Pacific Advisory Variable Annuity provides tax-deferral for more than 100 investment options, with an optional living benefit designed to help increase future retirement income in all market conditions.
The Market
At nearly $2 trillion in size1, it’s no surprise that nearly half of investors own an annuity, and even more are interested in the idea of guaranteed lifetime income.2 Annuities are often purchased by investors to generate guaranteed lifetime income, but can provide additional benefits to potentially help increase retirement income, maximize tax-efficiency of assets, or ensure a legacy for loved ones.
Why DPL Likes Pacific Advisory Variable Annuity
Pacific Advisory Variable Annuity provides tax-deferred access to 100+ investment options and allocation models, all with expense ratios of 1.00% or less. Investors can also purchase optional benefits for an additional cost, including a Return of Investment Death Benefit (0.15%), and Portfolio Income Protector (1.25% single/1.35% joint).
Portfolio Income Protector provides a guaranteed minimum withdrawal benefit, allowing investors to lock in market gains when markets are up, or a simple interest credit to the account when markets are underperforming (for up to 10 years). When your client is ready to begin taking income, the benefit provides a withdrawal percentage guaranteed for life. Additionally, advisory fees can be deducted from the annuity without impacting the optional benefits.
How to Think About Commission-Free VAs
When your client needs:
ANNUITY RESCUE+: For clients looking to move assets from their high-cost traditional annuity into a low-cost, Commission-Free product, a “1035 exchange” may be appropriate. Annuity Rescue+ may help clients achieve:
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Low cost — if the goal is simply to achieve the lowest cost, DPL recommends using an investment-only variable annuity.
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Guaranteed income — often clients purchase an annuity because they like the guaranteed income feature. Depending on your investment approach, DPL will find the product that is best suited for you and your client.
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Return of premium — utilizing a 1035 exchange into a solution with a return of premium benefit can be a thoughtful way of essentially “locking in gains,” as the amount of the new premium will include any gains from the previous annuity. DPL brings several very low-cost and innovative strategies.
TAX DEFERRED GROWTH: For high income earners, low-cost annuities can provide tax deferral to benefit portfolio growth during a client’s accumulation phase. Studies show that tax deferral can add 1.00% to 2.00% of additional net return to a client’s portfolio, when locating tax-inefficient investments within the annuity.3
GUARANTEED LIFETIME INCOME: While other product types are generally better options for guaranteed lifetime income, variable annuities can provide the greatest investment flexibility of the product types that offer this feature — potentially generating additional growth of the portfolio. It may be more appropriate to use a low-cost VA during the accumulation phase and then, when the client is ready to begin taking out guaranteed lifetime income, move into the best available income product.
Product information sourced directly from: https://www.pacificlife.com
1Insured Retirement Institute, 2019; https://www.myirionline.org/newsroom/newsroom-detail-view/iri-issues-second-quarter-2019-annuity-sales-report.
2Insured Retirement Institute (IRI), “The Language of Retirement 2017: Advisor and Consumer Attitudes Toward Income in Retirement.” https://www.myirionline.org/docs/default-source/research/iri_whitepaper_final_singlepg.pdf?sfvrsn=2
3Morningstar Report: The Value of a Gamma Efficient Portfolio, 2017; https://www.morningstar.com/content/dam/marketing/shared/research/foundational/831611-GammaEfficientPortfolio.pdf
Your clients should consider a variable annuity’s investment objectives, risks, charges, and expenses carefully before investing. Go to pacificlife.com for prospectuses containing this and other information. Encourage them to read it carefully.
Variable annuities are contracts purchased from a life insurance company that are designed for long-term retirement goals and are subject to market risk, including loss of principal.
No investment strategy insures a profit or protects against losses in a down market.
All guarantees are based on the financial strength and claims-paying ability of the issuing insurance company.
The purchase of an annuity within a retirement plan that already provides tax deferral under sections of the Internal Revenue Code results in no additional tax benefits. An annuity should be used to fund a qualified plan based upon the annuity’s features other than tax deferral. All annuity features, risks, limitations, and costs should be considered prior to recommending the purchase of an annuity within a tax-qualified retirement plan. In addition to surrender charges, withdrawals are subject to income tax.