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

How Personal Risk Tolerance Affects Retirement

Over the past couple weeks we have talked about the indicators that allow you to decide when to time your exit from market-based securities.

The idea is to give you some level of control so that you can decide when and how you retire rather than having market performance decide for you.

So we had three factors that will help determine when timing is right so that you can make decisions that are based on long-term goals instead of wild swings in the market.

First, we looked at how length of time until retirement gives you an idea of what level of risk is appropriate.  The closer you get, the less risk you need to take.  On average, it takes the stock market around three years to recover from a bear market.  You don’t want to tread water in the years before retirement so you need to shift assets to safety before you run the risk of declining portfolio value that will cause you to alter retirement plans.

Next, we talked about the main indicator that everyone needs to consider and that is income needs in relation to portfolio value.  The amount of income you need for necessary and discretionary spending in retirement gives you an objective benchmark.  Consider your income needs first and once you have reached the level of assets needed it is reasonable to protect enough assets so you can maintain expectations regardless of what happens in the market.

And finally, personal risk tolerance will cause you to adjust either of the first two.  There are those who don’t mind swings in the market, knowing that the market will always recover and continue to grow.  There is an equal number of people who don’t care for risk at all, don’t trust the market and would rather preserve assets and see continual, incremental growth over time.

If you prefer more risk in return for greater growth potential then you might be inclined to stay fully invested in the market all the way up to your retirement date or even beyond.  And if you have enough in your portfolio to sustain income withdrawals in retirement then too much risk might require a spending adjustment during volatile markets.

Those who don’t take the risk can use the same indicators and sacrifice growth for the peace of mind that comes with predictability.

But, it’s not my job to tell you how much risk to take.  Rather, I try to explain how protecting your portfolio the right way can result in continued growth and accumulation throughout your retirement years.  The proper strategy can give full protection and greater growth for those who are conservative as well as less volatility and more predictability for those who continue to chase growth at all costs.

Eliminating losses is an obvious way to enhance wealth accumulation because it allows you to maintain a higher starting point during times of recovery.  Appropriate asset allocation becomes more important as you approach retirement because systematic withdrawals enhance the effect of volatility on asset value.

Your personal risk tolerance will tell you whether to use the indicators mentioned over the last couple weeks.  Capping the three part series this week has been really good timing.  At the close of business Friday, broad US markets were down about 4% this week.  If you don’t mind risk then it won’t bother you to see a slight drop in asset value.  But if it changes the way you view retirement then you need to take a different approach.

As you get closer to retirement, a certain level of assets need to be protected so that you know income needs in retirement can be secured.  Personal risk tolerance will determine whether you want to push for more or play it safe.

When do you plan to retire?

Have you saved enough to make it work?

These are two of the most common questions I get from the thousands of people on this email list.  Only you can provide the answers and I’ll do what I can to help.

Talk to you next week…


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Timing the Market Part II: Income Needs in Relation to Portfolio Value

It’s the comment I hear most often.  “I’m trying to decide if I have enough to retire.”

Considering that for every time I get a question or comment there are several other people who are staying silent, I will assume that many of you need to answer this question.

It can be a hard decision to make.  Whether you have enough to retire is an objective calculation based on your needs and wants.  But it’s not always easy when you have a major emotional investment in the work you’ve put in to get here.

Last week we looked at how the length of time until retirement can give you an indication of to what extent you should be invested in the stock market.  Now I’m going to expand on the second of three factors that will help you determine the timing that is right for you.

Taking into account your income needs in relation to portfolio value is probably the most important consideration you should make.  Once you have enough and are within a few years of retirement then it’s time you need to protect some assets, regardless of what the market is doing.

It starts with basic math.  Find out how much you would like to spend on an annual basis and take that as a percentage of your total assets.

The higher percentage of income you need, the more assets need to be protected and the sooner you need to eliminate risk.  And the lower the percentage of income you need, the less assets need to be protected and the less you need to worry about making quick decisions.

