Capital Income, a fixed index annuity issued by Midland National, offers a health-activated income multiplier feature to further provide client peace of mind.1
In 2021, fixed index annuity sales reached $63.7B, a 15% increase from 2020. Improved interest rates and product innovation around cap rates helped make these products more attractive to advisors and clients alike. FIAs remain a highly popular product for investors seeking market growth with complete principal protection and the ability to add guaranteed lifetime income through a rider. As more investors seek ways to combat inflation, FIA popularity is only expected to increase.
Why DPL Likes Capital Income
Like all FIAs, Capital Income provides tax-deferred growth potential with complete principal protection from market downturns. Capital Income provides a guaranteed lifetime withdrawal benefit (GLWB), available for an additional cost, which offers an increasing payout option to help keep pace with inflation. A level payout option is also available for the GLWB.
A unique feature of this GLWB is the health-activated income multiplier feature. If an unpredictable event renders a client unable to perform at least two of six "Activities of Daily Living" (ADLs)3 as defined by the contract, their lifetime payment amount can double for up to five years of payments as long as they continue to meet the requirements on each annual payment date. Note that there is as 3-year waiting period from contract issue, and the benefit cannot be elected until three months following the lifetime payment election date.
How to Think About Commission-Free FIAs
One advantage of utilizing FIAs is to leverage the scale of insurance carriers to deliver strong pricing in a packaged product, making it comparatively easy to implement, while also getting guaranteed downside market protection from the carrier.
Many FIAs offer optional guaranteed lifetime income riders for an additional cost. While guaranteed income options from FIAs are generally a bit lower than can be achieved through single premium immediate annuities (SPIAs), they generally have greater liquidity and flexibility.
When your client needs:
PRINCIPAL PROTECTION: With the principal protection from market risk provided by FIAs, they should be considered for clients nearing or in retirement to help mitigate sequence of returns risk.
FIXED INCOME: FIAs can be viewed as a fixed income replacement as client portfolios are de-risked from equities. They provide sequence of returns protection for those entering or in retirement, with an overall return above 6%, based on historic averages.4
GUARANTEED LIFETIME INCOME: Through the use of a living benefit, FIAs can be used to generate guaranteed lifetime income with allocation flexibility and liquidity (beyond the surrender period).5
Product information sourced directly from MidlandNational.com
1This benefit may not be available in all states.
3Known as ADL Benefit Rider in the contract. See contract for full ADL definitions and additional conditions required to elect it. THE ADL BENEFIT RIDER (ALSO KNOWN AS THE HEALTH-ACTIVATED INCOME MULTIPLIER) IS NOT LONG TERM CARE INSURANCE NOR IS IT INTENDED TO REPLACE LONG TERM CARE INSURANCE.
5FIAs may be subject to surrender charges, market value adjustment, and taxation for early withdrawals
Fixed indexed annuities are contracts purchased from a life insurance company that are designed for long-term retirement goals.
While the interest rate credited to an indexed account is linked to the performance of an underlying index, premium payments made to a fixed index annuity are never directly invested in the stock 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.
Sammons FinancialSM is the marketing name for Sammons® Financial Group, Inc.’s member companies, including Midland National® Life Insurance Company. Annuities and life insurance are issued by, and product guarantees are solely the responsibility of, Midland National® Life Insurance Company.
Insurance products issued by Midland National® Life Insurance Company, West Des Moines, Iowa. Product and features/options may not be available in all states or appropriate for all clients. See product materials and state availability chart for further details, specific features/options, and limitations by product and state.
The Midland National Capital IncomeSM is issued on base contract form AS202A/ICC19-AS201A or appropriate state variation including all applicable endorsements and riders.
"Income” or "lifetime income” refers to guaranteed payment of lifetime payment amounts (“LPAs”). It does not refer to interest credited to the contract. Advise clients to consult with their own tax professional regarding tax treatment of LPAs, which will vary according to individual circumstances.
Under current law, annuities grow tax deferred. An annuity is not required for tax deferral in qualified plans. annuities may be subject to taxation during the income or withdrawal phase. Neither Midland National, nor any agents acting on its behalf, should be viewed as providing legal, tax or investment advice. Your client should be advised to rely on their own qualified adviser.