used in buying the product. This will be used as the initial cash value.
Internal RoR (after fees) is the rate of return assumed on the cash value of the product starting from the purchase date onwards. The estimated rate of return entered should be net of assumed internal fees as they are not independently modeled.
Survivorship options allow you to specify an Additional Death Benefit. This benefit will increase the projected annuity cash value of the annuity by either a set % rate or a fixed $ amount at the time of the owners death. The surviving spouse automatically inherits the annuity and can continue distributing income from it. If the owner lives to the end of the plan, the Ending Balance will incorporate the additional death benefit.
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