Current events, commentary, and links to other resources on retirement income and annuities in the news.

Retirement Planning Checklist

Below is a basic list of items to consider when working to formulate an income plan for retirement.  Much of what makes up this list requires a more detailed explanation as to why you might run into trouble when taking advice from someone else.

I’ve heard of some advisors telling some clients of mine that they don’t have enough money to retire when that’s not the case.  And more often than not I see a lot of advisors use funds from the wrong type of account to fund an annuity so special attention needs to be paid to allocation, not only with respect to your portfolio but also your blend of qualified and non-qualified assets.

Most plans that center around annuities require a far greater investment in that annuity than is appropriate.  This is one of major reasons for the negative press annuities receive.  The result is that many people avoid annuities when there is actually a strategy that can be used to strengthen a portfolio, adequately protect assets for income and increase wealth through retirement.  And yes, you can do that with annuities.

If you plan to do this on your own or with the help of a local advisor, you need to be able to verify that person knows what he/she is doing.  At the end I’ll tie it together with some final advice and hopefully this will offer some support to those of you planning to do business elsewhere.

Here is the list…

  • Total assets in relation to needs
    • Basic question that shows at a glance whether income goals are attainable
      • Annual income needs should be less than 5% of total liquid assets
    • More accurate if planned discretionary spending is included (new vehicle, daughter’s wedding, home repairs etc.)
  • Percentage of total qualified money
    • How much of your assets are in IRA/401(k)?
    • Calculate approximate required minimum distribution when you turn 70, even if you’re not yet 70
    • This can and often times does dictate an income plan and causes you to draw more than you want or need thus paying more in taxes
    • 80% of plans I see have come with strategies and products that have not adequately accounted for required minimum distributions
    • Keeping this in mind from an earlier age can help minimize tax liability or present an opportunity for a laddered Roth conversion
  • Current Account Allocation
    • Where are you in relation to the traditional mix of 60% equities and 40% bonds?
    • What percentage of assets would you like to protect?
      • No wrong answer – some want to protect it all and some don’t want to protect anything
    • How much you should protect depends on how much income you need.
    • In most cases it is advisable to have the same allocation percentage for both qualified and non-qualified funds
  • Safe Assets and Income
    • Safe allocation from above should provide majority of income
    • Some choose bonds – low cash flow and require performance and withdrawals from remainder portfolio so this carries a fair bit of risk
    • Many use annuities – guaranteed income but typically comes at a high cost
      • In most cases annuities require you to allocate a far greater percentage of your portfolio to safe assets
      • Locks up money and makes an inflexible plan
    • Other ways to use annuities – deferred fixed contracts using withdrawals for income
      • Saves on fees and makes asset more flexible
      • Creates opportunity to change and rework plan as time passes
  • Fixed vs. Fixed Indexed Annuities
    • Fixed annuities offer a guaranteed rate – Fixed indexed offers potential for more
    • Some would rather just take the guarantee and others like simple protection of principal with the opportunity to yield better than the guaranteed rate
    • In some cases your personal preference is the decision maker but there’s one advantage indexed annuities have over fixed annuities
    • Indexed annuities offer 10% free withdrawal and most fixed annuities only offer interest withdrawals, making them identical to bonds in regards to creating income
    • Using something similar to the flex strategy requires larger withdrawals in order to really get the most growth from the remainder of your portfolio

Ok, this is a general list and requires much more detail that I plan to build into this over the coming weeks.  When you create an income plan it takes a specific level of care and consideration.

First you need to have enough money to retire.  This mostly depends on how much income you need but additional expenses are important as well so you can get as close to the total as possible.  One person I recently met with had every planned car purchase and home improvement project planned for the next 20 years.  It doesn’t mean it will happen that way but it gave him the opportunity to text the viability of various income plans.

Next, you need to make sure that any qualified money in your IRA/401(k) is specifically considered as part of any income and allocation plan.  Lots of people have been sold annuities that cover income needs in their 60s that won’t work as well once RMDs are added to the equation at age 70.  And likewise, many advisors propose annuities that require deferral past age 70.  In either case RMDs were not considered and one person had a larger than expected tax burden while the other purchase an annuity that never created the intended benefit.

Next, consider your current portfolio allocation and how it relates to your optimal blend of assets.  If you have saved adequately and have reasonable income expectations then you can usually design an income plan without making any major changes to your portfolio.

And finally, learn to evaluate the different options you have for protecting assets and creating income.  Done correctly you can do both at the same time.  I am not partial to any one contract but I am being honest when I say that guaranteed income contracts in this market do not offer a way to maximize potential with assets.  While they may be safe you could be short-changing yourself.  I do believe deferred growth contracts are better for both protection and income and deciding what you use is a personal choice.

There are several ways to create a reasonable retirement plan.  There is a “best” way to do it and not everyone is going to do it that way.  With the financial services industry working the way it is you are likely to only see standard options so my objective is to first make sure you don’t make a mistake and second to give you ideas to improve your chances.

Best of luck to you all as you look to make the right moves for your future.  I am here to help and answer any questions you have.  Feel free to call or email any time.


All my best,


Bryan J. Anderson

Annuity Straight Talk


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How Interest Rates Dictate Planning Decisions

As investors approaching or in retirement you all need to understand a few fundamentals that will help you make the best decisions in regards to asset allocation.  With respect to this I’d like to talk about interest rates as an indicator that give you some idea of how to plan and what to expect from market performance.

The first is to take a look at the US Treasury yield curve.  This shows the difference between short and long maturity treasury securities.  Obviously the shorter term treasuries will have lower yields and the longer term will have higher yields.  For investors with a short time horizon, the lower yields are acceptable because money is liquid at an earlier date.  Retirees with a long time horizon should look at the longer terms for stable planning over extended periods of time.

This explains what is considered to be a normal yield curve, with short term maturities paying low yields and the curve steadily rising and maturities increase.  This would happen when the long-term economic outlook is positive.  Short and long term investors get exactly what they need.  Retirees in this case would find that the products designed for guaranteed income are priced appropriately and offer a good deal.

Right now, the yield curve is basically flat and that is an indicator of economic uncertainty.  Take a look at the US Treasury yield chart using this link.  The 1-year is 2.42% but the 30-year is only 3.03%!

So if you loan the federal government your money you do almost as well with a one year commitment as you would by locking up your money for 30 years.  This directly correlates with the retirement products the majority of financial advisors are selling.  Long-term products are based on the long-term market yields and it doesn’t make sense for planning purposes to lock money up for extended periods of time unless you are paid a reasonable yield to do so.  That option doesn’t exist in the products available today.

The best deals are in the short-term opportunities.  You’ll earn nearly as much interest but have your funds liquid at an earlier date and available for re-positioning as markets change.

What about a third type of yield curve?  Let’s assume that short-term rates are higher than long-term rates.  This would be called an inverted yield curve and it signifies a poor extended outlook for the economy.

This doesn’t happen often but when it does it leads to serious market volatility that will wreck a portfolio.  Recovery could take several years and require a steel nerve that would make Josey Wales back down.

One of the more well-known indicators of this happening is seen in the difference between the two and ten year treasury.

As of the market close on August 10th, 2018 the 2-year is at 2.61% and the 10-year is at 2.87%.  Take a look at this article that explains what happens when those yields switch and the 10-year pays less than the 2-year.  In all points through history when the yield curve inverts over this time period it precedes a wicked market correction.  It’s reason to be cautious when making allocation decisions, and with equities markets recently approaching or reclaiming historic highs it’s not a bad time to protect some assets.

The above article about treasury spreads is from earlier this year and I have shared it with several of you.  The fundamentals and our current economic situation have not changed so I felt a little urgency to get this out to as many people as possible.  Several analysts are calling for an inverted yield curve within the next year.  I don’t like to make predictions but I do like to provide justification for the strategies I promote at AST.  Whether the yield curve inverts or not makes no difference to me.  I just want you to be ready if it does.

Keep your commitments short and flexible.  Set enough aside so you can weather a market downturn without sacrificing retirement lifestyle.  Be ready to make changes as time passes so you can increase wealth through retirement.

Planning is simple when you do it right.  If you have any questions feel free to call or email any time.


All my best,


Bryan J. Anderson


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AST Newsletter for August 4th, 2018

We’re going to start this off by talking about two of the more pressing issues that relate to retirement planning:  interest rates and market volatility.

The Fed met this week and decided to delay a rate increase this quarter but confirmed plans for two more rate increases later this year.  I don’t mean to be patronizing but many people mistakenly assume that actions by the Fed are what lead to the increased consumer rates that we all care about.  You may or may not know that the Fed can only control the rate at which they lend to member banks.

The increase in rates on treasury securities, which fuel all rates that affect us, depend on several other factors with the most important being government spending.  To highlight this I have a link to a recent Bloomberg article that talks about recent debt issuance by the Trump administration.  This will bring US Debt sales to the highest level since 2010.  Many analysts believe this is unnecessary given the strong economy and the result is that we will continue see large federal deficits with no end in sight.  News of the issuance caused the 10 year treasury to spike over 3% for the first time in several years.  This will increase borrowing costs for consumers but may also increase rates on fixed investment vehicles so it’s not all bad for retirees who are looking for higher rates in order to plan for retirement.

You can read the article here…

Next week I will talk more about how interest rates affect the economy and stock market performance so we can tie it all together and look at how that might affect the way you should plan for income or asset management in retirement.

It holds true that investors should pare back on risk within five years of retirement.  But that’s hard to do when markets are recovering or on extended runs.  The S&P 500 is back in positive territory for the year but the Dow Jones still lags back and hasn’t recovered from the February correction.  These are things we all deal with but when retirement comes you certainly don’t want it to affect your lifestyle.

