Be sure to read our SMA Case Study #2 also.
Case Study- 47 year old single male. When Dave came to me he clearly indicated he was extremely risk-averse. Having been on the losing side of the S&L crisis in his early saving years and two major market corrections more recently, he was pretty fed up with the investment business.
Even so, he was able to accumulate a solid level of assets in cash and an IRA. After taking time to understand his needs and current position, we began talking about annuities, as safety is what most appealed to him. Together we looked objectively at various annuity contracts he had been shown by other agents, including GLWB and deferred index annuities.
For one reason or another nothing was completely appropriate for him given his relatively young age and the fact that he really didn’t need to make any sudden moves. We decided to wait for the right deal to come along. Many investors and members of this site I speak with daily have the same cautious approach in this volatile market.
Along came secondary market annuities, and the potential for substantially higher interest rates on a guaranteed basis. We began talking about the possibility before I had access to the products so he was well informed and able to act quickly.
Being prepared beforehand was extremely important to this process and enabled him to take action when the right deal came up. I can’t stress enough, that pre-education a critical foundation for every individual considering these products.
Here’s what we were able to accomplish with several Secondary Market Annuities…
Over the course of two weeks, Dave purchased four separate secondary market annuities for a total investment of $294,910. Rates on these contracts range from 6.25% to 7.25% over a time period of ten to 25 years. To keep it simple I’ll use the aggregate figure and show distributions as a whole.
The individual payments listed represent the guaranteed payments as part or all of each specific deal. As it all came together we were able to write it down on a timeline to see how it works in his unique situation. Here’s how it comes out based on his future ages at the time of each distribution.
INITIAL INVESTMENT OF $294.910 AT AGE 47
1.) $60,000 at age 58
2.) $60,000 at age 60
3.) $30,000 at age 62
4.) $100,000 at age 63
5.) $265,000 at age 64
6.) $83,250 at age 67
7.) $100,000 at age 68
8.) $300,000 at age 73
Total Investment: $294,910.
Total Aggregate Cash Flow: $998,250
Blended Effective Yield: 6.874%.
This plan creates a staggered set of payments that will allow him to ladder various retirement income investments to counter longevity risk and inflation.
The best part is that he can do all this with no market volatility in any part of the equation. These contractually guaranteed figures give Dave tremendous income potential in the future with the flexibility to adapt to changing market conditions throughout retirement.
Now that’s my kind of plan!
It really shows what kind of output is possible with solid, consistent growth over time. Now, to be honest, this clients name isn’t really Dave but he is so happy with the process and end result that he has made himself available to anyone of you that would like to talk to someone who has been on your side of the secondary market annuities process and chosen to take the leap. Call or email me and I’ll share his real name and set up a time when you two can chat.