Propose an Indexed Variable Annuity - Action Items

An Indexed Variable Annuity (sometimes referred to as a buffer annuity) is an annuity type that is similar to an indexed annuity, but does not entirely protect against market loss. In RightCapital, advisors can propose indexed variable annuity purchases in the Retirement > Analysis section. Annuity values and income can be tracked within the Retirement > Cash Flows.

If you would like to propose the purchase of an indexed variable annuity within a client's Proposed Plan, this can be done within the Retirement > Analysis section. Scroll down to the Action Items at the bottom of the page, click Edit > Add New Items, and then choose Annuity:

This will add a new annuity purchase to the proposal. This entry allows you to enter the purchase year, the value of the new annuity, and specify which account is being used to fund it:

For modeling purposes, RightCapital utilizes the return for the Large Blend index when projecting future growth on the total balance. This is the average between the Large Growth and Large Value asset classes, and will be based on your asset return assumptions for each.

An optional account value bonus can be entered, which is an upfront bonus that will be applied to the transferred account value for the annuity. Be sure to select 'Indexed Variable Annuity' as the Annuity type, which will allow you to enter the cap, buffer, and participation rate.

Entry

Description

Cap

The maximum rate applied to the account in any year; if the Cap is set to 6%, the maximum increase in any year will be 6%.

Buffer

The percentage of loss that the insurance company will absorb in a given year. If losses exceed the buffer percentage, the account value will be reduced.

For Example, if the buffer % is set to 10%, and the index loses 25% in a year, the account will drop by 15% (25% - 10%).

Participation

The percentage that is used to reduce the index rate each year. For example, if the participation rate is 80% and the index returns 7%, we will credit 5.6% (7% * 80%) for that year.

The eventual distributions from the proposed indexed variable annuity will be determined by the option you select in the Distributions dropdown box:
  • Regular withdrawals will treat the annuity similarly to other investments. Income distribution cards can be added in the Profile > Income section to withdraw a specific amount each year from the annuity.
  • Annuitization will surrender the account value in exchange for a guaranteed fixed income stream. This option will populate new fields to enter the details of the annuitization.
  • Lifetime income can be used for an annuity that has a guaranteed lifetime income rider or associated benefit. This option will populate new fields to enter the details of the lifetime income guarantee.
After proposing a new indexed variable annuity in the Retirement > Analysis section, you can track the value of the annuity as well as the income stream within the Retirement > Cash Flows tab.

The value of the Annuity can be tracked within the Cash Flows > Accounts tab, by viewing the Ending Balance by Accounts:
The income stream from the annuity can be tracked within the Cash Flows > Summary tab, by clicking into the underlined header for Income Inflows:
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