An Annuity Success Story

Frankie and Linda are like family.  We met in 2011 when Frankie was doing what most of you are doing, trying to find the right way to distribute retirement assets.  They had made the rounds through several online salespeople and contacted me for an opinion on some of the offers they had seen.

I talk a lot about the risk spectrum.  On one end is money in the bank and on the other end is market investments that go up and down in value.  Most people fall somewhere in the middle, wanting to protect some assets but also hoping for long-term growth.  I’ve met people who go to either end of the spectrum with everything they have and it’s a matter of personal choice so that’s fine with me.

Frankie and Linda fall squarely on the conservative side of the spectrum and that’s why they were looking into using annuities in retirement.  After making the rounds and looking into several different options they honored me with the job of helping them put assets to work.

Well like everyone else I keep in regular contact with clients, some more than others just depending on personal needs.  Frankie and Linda have been actively reinvesting as certain allocations mature so their money has always been safe and always at work.  We speak a lot because they are very proactive about getting the most from their money and never taking risk.

We spoke this week because Linda has some funds maturing this summer and Frankie is looking for some ideas.  I looked into the accounts to see where it’s at and we were both pleased to see the value of current holdings.  In 2012 they were sitting with a combined $500,000 in 401(k)s and as of yesterday it’s all worth just over $763,000.  Over a period of seven years that amounts to more than 6% annualized return, all without risk of loss.

Back in 2012 the stock market had fully recovered from the losses in 2008.  Everyone was still nervous about the market dropping again and anyone at retirement age, like Frankie and Linda, were justified in protecting assets.  Sure the market has roughly doubled over that time period but it’s easy to pick winners in hindsight.  And there’s nothing wrong with a 6% yield with none of the ups and downs that were all part of the market getting to where it is now.

Everyone is going to want to know, what specifically did they do?

Well the full picture is complex because we’ve been working on it for more than seven years but I can give you a general idea.  The placement of their assets pretty much follows my evolution of recommendations as a result of a difficult interest rate market over time.  The most important point of their plan is not just the specific assets used but they flexibility they have had for reinvestment

Back in 2011 I sold a lot of structured settlements because of higher rates available on the secondary market.  Frankie and Linda needed an income stream so we were able to place several secondary annuities that would give them a discount on the initial purchase.  They did more with their money at the beginning but that’s not what made it work.

Frankie decided to go back to work for a while so he saved a little more money and didn’t officially retire until they started collecting social security.  Since they live within their means none of the income we put in place was needed so they continually reinvested in short-term deals to ladder investments and always have funds available if rates rise one day.  They used a series of fixed and indexed annuities with one maturing this year and another next year.  Plus the unused income stream provides steady available cash for reinvestment so flexibility in the future is optimal.

No one can predict the future and there’s one thing I say all the time that Frankie and Linda do better than anyone else.  Take the best deal available today but make sure you have the option and ability to make changes if better opportunities arise.  They have never been afraid of simply putting money to work in the best option available.  The result speaks for itself.  Not all of their assets have done better than 6%.  Some have returned higher and some lower but their diligence in identifying opportunities and acting on them is what produced the result.

Oh yeah, and there’s one more thing.  So many people question me about fees and feel like I’m holding back some hidden information.  Well Frankie and Linda do pay some modest fees.  They both have a self-directed IRA and the custodian charges $295 annually for each account.  So on $763K of assets they have combined fees of $590 per year.  No other fees of any kind apply whatsoever.  That’s less than 1/10 of 1% for anyone who wants to do the math.

Everyone knows I promote the Flex Strategy and I tell all who ask that it takes a different form for everyone who uses it.  There’s no single way to do it but the point is to maximize safe assets and maintain control of your money so you can take advantage of new opportunities when markets change.

Next week I’m going to share with you a complete overview of all the benefits of approaching retirement with the Flex Strategy.  Since I talked to Frankie yesterday I thought it would be a better idea to show you how it worked for some of my clients.

If you have any questions feel free to call, email or leave a comment below.




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Last Updated on February 1, 2023 by Bryan Anderson