Here’s a quick guideline for income percentages…

5% annual withdrawal– requires that you protect a substantial portion of your assets and maintaining too much risk in your portfolio may require you to delay retirement.

4% annual withdrawal– creates an optimal blend where you need a fair amount of protection but you still have enough flexibility to maintain a strategy for continued growth and accumulation.

3% annual withdrawal– you should have no problem meeting both necessary and discretionary income needs.  If income is secured optimally then a large portion of your portfolio will be available for whatever investment strategy you want to pursue.

The more you have the less you need to protect.  The relation between income needs and length of time until retirement will give you a clear indication of when you should exit the market and with what portion of your total assets.

Once you have figured out what percentage of assets you need to withdraw annually you’ll know when it no longer makes sense to take too much risk.  Remember, at five years you should start shifting assets toward safety, at three years you need to develop a strategy and within the last year you should implement that strategy.

In relation to the withdrawal rates above, protect yourself according to whichever category you are now in.  If you are still a ways out from retirement you’ll at least have a plan in place and can use the remaining work years to bump up to a more flexible position or even decide to retire early.

Everyone has different numbers, goals and expectations.  How you finally decide when to time full participation in the market will depend on your personal risk tolerance.  If you are an individual that doesn’t mind risk or market fluctuation then you’ll be more inclined to cut it close on both of the first two factors.  We’ll get into the details next week and that should tie it all together for you.

Enjoy the rest of your weekend…



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Read Part I:  How Long Until You Retire?

Product Spotlight: Allianz 222

I come across this product more than any other and it’s no surprise.  The 222 is the highest selling annuity on the market.  It carries a serious bonus that has recently been as high as 30%.  In addition it gives you an extra 50% of any interest credited annually.  Sounds amazing, right?

Well, it is amazing if that’s all you’re told and that is about as much detail as most agents offer.  The problem is that bonuses always come with restrictions and that is rarely explained when this contract is presented.  Restrictions are fine in exchange for something of value but in this case those restrictions limit the suitability of the product for the majority of people.

I have talked to hundreds of people this year who have been pitched the 222.  Of those, one person was suited for its purpose.  That means it was inappropriate for everyone else, but it was still being pitched by “fiduciaries” and “CFPs”.

So, what restrictions come with the bonuses?

First of all, you need to understand the difference between the account value and the protected income value.

Account value– Equal to the premium you invest plus any interest earnings over the term of the contract.

Protected Income Value– Equal to the premium you invest plus the premium bonus, plus interest earnings on the contract that are increased by an additional 50% annually.  The resulting value is used to calculate the amount of guaranteed lifetime income you will receive.

Easy, right?  The account value is your money and the protected income value is nothing but a factor used to calculate retirement income.

Don’t take it from me.  Let’s look at how Allianz explains it on their website.

The premium bonus and interest bonus are credited only to the Protected Income Value. To receive the PIV, including the bonus, the contract must be held for at least 10 contract years, and then lifetime income withdrawals must be taken. You will not receive the bonuses if the contract is fully surrendered or if traditional annuitization payments are taken. If it is partially surrendered the PIV will be reduced proportionally, which could result in a partial loss of bonuses…

Allow me to summarize the key points that I would consider to be restrictive.

  • All bonuses only increase the potential income and do not affect your account value
  • You have to wait 10 years to receive the benefit of these bonuses
  • Lifetime income payments are required to benefit from the bonuses
  • Partial surrenders prior to 10 years will create a proportionate reduction in the protected income value (for example, 10% free withdrawal will cost you 10% of your future income)
  • If you take your money and do something else you will not receive any of the bonuses

It’s pretty clear to see that the bonuses are not just free money and unless you are buying this 10 years before retirement then it is not appropriate.  If you need to take RMDs or withdrawals of any kind before 10 years then it is not appropriate.