Many analysts are calling for another correction and a recent article on MarketWatch explains several fundamentals that may give credence to the thought of some volatility ahead.  With a strong economy and slightly higher rates, retirement planning is easier today than in the past several years and my gut tells me we should see some steady growth in the near future.  However, I am not a stock analyst and I make my living advising and selling conservative strategies and products.

Read more from MarketWatch here…

It’s always a good time to eliminate risk if you don’t have the time, patience or stomach for a recovery.  The key is timing and it’s different for everyone.  Keep the big things in mind and use discretion when chasing yield.  Fear and greed drive most financial decisions so do your best to remove emotion from all decisions.

If you’d like to chat about how any of this might affect your situation you can always call or email any time.  I’ll be out of service this weekend but can return emails if you’d like to respond.  Phone calls will have to wait until Monday but if you’d like to leave me a message I’ll call as soon as I can.

Have a great weekend!




War Stories:  The Allianz 222

I’m choosing a product topic for my first version of this section.  “War Stories” came about mostly because I feel a fair bit of hostility toward this product in particular.  The Allianz 222 is the highest selling product in the Indexed Annuity marketplace.

That’s curious to me since it’s a product with a very specific use.  The reason it’s so popular is because the 30% bonus makes it kind of easy to sell and for agents who have a loose relationship with the truth then it ends up being owned by far too many people who will get a not-so-nice surprise down the road.

Let me explain a little more since I’ll never ask you to take my word for it.

1.) You get a 30% Protected Income Value(PIV) bonus when you purchase.

2.) PIV is used to calculate guaranteed lifetime income.

3.) You also get a 50% bonus to annual index credits that is added to your PIV.

4.) In order to capitalize on the PIV you must wait 10 years and then convert that PIV into a lifetime income stream.

5.) The PIV is not your money – it is simply a factor used to calculate lifetime income.

6.) Underlying growth potential on the contract is very limited, in order for the company to limit exposure to the income payments via the PIV.

7.) Do you really think an insurance company is going to give you 30% free money without a catch?

If anyone tells you anything to the contrary it is a lie.  This is the most misrepresented contract I’ve ever seen.  Nothing in life is free once our parents kick us out of the house and the Allianz 222 is no exception.

Do you have any specific questions?  Respond to this email or give me a call.

All my best,



How an Annuity Can Increase Wealth in Retirement

I have made this claim during personal meetings with people and more recently updated a few places on the website to reflect the idea.  You can own an annuity that allows you to increase wealth through retirement.  It’s not the annuity that does this, it’s how you use the annuity that makes it work.


This is something you’ll have a hard time finding elsewhere.  It takes independence of thought and a confidence in understanding basic financial principles for a person to do it successfully.  The reason is because the insurance industry has a very specific way of promoting products that are meant to protect assets and produce income in retirement.  Agents and advisors for the most part are more than happy to stick with the status quo and simply sell the way everyone else sells.


But since I do business all over the country from my office in Montana, I need to have an advantage over other products and services.  Otherwise, why would you trust someone this far away?  I will show you why.


When you buy an annuity to produce retirement income you have to take it from an investment portfolio that has potential to grow.  So the annuity reduces your investment portfolio in exchange for a monthly paycheck.  It leaves less money available to invest for long-term growth, which is what you need to fight inflation and increase wealth.


If you model the effect on your portfolio you will see that while the annuity protects your income it essentially prevents you from maintaining the same level of wealth through retirement.  The reason the annuity costs so much is because it provides income for all years of retirement.  This doesn’t make sense to me.


Since the point of the annuity is to insulate your retirement income from market volatility wouldn’t it make more sense to have an annuity that covers income only during the time when you can’t take money out of the stock market?


On average it takes the stock market 3.3 years to recover from a bear market.  During the Great Depression it took around 7 years for the stock market to return to previous highs.  If that’s the case, then why not just have enough set aside to cover income when the value of the stock market is depressed?


This is the idea behind what I call the AST Flex Strategy.  Instead of using an income annuity, use a deferred annuity as a protected pool of cash that you can use to draw income when the market is down in value.  When the market is performing well you can sell stocks at high values and leave the safe money alone for the next time you need it.


This allows you to spend less on the annuity and leave more working in the stock market for long-term growth.  The result is all the protection needed, more long-term growth, lower fees and a substantial increase to your net worth in comparison to traditional income annuity plans.  That’s what everyone else sells so I’ve seen it a thousand times and nothing so far comes close to the output of the AST Flex Strategy.


Where the traditional income annuity decreases your net worth, the AST Flex Strategy allows you to increase your net worth.  In most cases the difference is several hundred thousand dollars or even much more, depending on your situation.


The details of exactly how it works is something I plan to keep to myself and share only with clients.  When you see how it’s done you won’t believe what a difference it makes.  It gives you more money, more control over your assets and more opportunity to adjust the plan as time goes by.


Go ahead and buy an income annuity or indexed annuity with an income rider, but if you do so without giving the Flex Strategy a look then you are just stubbornly refusing to put extra money in your pocket.  It’s ridiculous to thinking about approaching retirement any other way.


If you’d like to see how it works go ahead and sign up to get the Indexed Annuity Guide or just give me a call.


All my best,


Bryan J. Anderson


Bonds vs. Indexed Annuities


Bonds: The Traditional ‘Safe Money’ Choice

Bonds are traditionally used as a safe, fixed rate asset in an investment portfolio.

As retirement approaches, conventional wisdom is to shift to a greater concentration of bonds to decrease risk.

Many people end up in bond funds that further diversify risk and return by actively trading multiple classes of bonds.

But do you fully understand the risk in a low-rate environment?

The truth is, if interest rates rise, bonds lose value.  The bond can perform perfectly well and you can still lose a bundle.

Now, it’s true that you can wait to term and get your yield, but a bond that is ‘underwater’ is completely illiquid because you WILL lose money if you sell and reposition your money.

And bond funds rarely hold individual bonds to maturity, so the risk of loss is even greater, because the fund manager might prune holdings and leave you with losses.

I don’t at all mean to be misleading.  Bonds and bond funds can be a very useful way to protect assets while receiving income in the form of interest or coupon payments.

But is it the safest place to be when we expect rates to rise?

There IS a solution

Yes, fixed index annuities provide conservative growth and asset protection to a greater degree than bonds in our current market.

I like to think of index annuities as bonds plus more…

….. Bonds plus more safety

….. Bonds plus more yield

….. Bonds plus more flexibility

Lets look at each of the ‘Pluses’ in more detail



Index annuities are bonds + safety

Insurance companies invest primarily in bonds, so the base asset behind the annuity contract is essentially the same as the bond you would buy….

…plus the reserves of the insurance company.

The insurance company itself issues you a guarantee and they bear the risk of bond devaluation based on changes in interest rates, which results in a guarantee of principal.

In sum, you get the Bond… Plus more safety, in a contract where you cannot lose money!

Therefore, Index Annuities Are Bonds Plus More Safety

Index annuities are bonds + yield

Insurance carriers that issue index annuities use your premium to buy bonds that yield interest income, and then use that interest income to buy options in a stock market index.

The market index options purchased by the insurance company are what drives the yield.  If the market does well, the contract owner captures a portion of that market rise.

Most caps and participation rates suggest that the potential gains far outpace yields on bonds of similar duration.   In recent years, renewals and actual contract statements bear this out (*Much depends on the crediting method selected, so your mileage may vary)

But in sum, you have more upside potential than by holding the bond itself…

Therefore, Index Annuities Are Bonds Plus More Yield


Index annuities are bonds + flexibility

Bonds are only a flexible investment if you can sell them.  But the price you’ll get could be higher or lower than what you paid depending on the rate environment at sale time.  This could be good or very bad, but you won’t know until it happens.

Now, if an unforeseen emergency forces you to sell, that crisis may come at a time when you’ll be forced to take a loss.  It’s not really the kind of flexibility most people want in retirement.

Index annuities come with a free withdrawal clause that allows 10% or more of the account value to be taken without penalty.  In addition, most contracts allow for full access to the funds in the case of major life emergencies including terminal illness, long-term care and death.

Unlike bonds, you have flexibility and no risk of loss whatsoever when a loss would hurt the most.

Therefore, Index Annuities are Bonds Plus More Flexibility



Summary- Bonds… Plus More

In summary, please let me repeat that I believe bonds to be a suitable retirement vehicle for many people.

The problem is that in today’s market environment bonds do not offer the overall benefits most retirees need for the safe side of a portfolio.

Index annuities are an option that provides more safety, higher yield potential, and the flexibility a person needs to make a retirement income strategy really work….

If you want more safety… more yield… more flexibility, then think Index Annuities instead of bonds.


Index Annuities Are Bonds…. Plus More!


All the best,

Bryan J Anderson

Annuity Straight Talk,   800 438 5121

Cons of Annuities

Most people approach the use of annuities in retirement planning with some sort of bias based on what they heard or read elsewhere.  There’s no shortage of negative opinions but you’ve got to consider where those opinions come from.  Typically you’re getting a perspective from someone who is in the business to sell you something else.

What do you think a Ford salesman is going to say when you mention the possibility of buying a Chevy?

It may come as a surprise to most people when they learn that I didn’t always like annuities either.  I didn’t like how annuities were sold so I learned to find the weak spots in a sales pitch and that would usually expose an under-performing product.  But I also found plenty of common features that looked very reasonable.

I have come to the conclusion that the cons of annuities are simply chosen add-ons that don’t have to come with a standard contract.  So avoiding the negative features comes down to how you use the annuity.

If a salesman doesn’t know how to use an annuity the right way then you will likely end up with an annuity that doesn’t work so well.  Let’s take a look at some of the cons of annuities so you know what to avoid.

The two biggest cons of annuities…

These are getting kind of tired but are still widely recognized as the biggest problems.

Fees:  You will be told that fees are too high and often undisclosed so they come as a surprise and work to        eliminate any possibility of yield.  Fees are directly related to options within a contract.  That means you choose whether you pay for an additional benefit.  An annuity without additional riders doesn’t have fees so it’s easy to eliminate the problem.  I don’t like fees and can show you how to use an annuity efficiently without paying extra for it.

Losing Control:  Most people are told that by using an annuity you are losing control of your money forever.  That is a general complaint about one specific kind of annuity.  And since lifetime income is not a very good deal then you have no need to lock money into a contract that pays for life.  If a plan is built properly you can get the same benefit without committing funds for life.  Less creative people have a hard time seeing the potential so you are likely going to continue to hear this.

Don’t ever forget this:  You only pay fees if you want to and there are plenty of ways to use an annuity and maintain control of your assets.

By debunking the two complaints above you can disregard 95% of the information you’ll hear about annuities that is negative.  There is more to it if you want to get technical but this really is about as simple as it needs to be.

Most people who don’t like annuities only say that because they are selling something else.  What you do with your retirement assets is your choice so you need to be able to logically compare the advice you get.

Annuities are just an option for protecting assets.  You have other options as well but the annuity will have some clear advantages, depending on what you are trying to do.  A good strategy is more important than anything and that’s the right place to start.

Go ahead and signup to receive the reports if you’d like to learn more or give me a call if you’d like to talk about how an annuity can improve your retirement plan.


Bryan J. Anderson


Limited Time Rate Hike For Fixed Annuities

For a limited time, Fidelity & Guaranty Life’s FG Guarantee-Platinum® single premium fixed deferred annuity with a five-year guarantee period will increase to 3.10%* – initial guarantee period. This special will start on February 6, 2017.

Most market observers see rates on a rising trend, and these shorter term contracts like the F+G are a good way to go.  It’s a way to safely place money, earn a decent yield, and turn the money over in just a few years.

While this specific product might not be appropriate for you, this flexible and laddered approach frequently comes up during appointments with clients discussing The AST Flex Strategy.  Give us a call to find out more.

Understand the Pros and Cons of Fixed Indexed Annuities

pros and cons of fixed index annuities

The pros and cons of any product are directly related to how you use that product.  With fixed indexed annuities it all depends on your goals and whether this type of annuity can help you meet those goals.

And when it comes to solving retirement problems, in every case there exists a “best” way to get things done.  Sometimes you need to disprove conventional knowledge to find it.

There is a way that 99% of the industry prefers to sell fixed indexed annuities.  That works for some people but most often it is not the “best” way to solve your problems.

A Better Way…

When you run the numbers, many annuity strategies decrease your net worth over your retirement years.  For many people it’s a necessary evil because it’s too risky to go without guaranteed income.  What if you can have the protection you want but get it in a way that allows you to increase your net worth through retirement?

For those of you who have saved enough to retire comfortably you will notice this is based on a few basic asset management principles.  You can eliminate the two biggest complaints about annuities and receive more benefit than you will get from any other strategy.  I don’t care who you saw on TV that says otherwise!

This is the beginning of a safe and flexible strategy that allows you minimize the cost for protection and in turn maximize the output from your portfolio.  You can check it out now using the link below.

Click here to learn more about this smart, flexible annuity strategy.  If you’d prefer, you may always call 800.438.5121 to talk about your situation, or continue reading if you’d like to start with the basics and learn what you can expect from fixed indexed annuities.  You owe it to yourself to make an informed decision.  Whether you use an annuity or not is a decision that needs to be made based on facts.


Each of the individual components of a fixed indexed annuity can be seen as a pro or a con, depending on your expectations and goals.  Let’s look at each of the major components and the positive vs. negative attributes of each.


Pro- You will never lose money.  The insurance company invests your premium in a portfolio of safe investments and backs it up even further with substantial company reserves giving your money the protection and guarantee that you need.

Con- This isn’t good enough for some people.  The cost for safety is limited growth and there are those that don’t mind risk in return for unlimited growth potential.

Earnings Guaranteed:

Pro- Once interest is credited to your account it is also guaranteed against loss.  Protected principal and earnings is a powerful benefit that pays off when markets are volatile.

Con- Most interest is credited once per year, although there are options for two and three year crediting as well.  This means your earnings potential depends on how the market finishes on a single day.  A significant drop in the market at the end of your crediting period can wipe out expected gains.  That can be positive as well but it’s important to not place all your expectations on a single year.

Caps, Participation Rates and Spreads: 

Pro- You get a risk-free option to track performance of a stock market index.  Option costs dictate how much of that gain you receive.  Specifics go deeper but the benefit is that you will experience yields that are far greater than any safe asset.

Con- Again, it all speaks to expectations.  If you think you can buy your own options and do better then go for it.

Surrender Periods: 

Pro- This is all relative to other safe money options.  CDs and Bonds have some long commitments as well but the annuity comes with access to funds and protection from interest rate risk.

Con- Many supposed experts tell you not to lock money up for extended periods of time.  It all depends on your plans for the money so if the annual free withdrawal is not enough to meet your needs then an annuity is not right for you.

Indices and  Crediting Methods:

Pro- Considering the entire annuity market, you have an overabundance of indices to choose from and crediting methods to use so no matter what your preference, there is an option available that will work for you.

Now- The Basics of How Index Annuities Work

The Pros and Cons of Fixed Index Annuities

The AST Flex Strategy helps you understand the pros and cons of fixed index annuities.

Index Annuities, Fixed Index Annuities, and Equity Indexed Annuities, all mean the same thing. These are all the same insurance product with different labels, but the correct name is a ‘Fixed Indexed Annuity’.

Fixed Index Annuities are nothing more than fixed annuities with a different method of crediting interest. With a fixed annuity, which is a lot like a CD, the contract owner receives a stated rate of interest each year.

But with an Index Annuity, the appreciation rate is calculated based on growth in an outside market index, like the S+P 500 or the Dow Jones index.

The beauty of Index Annuities is that if the market index goes up, the contract makes money. But if the index goes down, the principal is protected and the contract does not lose value.

Index annuities give consumers a partial participation in the markets, but offer a principal guarantee.

How Insurance Companies Make This Possible

How can insurance companies make a guarantee that your Fixed Index Annuity may go up, but will not go down?

Insurance companies in general use the premium they bring in to invest in safe assets in the general account.  Think of it like a large pool of conservatively invested money.

In a Fixed Indexed Annuity, the insurance company uses your premium to invest in bonds, mortgages, and other instruments in the safe, core general account.  This produces an annual rate of return, often known as the ‘general account’ yield.  The insurance company expenses are subtracted from this to create the yield you can expect to see with a fixed annuity.

But with an indexed annuity, instead of accepting this ‘general account’ fixed rate, the insurance company uses the interest earned from the conservative portfolio to purchase an option position in a market index.

If the market goes up, the company will exercise the option and realize a gain that is credited to your annuity account value.

If the market moves sideways or down, the option expires worthless and no interest – or gain- is available for crediting, but most importantly no loss of principal is realized.

Potential for Gain with No Risk of Loss

When talking about the pros and cons of fixed indexed annuities, the biggest positive is that index annuities truly offer you the potential for gains based on market appreciation, without the risk of loss to your principal.

Your principal is not at risk, rather, it’s only the earnings from your principal are invested in potentially higher yield options. Thus, an indexed annuity is a safe asset with upside potential.

This explanation also gives you a good idea why these are called “Fixed Indexed Annuities”. Income from the FIXED account growth is used to buy options in a market INDEX for potential gain.

 Using Fixed Index Annuities

Fixed index annuities are a great alternative to bonds and are a core, safe money holding often used to make sure principal is safe, and to preserve assets and options for later.

But far too often, the fixed indexed annuity is sold with income or long-term care benefits that add more cost and take away from the real benefits you need.

Additional cost is fine for additional benefit but you need to look at it from a different angle to see if if it truly gives you more money.  Most times it does not.  The key to getting the most out of an annuity is to use it so that the annuity allows you to get the most out of your total portfolio.  There is a best way to do it and that’s the only way I suggest doing it.

Like I said at the beginning, most annuities are sold in a way that decreases net worth in the long run.  But there’s a way to use an annuity that increases your net worth throughout retirement.  Are you interested in finding it?

We’ve produced The Annuity Guide as essential reading for retirees considering Fixed Index Annuities.  It is available for a free download at Annuity Straight Talk, and will help you find the safety and guarantees you need.

Click Here to get your copy today!

If you seek a qualified adviser well versed in the pros and cons of fixed index annuities, please do not hesitate to contact Annuity Straight Talk today on 800-438-5121.

Annuities and Retirement Happiness

annuities and retirement happinessIn a continuation of an earlier post, we have another study on how guaranteed income and annuities increase  overall retirement happiness.  The study focuses on how some portion of ‘annuitized’ assets increases overall happiness.

It seems that when people eliminate the stress and worry of ever running out of income, their overall peace of mind increases measurably.

The full study, by the firm TowersWatson, is available for download here.

Many Americans consider annuities as illiquid and expensive and thus have avoided them in the past, even as research has shown that the security provided by annuities boosts retirement satisfaction.

A 2003 study found that retirees with a higher percentage of annuitized income were happier on a cross-sectional basis and maintained higher levels of satisfaction over time than their less annuitized counterparts.

A 2005 study found that retirees receiving annuities from defined benefit pensions were happier than those without pensions and those with only a defined contribution plan.

Key Findings

  • Retirement satisfaction has steadily declined over the last decade.

  • Satisfaction is highest among those with high levels of wealth and income who are very healthy and annuitize their income.

  • Among retirees with similar wealth and health characteristics, those with annuitized incomes are happiest.

  • Annuities provide the biggest satisfaction boost to retirees with less wealth and those in poor health.