There is one little positive selling point I have left out so far.  The guaranteed income rider that comes with all the bonuses is free.  There are no fees on the contract.  So, some might say it’s worth doing because your money will still grow and you can walk away without a bonus in 10 years and at least it didn’t cost anything.

Yes, that is possible but let me explain why I think that’s a waste of time.  I cut the above quote from Allianz short and saved the last part for right here:

… Because this is a bonus annuity, it may include higher surrender charges, longer surrender charge periods, lower caps, higher spreads, or other restrictions that are not included in similar annuities that don’t offer a bonus feature.

I love that they use the word “restrictions”.  This is here to justify low caps and participation rates the contract offers and the result is minimal growth.  This is true with all bonus and income annuities.  If they give you more of one benefit then they will take it from somewhere else.

It wouldn’t take long to find several available products with no fees that have twice as much growth potential at the 222.

The underlying growth of the contract being low is what disqualifies this from being used for anything else but income after year ten.  The growth rates are low because Allianz adds 50% of the interest earnings to the protected income value.  This is a performance based guaranteed income contract

People have a hard time understanding this but there is one similarity that everyone can grasp.  Social security kind of works the same way.  The longer you wait, the more you get.  With the Allianz 222 you get more income if you wait ten years.

These critical points are almost never explained to the person buying.  It is not the fault of Allianz because we have seen they clearly explain the product right on their website.  It’s the fault of opportunistic agents and advisors who are not doing any research.

The Allianz 222 should not be the highest selling annuity in the market.  The ten year requirement disqualifies it for more than 90% of the people I meet.

Have you been pitched the Allianz 222?  Please reach out if you have received any conflicting information.


Bryan J. Anderson


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Part I: How Long Until You Retire?

To start this series let’s take a look at the first factor that will tell you how to appropriately time the market when planning for retirement.  Selling stocks at a high point sounds great but people tend to hang on a little longer than they should.  We are at a historic high right now but few people are selling and many who have been sitting on the sidelines are jumping in to the market.

If we add a few more variables to the decision process then you’ll see why it’s not just about getting the highest price, it’s also about making moves the fit well with your long-term goals.

The first thing to consider is the length of time you have until retirement.  There’s an easy rule I came up with that will help you keep things in line and on track.  You can call it the “5-3-1” rule if it needs a name or and I’ll explain it as we move along.

Specific portfolio moves should happen at five years, three years and one year prior to retirement.  This of course has a little wiggle room depending on the other two factors but we will put this building block in place first.  This is a general rule based on my experience dealing with these matters so please understand there is variability in each depending on your personal situation.

At Five Years:

You need to have 40-50% of your assets protected.  This will be different for everyone depending on factor #2 but for now it’s a good rule.  You’ve had a couple decades or more to chase growth and by now you should be able to tell if you have enough to retire.  Prudential calls the five year preceding along with the first five years of retirement the “retirement red zone.”  This is when you can least afford to weather corrections or bear markets.

You should be topping off savings, protecting your gains and preparing to turn on the income during this time period.  Big decisions like upsizing or downsizing a home, or even planning to move to a new place with lower taxes and nicer weather take lots of time.  If any of this is part of the plan then you need to stabilize your assets because it will give you more assurance that the market won’t take you off track.

At Three Years:

You should identify a strategy that will produce income, manage required distributions and sustain a long-term growth strategy that will help you meet inflation, discretionary spending and a legacy if you choose.

This is an important point in time because it’s when many people actually do the calculation to verify they have enough saved to retire.  Therein lies the reason to select products and identify strategies.  Different plans require different asset levels and you need to know your plan so you can confirm you have enough to make it work.

At One Year:

Your retirement strategy needs to be in place.  All the preparation done in the previous three years should be finished and all decisions made in regards to the right path.  Product selection and final asset allocation done a year in advance will give you plenty of time to consider all options and settle on what you feel is best.  In conjunction with this is the decision as to when it’s most beneficial to take social security.  Payouts will be close to set so you’ll have the clearest picture of what’s possible.  With a final strategy in place you will have more time to tie up loose ends at work and make a plan for how to spend your free time when you’re done working.