  • Despite variations, the satisfaction effects of annuitized income and general decline in retirement satisfaction are long term and extend across all respondents.

Magic Johnson Buys into Annuity Carrier EquiTrust


Recognizing the value of a growth industry, Magic Johnson has taken a major position in life and annuity company EquiTrust.  The company was purchased just a few years ago by Guggenheim Partners.

Guggenheim also bought Security Benefit and other life and annuity carriers just a few years back, and kicked off concern in the industry that the NY based investment company was not in the sapce for the ‘long haul.  Many of the index and hybrid annuity products offered by EquiTrust and especially Security Benefit sported flashy benefits and bonuses that masked low payouts and mediocre credit quality.  Billions of nmew premium flowed into these products nonetheless, giving Guggenheim lots more assets under management.

Now with thhis move, perhaps their overall plan is revealed- buy small to mid sized insurance companies, get control of the assets , retain those assets under investment advisory management, and then sell off the operating company.

Hopefulyl the deal works out for Mr Johnson.  I’m pretty sure it already worked out for Guggenheim…. I hope the policy holders fare as well too.

Here’s the article:

Magic Johnson Buys Into FIA Carrier EquiTrust

Retired basketball legend-turned-entrepreneur Earvin “Magic” Johnson has acquired more than 60 percent of EquiTrust Life from Guggenheim Partners.

The deal, which began last year, concluded for an undisclosed amount. EquiTrust is a leading writer of retail annuities. Guggenheim is a New York-based investment and advisory firm that reportedly had bought the carrier in 2011.

The deal gives Johnson’s firm — Magic Johnson Enterprises (MJE) – controlling interest in EquiTrust, which writes annuity and life insurance through more than 20,000 independent agents nationwide. The company is based in Chicago, with operations in West Des Moines, Iowa.

According to MJE, Guggenheim will continue to provide investment management services for EquiTrust.

A superstar in the business

For the insurance industry, this means a superstar has entered the annuity business. Johnson is the famed former Los Angeles Lakers point guard who is a two-time inductee to the National Basketball Association’s Hall of Fame. As founder, CEO and chairman of his own company, he has been investing in fitness sport centers, restaurants, travel, real estate funds and other businesses.

With this new investment, Johnson’s firm is extending its reach into the retail insurance market, especially the index and fixed-rate annuity market where the insurer has prominence.

At year-end 2014, EquiTrust ranked eighth in sales among 41 FIA carriers tracked by Wink Inc. In terms of overall fixed annuity sales at year-end 2014, the company ranked 14th in the top 20 list of fixed annuity writers, as posted by LIMRA.

The annuity products that EquiTrust writes include index-linked, multi-year guarantee and traditional tax-deferred contracts, and immediate-income annuities.

The company also sells life insurance life products including simplified-issue, wealth-transfer life insurance.

Formed in 1996, the carrier now manages more than $14 billion in assets. MJE was formed a little earlier, in 1987, and now invests in firms from many industries. So the two share a common bond in that their formative years were in close proximity to each other and that they have both grown substantially over time.

Future direction

But the bond that Johnson identified in his public statement on the closing has to more to do with future direction.

The acquisition will provide MJE with “a tremendous platform to advocate for financial literacy and assist in creating job opportunities at every level,” Johnson said. “We will educate and emphasize the importance of life insurance for estate planning and annuities for retirement planning purposes.”

He described this as not only “groundbreaking” but also as something that “continues my mission to invest in businesses where we can make a positive impact in the community.”

That aligns closely the company philosophy outlined on the MJE website — to hold a “firm commitment to strengthening urban and underserved communities” and work to “accelerate the advancement of multicultural communities.”

The celebrity factor

Annuity industry analyst Sheryl J. Moore is not sure whether Johnson’s celebrity status will impact annuity sales at the company. “In the past, I’ve see marketing group partners who have hired celebrities to help stimulate sales, but the feedback from the field that I’ve heard has tended to be uncertain,” the president and CEO of Moore Market Intelligence said in an interview.

“The producers would say things like, ‘How does this (celebrity) help my business?’”

Regarding the EquiTrust deal, Moore said she has not heard one single comment on the new ownership since news about the pending deal surfaced last year. “I’ve gotten calls from journalists, but not from producers,” she said.

No doubt other celebrities own stock in insurance companies, but no one in the industry talks about it, Moore added. “I’m not sure this is news for annuity producers”. Celebrities has a lot of impact on the society, and people really famous attract masses so when you something as a celebrity product or post like if you say Super Bowl Lady Gaga All Time Nude Pictures, people will be interested.

In the MJE case, though, the celebrity’s firm now has controlling interest, and this particular celebrity has a lot of knowledge about team strategy and championship. For those reasons alone, at least some industry onlookers will be watching to see whether this new boss takes the company’s sales, productivity, and other annuity and life insurance metrics to new heights.


401K Tipping Point? The Demographic Wave Builds

tipping-pointThere are several critical images to contend with when you look at demographics and retirement.  In fact, it’s one of the critical risks we contend with in retirement planning (You can read up on Demographic Risks Here)

Here’s the $.10 summary:

demographic risks 2

A wide bulge of Baby Boomers is approaching retirement, and they will start selling securities  at a more rapid clip than younger generations are saving and buying.

I personally believe that there is a significant wave of selling pressure on the markets in the years ahead.

This Wall Street Journal article doesn’t specifically touch on the demographics, but perhaps it’s an early warning sign that the net outflows from 401Ks exceeds the inflows….


Over the Hill: Retirees Yank 401(k) Funds

Withdrawals from 401(k) plans are now exceeding new contributions as baby boomers age, a shift that could have profound implications for the U.S. retirement industry.

Investors pulled a net $11.4 billion from tax-deferred savings plans in 2013, according to an analysis of government data provided to The Wall Street Journal by BrightScope Inc., ending decades of expansion. Complete industry information for 2014 isn’t yet available.

The movement out of 401(k)s is expected to accelerate in the coming decade as more baby boomers retire, squeezing large money-management firms that rely on fees charged to employers and investors as a chief profit engine, some analysts said.

Asset managers hope they can replace the outflows with a new surge from millennials or other products, such as individual retirement accounts. One industry data provider said most funds leaving 401(k)-style plans are migrating to IRAs.

It is “an inflection point” for the U.S. retirement industry, said J.P. Morgan Chase & Co. analyst Ken Worthington in a research note in April.

Large money managers will be forced to cut fees, offer different products or consolidate operations, Mr. Worthington added in an interview. “It changes the dynamic of the business itself.”

Tax-deferred 401(k) retirement accounts came into wide use in the 1980s as big companies embraced them as a replacement for costly pension funds. Baby boomers were the first generation to rely heavily on the savings plans and helped create a multitrillion-dollar industry that supported hundreds of investment firms and financial planners. Learn more about business, and visit Lee Rosen‘s blog.

Assets held by 401(k) plans ballooned to $4.6 trillion in the fourth quarter of 2014, up 171% from $1.7 trillion in 2000, according to the Investment Company Institute, a trade organization for mutual funds.

Now the 401(k) generation is ready to take its money out as the number of Americans reaching retirement age this year is expected to hit 3.5 million, up from 2.7 million in 2010, according to J.P. Morgan Chase and Census Bureau data.

One investor preparing to begin his exit is Dave Bernard, 56 years old, who retired three years ago as a consultant to startups in Cupertino, Calif. He and his wife, an office manager, both have a sizable amount invested in their 401(k)s, but in the coming months, when his wife retires, Mr. Bernard will start pulling money out of his plan for living expenses.

He expects to make withdrawals for about 10 years until he can access the full amount of Social Security benefits.

“We’re going to end up using a good portion of our 401(k) to subsidize us,” Mr. Bernard says.

The biggest 401(k) operators in the U.S. noticed the shift first since they generally serve older workers, according to BrightScope. In the past four years, investors pulled a net $12.8 billion from the top 25 plans by assets, according to BrightScope.

Estimates vary on how long the 401(k) net outflows will last and how severe they will become. Financial-services research firm Cerulli Associates projects outflows will persist at least until 2019 when investors will pull an estimated $51.6 billion, according to a December report. J.P. Morgan predicted in its April note the trend will last through 2030, with outflows peaking at $40 billion in 2019.

That money could stay with the retirement industry if baby boomers move 401(k) funds to IRAs. Contributions into IRAs are expected to reach $546 billion by 2019, up from $205 billion in 2003, according to Cerulli.

Some money managers are banking on another demographic group to reverse this shift: millennials. But they acknowledge that will require some convincing.

“Millennials haven’t moved into a higher savings rate yet,” said Douglas Fisher, Fidelity Investment’s head of policy development on workplace retirement. Fidelity is one of the largest providers of 401(k)s, managing accounts for 13 million people across 20,000 companies.

“We need to start getting them to the right level,” he said.

But even if millennials boost their savings, it will take some time for asset managers to see the benefits, said Mr. Worthington of J.P. Morgan.

“Redemptions in the industry are actually going to get worse for the next four to five years,” he said.

Scott David, the head of U.S. investment services for fund firm T. Rowe Price Group Inc., says the key to offsetting outflows from retirement plans is to move older workers into different products at the firm. T. Rowe also is among the largest 401(k) providers.

“Their distribution from a 401(k) plan just means they’re entering a different part of their life,” he says. “They still have investment needs, but their investment needs will change a bit.”

Some money-management firms are expected to lower fees in an attempt to keep market share.

Vanguard Group and Fidelity recently made moves to cut fees in retirement products, and 401(k) participants invested in stock mutual funds paid an average expense ratio of 0.58% in 2013 as compared with 0.63% a year earlier, according to the Investment Company Institute and Lipper Analytics, a mutual-fund research firm. Other fee rates in mutual funds also dropped that year.

One investor who is ready to pull money even though she doesn’t need it is Denise Dobkowski Hammond, 68, who retired about seven ago from her post as treasurer of West Bloomfield, Mich. Ms. Hammond says she saved as much as she could her entire life, putting the maximum amount into her retirement accounts and paying off her house.

Ms. Hammond said she doesn’t need her savings to live on, but a federal law requires her to start withdrawing money from her 401(k) at age 70½.

“I’ll pull out the minimum unless the kids need something,” she said.

When Losing $20 Million Isn’t A Big Deal- Tim Duncan’s Financial Nightmare

Tim DuncanBy all accounts, Tim Duncan is a very wealthy man, with over $220 Million in career earnings.  But a pending suit is showing just how bad things can get.  The article is below.

The lesson here?

Diversify your risks, and that includes making sure your have a couple managers looking over your affairs, and perhaps even looking over each other’s shoulders.

And like Ronald Reagan said, Trust, but Verify…

Duncan’s quote in the article is telling: “I’m a loyal guy. I’m a man of my word, and I assumed other people would be that way,” Duncan said. “That’s just not the case in life.”

Here’s the whole article, originally seen HERE

Tim Duncan isn’t worried after losing $20 million due to a dishonest financial adviser

The Big Fundamental has played 18 seasons in the NBA. He has dominated each and every one of those seasons. And even though he took a hometown discount to help the San Antonio Spurs in his last contract, the bottom line on Tim Duncan’s ledger is still an astronomical sum for the common man.

Duncan has earned over $220 million in his career, which is why he’s not too worked up about losing $20 million to a dishonest financial adviser.

Charles Banks, who served as Duncan’s former financial adviser, is being sued by Duncan over a faulty investment. As reported by Bloomberg, Banks hid his own interest in investment opportunities recommended to Duncan. The losses were found after an audit of Duncan’s fiduciary state as part of his divorce.

“I trusted someone to do a job that I hired them to do and they misused my trust and went astray and started using my money,” Duncan said of Banks.

However, Banks sees it differently. In his eyes, he did nothing wrong and is actually surprised by Duncan’s lawsuit from a consumer class action law firm.

“The note specifically discussed in Mr. Duncan’s complaint is current, Mr. Duncan is receiving 12 percent interest on that note, and Mr. Duncan’s investments as a whole have performed well. We are confident that when all the facts are heard, it will be clear that the claims presented lack foundation,” said Banks’ attorney Antroy Arreola.

Fortunately, Duncan says this will not impact his bottom line.

“This is a big chunk, but it’s not going to change my life in any way. It’s not going to make any decisions for me,” Duncan said.

The last sentence, of course, is a subtle nod towards potentially retiring this summer.

“I’m a loyal guy. I’m a man of my word, and I assumed other people would be that way,” Duncan said. “That’s just not the case in life.”

Duncan’s portfolio included hotels, beauty products, sports merchandising, and wineries that belonged to Banks.



New Lows- Baby Boomer Retirement Confidence Study

Social security card

As our economy continues to sputter along, from the front lines of retirement planning I continually feel like we are in a tenuous economic environment. The effects of a prolonged post recession period of what feels like tepid growth are showing up as new people call in to Annuity Straight Talk concerned about their retirement income and finances.

It seems that while no one is getting wiped out as so many did in 2008-9, it also seems that no one is really thriving right now.

And my front-line barometer seems to be in keeping with studies and more formal research.

The Insured Retirement Institute (IRI) today released a new research report that found Baby Boomers’ confidence in having sufficient savings to last throughout retirement has dropped to a five-year low. Declining each year since 2011, the first year this study was conducted, the report found only 27 percent of Boomers are highly confident their savings will last. Despite the drop in confidence, 44 percent of Boomers expect their financial situation to improve during the next five years, up from 32 percent in 2012.

The prolonged low rate environment means it takes significantly more assets to maintain a lifestyle. A good rule of thumb used to be that you needed about 18x your annual income needs in retirement savings to be comfortable. Now, we look at 25x as a more sustainable multiple.

Now, your mileage will vary and this is only a rule of thumb, but when you combine low rates and rising longevity, the picture is pretty clear. It take more money just to hold your position than it used to.

You can read this study here

Here are some other facts:

  • 19% of Boomers are extremely or very confident they will have enough money to pay for higher education costs for their children, down from 34% in 2014 but about the same as in 2012, when this question was first asked.
  • 28% of Boomers are extremely or very confident they will have enough money to pay their medical expenses in retirement, down from 37% in 2011.
  • More than one-third of working Boomers (36%) plan to retire at age 70 or later, significantly higher than the one in five (19%) that planned to retire at or after age 70 in 2011.
  • Less than half of Boomers believe it is somewhat or very important to leave an inheritance for their loved ones, down from 62% in 2011.
  • One in five Boomers (18%) are uncertain when they might retire, and three-quarters of them cite not having saved enough or being unsure they will have enough to retire on as the reason for their uncertainty, compared to almost four in 10 (39%) that were unsure of their retirement age in 2011.
  • One in five Boomers are extremely or very confident they will have enough money to pay for long-term care in retirement, down from about one-quarter in prior study years.

The silver lining:

One interesting finding in the study is the significant difference in outlook the survey revealed for those who are working with financial advisors.  Boomers who work with advisors are more satisfied, and the gap is widening:

  • Among Boomers who work with advisors, however, only one in 20 are unsure of their retirement age.
  • In 2015, seven in 10 Boomers (68%) who work with an advisor are extremely or very satisfied with the way things are going in their lives, versus only four in 10 (42%) of those who do not work with an advisor.
  • In 2014, about four in 10 Boomers working with an advisor were satisfied, as were six in 10 not working with an advisor.

And here is the most revealing of the findings:

Annuity ownership is highly correlated with retirement planning, retirement readiness, and positive retirement expectations.

  • Over nine in 10 Boomers who own annuities have money saved for retirement; less than half of Boomers who do not own annuities have retirement savings.
  • Eight in 10 Boomers who own annuities expect their money to last throughout retirement, and to have at least some disposable income for travel and leisure, compared to less than half of those who do not own annuities.
  • More than six in 10 Boomers have calculated the amount they think they will need to have saved to retire, versus less than one-third of non-annuity owners.
  • More than six in 10 annuity owner Boomers have consulted a financial advisor to help them prepare for retirement; fewer than two in 10 non-annuity owners have taken this step.

The lesson:

Be in that top tier of people proactively preparing for retirement. Be an annuity owner and be prepared!

We’re ready for you when you are ready to take that next step,

All the best,


Nathaniel M. Pulsifer and Bryan J Anderson

Annuity Straight Talk

800 438 5121

A Plea For Common Sense

2-rules-money-Warren-BuffettWe frequently dive into politics at Annuity Straight Talk with our customers but I’ve shied away from being too outspoken on the web for fear of offending.  But I got a forwarded email today from a good friend that is just too sensible to pass up.

Now, I always appreciate the wisdom in Ronald Reagan’s “Trust but Verify” statement, and so I looked up the proposal that I’ll quote, below.  While the email sent to me was titled “The Buffett Rule”, of course the Sage from Omaha did not pen this missive.  There are a few other ‘stretched’ facts in here about Congressional salaries too, but overall, this isn’t a bad starting point for some sensible reforms  that align the interests of the people and Congress.  Here’s where I checked:

So with the appropriate dose of salt, enjoy what seems like a sensible proposal:

We must support this – pass it on and let’s see if these idiots understand what people pressure is all about.

Salary of retired US Presidents .. . . . .. . . . . .. . $180,000 FOR LIFE

Salary of House/Senate members .. . . . .. . . . $174,000 FOR LIFE This is stupid

Salary of Speaker of the House .. . . . .. . . . . $223,500 FOR LIFE This is really stupid

Salary of Majority/Minority Leaders . . .. . . . . $193,400 FOR LIFE Ditto last line

Average Salary of a teacher . . .. . . . .. . . . . .. .. $40,065

Average Salary of a deployed Soldier . . .. . . .. $38,000

I think we found where the cuts should be made! If you agree pass it on, as I just did.

Warren Buffet, in a recent interview with CNBC, offers one of the best quotes about the debt ceiling:

“I could end the deficit in five minutes,” he told CNBC. “You just pass a law that says that anytime there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election”.

The 26th Amendment (granting the right to vote for 18 year-olds) took only three months and eight days to be ratified! Why? Simple! The people demanded it. That was in 1971 – before computers, e-mail, cell phones, etc.

Of the 27 amendments to the Constitution, seven (7) took one (1) year or less to become the law of the land – all because of public pressure.

Warren Buffet is asking each addressee to forward this email to a minimum of twenty people on their address list; in turn ask each of those to do likewise.

In three days, most people in The United States of America will have the message. This is one idea that really should be passed around.

Congressional Reform Act of 2015

  1. No Tenure / No Pension. A Congressman/woman collects a salary while in office and receives no pay when they’re out of office.
  2. Congress (past, present, & future) participates in Social Security.

All funds in the Congressional retirement fund move to the Social Security system immediately. All future funds flow into the Social Security system, and Congress participates with the American people. It may not be used for any other purpose.

  1. Congress can purchase their own retirement plan, just as all Americans do.
  2. Congress will no longer vote themselves a pay raise. Congressional pay will rise by the lower of CPI or 3%.
  3. Congress loses their current health care system and participates in the same health care system as the American people.
  4. Congress must equally abide by all laws they impose on the American people.
  5. All contracts with past and present Congressmen/women are void effective 12/1/15. The American people did not make this contract with Congressmen/women.

Congress made all these contracts for themselves. Serving in Congress is an honor, not a career. The Founding Fathers envisioned citizen legislators, so ours should serve their term(s), then go home and go back to work.