This is not something that I created out of thin air.  The guidelines for the timing of retirement are the product of conversations with hundreds of people just like you. But everyone is different and real timing of the market that allows you to keep long-term plans on track depends on personal factors.  Each of the above points in time may move forward or backward depending on who you are and what type of goals you have.

Some people buy annuities several years before retirement.  That works just fine since most people are shifting away from risk well before the final date.  Others wait and don’t do anything until the day of retirement and still others leave things hanging for several years.  This will be determined for you based on the other two factors.  Income needs and personal risk tolerance will help you narrow it down even more.

Next week I’ll expand on the second factor which is income needs in relation to portfolio value.  This plays directly into the above timeline.  When you have saved enough it’s time to start protecting assets, identifying options and finding the best strategy.

Focusing on this formula will help much more than watching a specific stock index and wondering whether it’s going to correct or keep climbing.  That’s a speculators game and you’re better off avoiding it altogether.

Talk to you next week…



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When Is The Right Time To Buy An Annuity?

Managing retirement assets is stressful and it’s very difficult to not make emotional decisions.  Very few people are able to rely on objective analysis and it’s no surprise.  The old saying that fear and greed are the driver’s behind most decisions is absolutely true.  Given that all of you have seen some serious swings with investment accounts in the past 30 years I understand why it’s hard to time some of the biggest financial decisions you will ever make.

2018 has been something of a microcosm of the last 30 years.  It started with the stock market reaching a record high but before the end of January came a correction that skimmed more than 10% off the value of the Dow and the S&P 500.

Many were reminded of 2001 or 2008 and expected the route to continue, if not for fundamental reasons then definitely because it was about time for it to happen.  This extended recovery we’ve seen since the banking crisis of 2008 has had people jumping back into the market at every point along the way.

I’ve talked to people who stayed the course from the beginning and saw a nice rebound while others sold and sat on the sidelines, envious of the yields that could have been.  I always tell people, “in ten years we’ll know exactly what we should have done.”  It’s my variation of an old adage and I use it to remind everyone that all you can do is go with the best option today.

So this year has been interesting.  The market rose to new highs, corrected and scared everyone only to slowly recover and approach or exceed those record levels today.  Since we’ve seen it come all the way back I am reminded of some decisions people made early in 2018.

After creating an income plan for one gentleman, I asked him for any concerns about buying the annuity.  He replied that if the market rose another 15% he would regret not staying in the market with all his assets.

This person had a nice-sized portfolio and modest income needs so it wasn’t a critical move either way but I had to remind him that buying an annuity doesn’t mean you are taking all possibility of growth off the table.

Here are the details:

Portfolio value was just shy of $1M

Protecting enough to secure income would have cost $200,000

If he didn’t buy the annuity and the market rose 15% his portfolio would have been worth $1,150,000

With a 50% participation rate on the annuity and the same increase in the market he would get…

15% on $800,000 and 7.5% on $200,000

Total portfolio value of $1,135,000

So when the market gains 15% he gets 13.5%

Noticing he wouldn’t be giving up much yield he decided to protect what was needed for retirement income.

Fortunately, it was done in time to avoid the correction in late January so rather than limiting his gains, the annuity insulated the portfolio from greater loss.  What is needed for retirement income is protected and the rest of the portfolio can continue to grow forever.  Regardless of what happens in the stock market he will be able to pursue the kind of long-term growth that will build a serious amount of wealth through retirement.

When is the right time to buy an annuity?  When you’re ready to remove the stress of uncertainty.


Have a great weekend!