If each person contacts a minimum of twenty people, then it will only take three days for most people (in the U.S.) to receive the message. Don’t you think it’s time?


If you agree, pass it on. If not, delete.

Failings Of The 4% Rule- New Research

4pctThe often quoted ‘ 4% rule’ whereby a retiree’s portfolio is drawn down methodically by 4% per year, is the source of great pain in volatile markets.

Blindly sticking to this withdrawal rate when markets are down exposes investors to ‘reverse dollar cost averaging’, otherwise known as selling when you are down.

And further, in boom years, sticking to just a 4% withdrawal rate might be shortchanging your retirement.

In short, there is no magic withdrawal rate that works for everyone.

To actually achieve optimal utility of assets (to use a grown up sounding economic term) you simple must shift some risk to a third party.

The most common risks we shift using annuities are longevity risk (the risk of outliving your money) and market/sequence risks.

Longevity Risk:

To shift longevity risk, simply buy an income you can’t outlive.  Guaranteed lifetime income, from immediate annuities or index annuities with lifetime income riders, or deferred income annuities, all do this job well.  which is right for you depends on a lot of factors, which is why we’re here to help.

Market Risk:

And market/ sequence of returns risk is handily mitigated by placing a portion of your assets into guaranteed income or guaranteed outcome tools- level out and stabilize your portfolio by removing market risks and you increase overall stability and safety.

New Research:

Now, the items summarized above are worked over in new research from PriceWaterhousCoopers and recently published in the Retirement Income Industry Association journal.  The article is quoted below, and you can find it and the PWC study HERE

Financial Industry’s 4% Rule Does Not Work For Most Americans

Financial Industry’s 4% Rule Does Not Work For Most Americans:
New PwC US Report Shows Need for New Planning Approach that Reflects Retirement Realities

BOSTON, MA, April 15, 2015 – The financial industry’s 4% rule, which has been used historically as a guideline for asset withdrawals in retirement, may work for the wealthy, but not most Americans, according to a new PwC US report, which will be published in the upcoming Spring 2015 issue of the Retirement Income Industry Association® (RIIA®)’s Retirement Management Journal®.

The report, based on findings from PwC’s Retirement Income Model, shows that following the 4% rule will lead most retirees to use up savings earlier than planned or to significant reductions in wealth for the affluent. The report highlights the impact of wealth, sequence of returns and consumption, and unplanned financial shocks on 4% rule-based retirement outcomes.

“According to philosopher H.L. Mencken: For every complex problem there is an answer that is clear, simple, and wrong,” notes Elvin Turner, RIIA’s Business Unit Director for Research. “For the majority of client households, a more holistic and dynamic planning approach that takes into account retirees’ behaviors is required. The body of research that shows most retirees spending much more in their early retirement years than later years is just one example of the way in which retirement realities don’t fit a 4% withdrawal world.”

PwC’s Retirement Income Model (RIM) is a retirement planning tool that draws upon a range of data and economic sources, and tracks actual consumer behavior to calculate expected retirement outcomes. It is able to incorporate the impact of non-linear events on clients’ financial experiences in retirement, such as health care events or economic shocks. The RIM leverages PwC’s behavioral economics framework, which captures how households make saving and consumption decisions based on behavioral preferences, and RIIA’s core Household Balance Sheet℠ (HHBS℠) approach to understanding the complete financial picture or “fundedness” of retirees.

The safety and efficacy of Naturaful review products just hasn’t been evaluated, so I would caution you on their use. In addition, there is no data to suggest that a lack of nutrients diminishes breast development.

“The Retirement Income Model offers a new dynamic approach to retirement planning that reflects real world realities at an individual level,” said Anand Rao, analytics principal, PwC US. “In addition to projecting outcomes based on market returns and expected consumption, it is sophisticated enough to determine the impact of ‘What if?’ scenarios related to major household events – such as marriage, childbirth, employment changes and deteriorating health – on retirement savings, future drawdowns, and retirement portfolio balances.”

The paper shows that in real life, regardless of how good average returns are over time, it really matters when the good and bad investment years occur. If investment returns are low or negative in the early years of a portfolio, the client may find that their financial plans have been ruined as a result of sequence of returns risk. It also highlights the key role of consumption risk – higher levels of consumption in earlier stages of retirement – in retirement outcomes.

“While the 4% rule of thumb has become a foundational aspect of retirement planning wisdom, advisers and their clients understand that retirement spending will vary over time,” added François Gadenne, Founder, Chairman and Executive Director of RIIA. “This paper reveals the impact of these non-linear experiences and behaviors on retirement outcomes. It demonstrates the importance of having more sophisticated tools such as the Retirement Income Model to help clients plan for real world retirement scenarios to achieve more predictable and successful retirement outcomes.”

Download the report.

About RIIA:

The Retirement Income Industry Association (RIIA) is a not-for-profit industry association that was started in 2005 and launched publicly in February 2006 to discuss the new realities of the retirement business and to do so from the perspective of “The View Across the Silos℠”.

RIIA has developed the retirement body of knowledge that supports its professional designation: the Retirement Management Analyst® (RMA®). RIIA organizes conferences and events, professional education for RMAs, publishes a peer-reviewed journal (Retirement Management Journal®), offers twice-monthly weekly retirement-focused webinars through its Virtual Learning Center, manages a 7000 person strong LinkedIn discussion group, provides research and other services to the industry and its clients. More information about RIIA can be founded at

Darryl Strawberry’s Payments- It’s Hard to Compete With Crazy

As a follow on to last week’s high drama regarding the Darryl Strawberry payments up for auction, an astute reader sent me the following article (quoted below) this morning.  The article was published just after the auction sale yesterday in Chicago.

The winning bidder agreed to pay $1,300,000 for this payment stream- more than twice what I thought made sense.

Wow- basically, this bidder bought an unsecured general obligation of the baseball team, for a yield of a hair over 5%…

Hopefully the buyer has some inside knowledge of the transaction to make this make sense…. because I sure don’t see the logic!

We deal in guaranteed payment streams here at Annuity Straight Talk so while most people are focused on the star value of baseball player, we were focused on the underlying credit quality to determine the bid.  How safe are the Mets? That’s the rub.

Probably they will be fine, but the deferred compensation agreement underlying this deal made it quite clear that there was no guarantee, no set-aside funds, and no ‘asset’ there…. just a promise to pay in the future.  That demanded a far higher rate of return than 5.1% for the credit risk.

Here’s the illustration:

Darryl Strawberry Payment- Winning Bid

Darryl Strawberry Payment- Winning Bid


Here’s the article from ESPN as well-

Mets pay winning bidder OF’s checks

The Internal Revenue Service on Tuesday auctioned off the money owed to Darryl Strawberry from the New York Mets contract he signed in 1985.

A man, who did not want to be identified, agreed to pay $1.3 million to receive a check from the Mets of $8,891.82 a month for the next 18½ years. Assuming a realistic timeline for the court to approve the sale, the value of the deferred payments will equal close to $2 million.

USA TODAY SportsMets money owed to Darryl Strawberry that was seized by the IRS as payment for back taxes was won at auction Tuesday.

Strawberry was forced to give a portion of the deferred money from the contract to his ex-wife, Charisse, as part of their divorce settlement in 2006, but the payments were never made.

In 2010, Charisse filed for Chapter 7 bankruptcy protection and, as part of the proceedings, asked for what was owed. But in September, a judge in the Northern District of Florida ruled that the annuity was the property of the IRS, not Charisse, because Darryl still had not settled his tax debt owed for 1989, 1990, 2003 and 2004.

A person in the room at Tuesday’s auction in Fairview Heights, Illinois, said that the IRS momentarily held up the auction as Charisse tried to file an injunction to halt the sale, which required a minimum bid of $550,000.

Anuj Kumar, an investor from Austin, Texas, said he usually invests in stocks and bonds, but the unique nature of the property was intriguing enough to fly in for. Due to mail-in bids, bidding started at more than $900,000, Kumar said, which was close to the number he was looking for. Kumar said there were roughly 25 people in the room, but the winning bidder showed the most interest all along.

“You could tell he wanted it no matter what,” Kumar said.

Given the present value of the deferred money on the $1.3 million sale price, the rate of return for the winning bidder is about 5 percent.

The total value of the contract, which covered his 1985 through 1990 seasons, was $7.1 million, but nearly 40 percent of his $1.8 million team option in 1990 ($700,000) was deferred and put into an annuity with a 5.1 percent interest rate.

From 1987 to 1990, Strawberry failed to pay $542,572 in taxes, according to court documents. As of November 2013, Strawberry owed at least $80,000 from his tax liability from missed payments in 2003 and 2004.

The Mets famously bought out the final year of Bobby Bonilla’s contract in January 2000 and deferred the $5.9 million deal into 25 payments of $1,193,248.20 that began in 2011 and end in 2035. By deferring, Bonilla turned the $5.9 million into $29.8 million after negotiating an 8 percent interest rate on the deferral.

The Perils Of Not Paying Taxes- Darryl Strawberry’s Payments

strawberry$8892/ Month for 20 years, for only $550,000??? A 21% effective rate of return!!??

Not so fast…

There are only two certainties in life, death and taxes. And when you don’t pay your taxes, the IRS gets even, and then gets what is coming to them.

Darryl Strawberry, the famous New York Mets baseball player, forgot to pay his taxes for several years. Like many sports players, part of his compensation package was deferred. While not exactly an annuity, he did have a 30 year payment stream from the Mets that paid out long after he left the game.

ESPN Link and Forbes Link

Unfortunately, he didn’t keep up with his taxes, and the payment stream was seized by the IRS. It is available for sale and is such an interesting opportunity, that we are putting it out to our members and readers to see if there is interest.

I was only made aware of this yesterday, and did a little research as fast as I could.