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The Case for Annuities in a Retirement Portfolio

If you are going to consider using annuities in a retirement plan it’s necessary to start by improving on traditional advice.  If an annuity isn’t the better option then there’s no reason to buy one.  The only reason I sell annuities for a living is because I know there are many instances where an annuity is the best choice.

For comparison purposes let’s start with a fairly standard portfolio example.  Generally speaking this is going to consist of a pre-chosen blend of equity stocks and bonds.  Traditionally people have been advised that a 4% withdrawal rate is sustainable so assuming no major volatility issues, a $1M portfolio should be able to produce $40,000 income annually with inflation adjustments.

Bonds provide steady income, stocks and mutual funds provide some dividends and the growth from the equity side is supposed to offset inflation.

We can use current interest and dividend rates to see how a mix of 40% bonds and 60% stocks will produce the income needed.

Five year bonds are paying 3.5% interest and the average dividend on stocks in the S&P 500 is around 2.5%.

40% of the portfolio in bonds will produce $14,000 interest annually.

60% of the portfolio in US-based equities will produce $15,000 in dividends annually.

This is a portfolio that is not particularly risk-averse and well positioned for growth on the equity side.  But the mix will leave someone $11,000 short of the initial income goal.  Making up the difference will require selling into principal and growth on the equity side will be needed to offset inflation and maintain a growing balance over time.

Selling into principal compounds risk and damages portfolio growth over time.

If you sell bonds, you have interest rate risk that could devalue the withdrawal, plus it will decrease future income payments with less principal.

Selling equities is fine except when the market is down in value.  Selling stocks when down in value only compounds losses and also decreases dividend yields with a lower balance.

“Interest rate risk and low rates on the bond side and market risk on the equity side make it complicated to manage income and achieve optimal growth.”

Over time the market will rise but if the timing is wrong on any withdrawals it will only be more difficult to keep pace with the income difference and any necessary inflation adjustments on spending.  This is the issue that causes long-term problems and has puzzled academics and industry analysts for years.

The insurance industry has an answer for providing the income needed but producing $40,000 income annually will cost $700K or more.  Income would be covered for a lifetime but only $300K of the portfolio would be left for inflation protection and discretionary spending.  For some, the peace of mind is worth it but I think that’s far too expensive and the kind of emotional leap that is hard for many to take.

I have always found that to be a hard way to sell annuities because I don’t especially like to prey on the various fears retirees have.  It takes a major shift in the portfolio to accomplish this as well.  The annuity expense is not the only problem.  You would also have to relinquish a significant portion of growth potential.

There happens to be a better way that addresses the issues with the standard stocks and bonds portfolio approach and also eliminates the substantial cost of the annuity.

Start by replacing bonds with an indexed annuity.  The first benefit is that you are not making a significant change to the overall portfolio.  Similar growth potential exists on the equity side and I’ll show you why the indexed annuity improves the safe allocation.

Rather than use the bonds in a portfolio to produce income, use the indexed annuity as a place to draw income when the market is down in value.  10% of the account can be drawn annually without penalty of interest rate risk.  And to beat a bond it only needs to grow at 3.5% or better, which is fairly easy to do.

If you consider the $15,000 available annually from the equity side of the portfolio that means a maximum withdrawal of $25,000 from the annuity.  Withdrawals can be increased on the annuity side so that dividends can be reinvested in good markets or bad in order to maximize growth or enhance recovery, depending on performance and personal goals.

Having developed a basic model to test the various options I can tell you with confidence that what I call the Flex Strategy produces substantially more growth on a portfolio than traditional management or the standard approach with a lifetime income annuity.

Targeting short-term indexed annuities without income riders will eliminate fees and enhance growth on the contract.  When the term is up the portfolio can be rebalanced to maintain the desired character for growth and income.

This is an excellent way to produce systematic or discretionary income but that’s not all.  When required distributions come at age 70 it is also the optimal way to manage a portfolio when you have to take withdrawals.

The details of this example are intentionally general in nature.  Average yields for both bonds and dividends can be increased by taking on more risk with lower rated bonds or by accepting less growth on higher dividend stocks.  The interest and dividend figures are also void of management fees so I call it a wash.

If you were able to manage it all yourself it takes a substantial amount of work and experience to accomplish total interest and dividend yields that exceed 4%.  If you are looking for a more care-free retirement then the annuity option would give you all the benefits needed.

Please feel free to comment or give me a call if you would like to see models using your numbers.

All my best,



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More Advice From the Mainstream

Comments and questions from the blog posts give me valuable feedback so I can refine my recommendations and create new ideas for retirement planning strategies.  Some comments are thoughtful, inquisitive and insightful while others leave me scratching my head in confusion.

After last week’s newsletter we received a call from another advisor who accused me of only trying to sell 7-year annuity contracts so I could sell another contract in seven years.  Now I didn’t specifically mention that in last week’s post so he must have been reading some of the past stuff and decided to focus on a minute detail.

First of all, the main objective of this website is not to sell an annuity to everyone who signs up.  The goal is to provide information and useful retirement strategies that help people find value in the various products and financial vehicles available.

Second, when I do offer recommendations I put a fair bit of explanation behind it.  So focusing on the end result while ignoring the process of analysis that it took to get there is fairly short-sighted.  My fifth-grader has to do better on her homework than that.

I try to make things easy for you.  Over the past several weeks we’ve covered some simple topics that have technical implications.

We talked about how interest rates over different terms indicate different levels of economic certainty and dictate how you should approach the allocation of safe assets.  Short and long term rates are nearly identical right now so staying more liquid and flexible with a shorter commitment makes sense to me.

Then I gave you a retirement planning checklist that gives you a step-by-step list of considerations that need to be made when planning for retirement.  The point of that is to give you something useful no matter who you do business with.  It illustrates the fact that planning for retirement is a much more simple process than many advisors make it out to be.

And finally, last week we brought you a common question from a retiree and the standard type of advice you might receive from the average advisor.  Most of you are here because you’re in a typical situation and it helps to compare different plans and see what others are doing who have the same concerns.

None of this specifically states a belief that an annuity is the only way to get something accomplished.  Different people choose unique ways to solve problems.  I happen to believe that annuities have clear advantages over other assets and I clearly explain my point of view.  None of it means you have to agree with me and you are free to choose any strategy that you like best.

As for how I recommend annuities, 7-year contracts are the best value proposition in the market.  Terms for that time period are as good as or better than terms for longer periods.  I wrote an entire blog post explaining the fundamental analysis behind it.  Why go longer if it offers no additional benefit?

Shorter is always better and I actually use several contracts that are as short as five years in term.  I also like three to five year fixed annuities when appropriate for a given situation.

When I put these contracts into a plan I have proved over and over again that you can produce more income and accumulation in retirement with the proper strategy.  I keep the details close to the vest.  It’s my intellectual property and free information has its limits.  Without my help that means you have to connect the dots but I’m trying to make it as easy as possible.

The advisor who called was obviously not able to do that.  I’m concerned for his clients but that’s not my problem or yours.

Here’s the deal:  would you like to buy a 12-year contract with a bonus, income rider and annual fee that takes 20 or more years to break-even?

Or, would you rather buy a 5-7 year contract with no fees inside a strategy that protects assets and increases net worth in retirement?

What happens after seven years?  Well you can keep the contract, buy a different one, move the money somewhere else or buy a motorhome and come visit me in Montana.  It is going to depend on what the market looks like at that time and I have no way of knowing.  It will always be your money so you can do whatever you like.  But if I create a plan that works well, of course you’d be likely to continue doing business with me.

If not, you are fee to do whatever you want.  If you buy an annuity from me I want it to work so well that your retirement is as easy and care-free as possible.  The motivation goes no deeper than that.

As always you can call or email if you have any questions.  Just let me know how I can help.


All my best,




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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

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