The details are taking shape minute by minute, but here’s what I know as of Friday, January 9.

  • A federal court has seized the payment stream and is offering it for auction on January 20
  • the sale will be confirmed by a court order
  • The available payment stream is $8891.82 per month for 226 months, starting immediately and ending December 1 of 2033
  • To bid, we will need to submit certified funds of 20% of the bid amount.
  • The minimum bid is $550,000, however I suspect the payment stream to sell for somewhat more than this amount.
  • The buyer can be an IRA, a trust, or one or more individuals. Like other discounted cash flows, it would be considered taxable income, the exact tax treatment is between the buyer and their tax counsel.
  • A beneficiary can be designated, and upon death of the buyer, the remaining payments would go to the designated beneficiary.

Now here is a larger list of things I don’t know yet.

  • The purchase price. This is to be determined at a sealed bid auction on January 20.
  • The rate of return on investment. This is determined by the purchase price, which is unknown.
  • The strength of the court order.
  • The true nature of the payor: Is at the New York Mets, or is it an underlying annuity? That is an open item. Let’s hope there is actually an annuity… not a general obligation of the Mets.
  • The IRS auctioneer has stated that the IRS will not impose withholding taxes on the New York Mets, for this payment stream, however that has not yet been confirmed in writing by both parties.
  • What the New York Mets will do with a new payee- they have been silent on the auction and there is no stipulation agreement that I am aware of yet.
  • My guess is that they will be bidding as well, if only to clear their books of a future payment liability.
  • Likewise, I am as yet unaware of any other claims to the payment stream, or challenges to the court order or the IRS seizure. Caveat emptor.

Why do I want to jump in to this?

Frankly, it would make a heckuva good press release when it’s all done.

While this is not a payment stream we will buy directly in the business trust, I would be willing to manage the transaction directly, to work through the legal and due diligence issues quickly, if I have a solid buyer(s).

I’d need to line up a solid buyer(s) this weekend, and my fee would be a nominal buyer’s premium such as you find in most auctions.

Your investment and yield, therefore, is determined by you as we hustle through discovery next week and determine what to bid.

This is a fascinating case because it’s very high profile. Owning Darryll Strawberry’s annuity is definitely unique.

But there are risks to the payment that you don’t find in normal secondary market annuity transactions. If this is a general obligation of the New York Mets, and not an annuity backed payment stream, then risks are much higher. I reserve the right to be wrong on this, and hope I am.

There are a lot of things that I don’t know yet, but it would be fun to figure out. It’s Friday afternoon, and there are really only five business days available to do all the due diligence.

If anyone wants to take a stab at it, give me a call. I’ll bring you up to speed on what I know as quick as possible.


Let’s Play Ball!

Nathaniel M. Pulsifer


Update, as of January 14th, 2015

We had a very strong response to the email a few days ago about this payment stream, and dug in over the weekend and Monday with one investor in particular who had the stomach to handle the deal.

Our counsel assisted greatly and determined that the IRS seizure of Darryl’s payment *should* create a free and clear right to receive payments upon confirmation by the court. The draft court order appears to be favorable and there were only a few loose ends to clarify in writing with the Mets counsel. This, of course, given limited time to review and get up to speed.

The various parties to the case, including bankruptcy trustee, ex wife, and Darryl, appeared to be in line and we felt reasonably confident there were no boogeymen or skeletons in the closet that would rear their head to make a claim and throw the whole mess back into litigation after the auction.

It was certainly not a deal I would have felt representing to people as ‘safe’ in any way, however.

The bad news is that with this deal, in a best case scenario, is that you’d buy exactly what they represented- an un-secured general creditor obligation of the Mets ball club.

No underlying annuity, no set-aside trust account, no guarantees…

Being in the business of guarantees, and particularly, guarantees from highly rated carriers, we at AST and our prospective investor decided to take a pass on this deal. Even though we had expressions of interest for the deal 3 or 4 times over, it just would not be worth the risk.

It was fun to look, but wondering if next month’s check would be coming in for 20 years, from a baseball team, did not sound like fun…

There’s still time to bid if you really want to take a chance… Just need a cashier’s check in Chicago on Tuesday the 20th, for $110,000, and then we can figure out how much it’s worth to you at the auction…

I’d love to be there to see what it ends up trading for.

How I Lost All My Money- The Week Article

logoIn recent months I’ve become a huge fan of “The Week” because the articles are quick, to the point, and cover a wide range of views on a topic.  You can get the whole spectrum of biases and analysis in just a few paragraphs.

The Christmas issue has a poignant article that I’ll quite in its entirety below.  It is especially shocking to think that if the author had made a few intelligent moves to secure lifetime income, he could have avoided much of the pain of this scenario, however the author clearly takes responsibility for his financial outcome.  Above all, the author admits to retiring too early, and not having a clear sense of what his accumulated funds could supply in terms of income.

This is well worth reading in full, and making sure you don’t let this happen to you.  Here is the Original Article:

How I lost all my money

I had a successful career and a good life. I never imagined that one day I’d be poor.

By William McPherson, The Hedgehog Review | December 21, 2014

THE RICH ARE all alike, to revise Tolstoy’s famous words, but the poor are poor in their own particular ways.

I have some personal experience here. Like a lot of other people, I started life comfortably middle class, maybe upper-middle class; now, like a lot of other people walking the streets of America today, I am poor. To put it directly, I have no money. Does this embarrass me? Of course it embarrasses me — and a lot of other things as well. It’s humiliating to be poor, to be dependent on the kindness of family and friends and government subsidies. But it sure is an education.

If money defines class, the sociologists would say I was probably at the higher end of the lower classes. I’m not working class because I don’t have what most people consider a job. I’m a writer, although I don’t grind out the words the way I once did. Which is one reason I’m poor.

My income consists of a Social Security check and a miserable pension from The Washington Post, where I worked intermittently for a total of about 25 years, interrupted by a stint at a publishing house in New York City. I returned to the Post, won a Pulitzer Prize, continued working for another eight years, with a leave of absence now and then. As the last leave rolled on, the Post suggested I come back to work or, alternatively, the company would allow me to take an early retirement. I was 53 at the time. I chose because I was under the illusion — perhaps “delusion” is the more accurate word — that I could make a living as a writer, and the Post offered to keep me on its medical insurance program, which at the time was very good and very cheap.

The pension would start 12 years later, when I was 65. What cost a dollar at the time I accepted the offer would cost $1.44 when the checks began. Today, what cost a dollar in 1986 costs $2.10. The cumulative rate of inflation is 109.7 percent. The pension remains the same. It is not adjusted for inflation. In the meantime, medical insurance costs have soared. Today, I pay more than twice as much for a month of medical insurance as I paid in 1987 for a year of better coverage. My pension is worth half what it was. And I’m one of the lucky ones.

I was never remotely rich by what counts for rich today. But I look through my checkbooks from 25 and 30 years ago and I think, Wow! What happened?

IT WAS A long, slowly accelerating slide, but the answer is simple. I was foolish, careless, and sometimes stupid. As my older brother, who to keep me off the streets invited me to live with him after his wife died, said, shaking his head in warning, “Don’t spend your capital.” His advice was right, but his timing was wrong. I’d already spent it.

I’d wanted to explore and write about Eastern Europe after the fall of the Berlin Wall, which I did for several years. It was truly a great adventure: It changed my life, and it was a lot more interesting than thinking about what it cost, which was a lot. There’d always been enough money. I assumed there always would be. (I think this is called denial.) So another dip into the well.

I bought shares in AOL before it really took off and in Apple when it was near its bottom. I figured Apple’s real estate must be worth more than the value the market gave the company. I was right. Shares in both companies soared. If I’d shut up and stayed home…but I didn’t. I turned my brokerage account into a margin account for someone else to handle, and I left the country again. A few more dips into the well, a few turns in the market, a few margin calls, and when I went back for another dip, the well was empty. The old proverb drifts back to me on a wisp of memory. A fool and his money are soon parted. My adventures were over.

The story is, of course, more complicated than that — whose story isn’t? — but these are the essentials. It’s unlikely, and it’s not intended, to evoke sympathy. I’d acted like one of those people who win the lottery and squander it on houses, an Audi A1, family, and Caribbean cruises. But I hadn’t won the lottery; I’d fallen under the spell of magical thinking. In my opinion, I didn’t squander the money, either; I just spent it a little too enthusiastically. I don’t regret it.

When my writing was bringing in a little money, I had a Keogh plan, and when I was at the Post, a 401(k) account. I’d made a little money in real estate and received a couple of modest but nice inheritances, which together, and with Social Security and the pension, would have given me enough income to live on, had I not felt I’d lost the ability to continue writing and had I forgone, or at least spent more modestly on, my work in Europe and related activities, avoided the margin account, and so on. The “so on,” I should add, included a major heart attack that led to congestive heart failure, a condition that greatly reduced my physical resilience and taxed my already-limited income.

There are a lot of people like me, exiles from the middle class who suddenly find themselves on Grub Street. I am not trying to exaggerate my own particular plight. I’ve never had to apply for welfare or Medicaid or food stamps. I have asked the Department of Housing and Urban Development (HUD) to subsidize my rent and a Washington, D.C., office to subsidize my medical insurance payments. That involved a lot of paperwork but not a lot of lines, and I am very glad to live in subsidized housing with a number of people who really run the gamut. One of them is the great-grandson of Leo Tolstoy. Some were trained as lawyers from Parkersburg WV Car Accident Lawyers | Serious Injury Law Group, some have doctoral degrees, some were teachers. There are journalists and writers. What we have in common is we are all older, we are all poor, and each of us has, to a greater or lesser degree, the ailments that come with age. As everybody knows, if you don’t have good insurance, medical bills can be catastrophic and have been for some of us here. But I think all of us would agree that living here beats living in a homeless shelter.

Compared with most poor people, I am fortunate. If you’ve got to be poor, finding yourself at the upper edge of poverty with a roof over your head and a wardrobe that doesn’t look as if it came from the Salvation Army is as good as it gets. It also helps to be white.

An African-American trainer at a gym I used to go to before the well went dry had a lot of clients and must have made decent money, enough to support himself and his son, anyway. He was walking down Connecticut Avenue one day when he saw one of his female clients approaching.

“I don’t have any,” she exclaimed and turned abruptly away as he was opening his mouth to greet her. “I don’t have any money!”

She didn’t see my friend Jeff; she saw a black man in trainers about to ask her for a handout on one of the busier avenues in the city. Jeff doesn’t look like a hustler. He doesn’t look poor. I don’t look poor, either, but I am white. So I never suffered that kind of demeaning slight.

BY FEDERAL GOVERNMENT standards, I’m not poor, but by any rational standard, I am. My income is above $11,670 annually, which, in 2014, puts me above the poverty line for a single person. My Social Security comes to more than that. The federal minimum wage in 2014 is $7.25 an hour, or $15,080 annually. When FICA taxes of 7.65 percent for Social Security and Medicare are deducted, that brings the income of a full-time minimum-wage worker to $13,949. For a family of three, the poverty line is $19,790. This is not a joke. It doesn’t leave much extra for an ice cream cone.

I have a roof over my head, thanks to the aforementioned HUD subsidy, which required hours of paperwork, signed affidavits from doctors, many duplicate copies, and a lot of running around.

If you’re poor, what might have been a minor annoyance or even a major inconvenience becomes something of a disaster. Your hard drive crashes? Who’s going to pay for the recovery of its data, not to mention the new computer? I’m not playing solitaire on this machine; the hard drive holds my work, virtually my life. It is not a luxury for me but a necessity. I need dental work. Anybody got $10,000? Dentists are not a luxury. Dental disease can make you seriously ill. Lose your cellphone? What may be a luxury to some is a necessity to me. Without that telephone and that computer, my life as I have known it would cease to exist. Not long after, so would I. I am not eager for that to happen. Need to go to a Funeral care in Perth hundreds of miles away? Who pays for the plane ticket? In the case of the funeral, my nephew paid for the plane ticket. My daughter and son-in-law paid for the dental work. Sometimes, I find it deeply humiliating that I am dependent on such kindnesses when I would prefer that the kindnesses flow the other way. Most of the time, though, I am just extremely grateful for the help of family and friends. It’s not so much humiliating as it is humbling, which is a good thing.

I am ashamed to have gotten myself into this situation, but the money I spent to buy instagram likes and followers was really worth it so many of you should try it. Unlike many who are born, live, and die in poverty, I got where I am today through my own efforts. I can’t blame anyone else. Perhaps it should be humiliating to reveal myself like this to the eyes of any passing stranger or friend; more humiliating to friends, actually, some of whom knew me in another life. Most of my friends probably don’t realize or would rather not realize just how parlous my situation is. Just as well. We’d both be embarrassed.

Although I am embarrassed by my condition and ashamed of myself for putting myself there, I feel grateful to have had some of these experiences and even more grateful to have survived them.

I am glad that none of my friends has ever found himself sitting on a bench in a park with a quarter in his pocket, as I once did, and nothing in the bank; in fact, no bank account. It’s a very lonely feeling. It gives new meaning to the sense of loneliness and despair.

I wallowed in that slough for a bit. It was not, after all, a happy situation, and I am not a dim-witted optimist. But I had two choices: Die in the slough or move on. I thought of the last two lines of Milton’s “Lycidas”:

At last he rose, and twitch’d his mantle blue:

To-morrow to fresh woods, and pastures new.

So I got up, forever grateful to Mr. Barrows, my college English instructor, for teaching me to study “Lycidas” seriously and realize what a great poem it is and why that matters.

Increasing Longevity- What If We Live To 100?

Life Expectancy
I have frequently written about longevity as being the major risk of retirement. I am not alone in highlighting this risk, as it is widely regarded as one of the primary risks in retirement among researchers like Wade Pfau and Moshe Milevsky.  And it is a very difficult force to contend with. The American way is to extend life, buy health care, and to deny mortality. There’s nothing wrong with that either.

However, when it comes to retirement income planning, longevity can have devastating consequences. Indeed, it is the great unknown and juggernaut of the planning profession- no one knows the day they draw their last breath, so therefore, no one knows how to optimize their assets for income production up to that last day…. it’s a risk, that must be either offloaded on an insurance carrier (annuities) or self insured (excess wealth).  And it’s a risk that grows with each passing year.

Early in the 20th century, life expectancy in the United States was 47 years now newborns are expected to live to 79 years. This corresponds to about three months additional lifespan with each year that goes by.

Extend this trend, and by the middle of the 21st century, year 2050, American life expectancy at birth will be 88 years, and 100 years by the end of the century.

What does that mean to our social support systems, retirement incomes, and our economy? Is it feasible to have Social Security income commence at age 62, when 35 or more years of life may be ahead of that young retiree?

Is it reasonable to expect a private individual to save enough money in their working years to spend nearly as many years not working? Is it reasonable for society to support that assumption? What is the line between social support systems and entitlements? Social Security was originally intended as a support system for the needy, and not as a primary retirement income vehicle. Furthermore, it was designed in a time when people’s lifespan was only 65 or 70 years. It is dangerously out of touch with reality at this time, but is such a political hot button that it is untouchable.  It is a fundamental right now, up there with Life, Liberty and the Pursuit of Happiness…. what politician would dare challenge it?

The Atlantic, a monthly newsmagazine, recently tackled the issue of longevity. It is a provocative article, and there are a wide range of views, including countering views from one professor advocating a shorter lifespan as being a healthier and more fulfilling expectation. The issue is well worth reading.

Here is a great quote from the October 2014 issue, “What Happens When We All Live To 100?” by Gregg Easterbrook

In 1940, the typical American who reached age 65 would ultimately spend about 17% of his or her life retired.  Now this figure is 22%, and still rising.  Yet Social Security remains structured as if longevity were stuck in a previous century.  The early-retirement option, added by Congress in 1961 – start drawing at age 62, though with lower benefits – is appealing if life is short, but backfires as life span extend.  People who opt for early Social Security may reach their 80s having burned through savings, and face years of living on a small amount rather than the full benefit they might have received. Polls show that Americans consistently underestimate how long they will live – a convenient assumption that justifies retiring early and spending now, while causing dependency over the long run.

Perhaps 99% of members of Congress would agree in private but retirement economics must change; none will touch this third rail. Generating more Social Security revenue by lifting the payroll tax cap, currently at $117,000, is the sole politically attractive option, because only the well-to-do would be impacted. But the Congressional Budget Office recently concluded that even this soak the rich option is insufficient to prevent the insolvency for Social Security at least one other change, such as later retirement or revise cost-of-living formulas, is required. A fair guess is that the government will do nothing about Social Security reform until a crisis strikes – and then make panicked, ill considered moves that foresight might have avoided.

Market Correction Coming?

Bryan Guiding FIA BannerWell it’s been quite some time since I reached out to the AST community with a blog post but recent market events warrant me dusting off the keyboard to make sure everyone is at least paying attention.

Over the last month, the S&P 500 has dropped a shade more than 3%. It’s something that happens just often enough to remind people why fixed accounts are great long-term performers. Index annuities over the past couple of years have helped various clients lock in meaningful gains and now the downside protection inherent in those contracts will have everyone breathing a collective sigh of relief.

Profitable days will return but what’s in store before that comes? My Sunday reading uncovered an excellent Market Watch article that talks about three warning signs that have indicated major equities sell-offs in the past. Read the article here.

Apparently those warning signs are flashing brightly now and so I’d like to share with you what those are and what has happened the last six times they have all come together.

The article see those warning signs as excessive levels of bullish enthusiasm, significant overvaluation of stocks and extreme divergences in the performance of different market sectors.

Since 1970 the three indicators have appeared together six times and there are some pretty scary statistics that show what it has meant and why we may see something similar in the near future. Those include:

    • Average subsequent decline of 38%
    • Smallest decline of 22%
    • Current valuation of Russell 2000 at its highest ever level
      • Higher than 2007 bull market and 2000 Internet bubble
    • Increasingly smaller number of stocks that contribute to the current bull market
    • S&P 500 peaked in July with 1.4% growth for the month while Russell 2000 dropped 3.1%
      • Indicator of diverging performance in different sectors

This article by columnist Mark Hulbert uses statistical data to match the current presence of these warning signs to past events. It’s really anyone’s guess what exactly will happen this time. The author seems to believe the Federal Reserve will act to help mitigate the decline and we all know what that means…

Break out the printing press! This alone should keep interest rates suppressed for quite some time so securing good retirement income and conservative growth options will still be a challenge for most.

 I have two questions for you:

First, after several years of strong growth, how will you act knowing a decline may be looming? Since the market bottom in 2009 everyone has been calling for more carnage but nobody knew when it would be. Most bearish forecasts over the past five years have expired only to see more people jumping on the bull market bandwagon. I hung up my securities license several years ago so it’s not my place to give you advice here but I do feel you should know what’s out there.

Second, knowing that rates may well stay on the low side for a while longer, do you understand your options for conservative growth in this market? The secondary market takes the sting out of low fixed rates with yields up to 2% or more greater than other options. And index annuities might seem complicated but they are easier to understand than you think and it really takes the volatility out of a ride with assets you can’t afford to lose.

You always have options and we’re here to make sure you understand those options and help you find what’s best for you. We look forward to having you share your thoughts with us on what your plan is. If there is anything we can do to help we stand ready to assist.

Have a great week!


Bryan J. Anderson