Annuity Straight Talk 2022 Review
We have covered a lot of ground this year and now is the right time to look back on it all and compare things to how they were just one year ago. I am extremely grateful to those who put their trust in me and to all the rest who continually read or listen to my content. It all helps to keep me sharp and in position to help more people to a greater extent. It’s a good time to look back and see what was covered during the year, as a review for the regular listeners and an introduction for anyone new. In order to know where we are headed it is useful to understand where we’ve been.
We ended last year with the market approaching an all time high, and it got there on January 2, 2022. Everyone was worried about an impending market crash but most chose not to bank returns and hoped it would keep going. It was a major topic at the time so we talked about it on a podcast on January 13th.
Everyone was asking the question and I hope it helped a lot of people to see some actual metrics that can be used rather than going on hope and positive thoughts. Other than the market being overpriced, inflation was the next biggest topic this year. But just because we have high inflation, doesn’t mean that all interest rates correlate. Rates did rise throughout the year but lagged well behind increases in consumer goods. I tried my best to explain this right off the bat this year.
Yes, rates were frustratingly low at the beginning of the year so I tried to get people to think outside the box. Lots of different things can be done with annuities and one of my creative strategies shows how you equal or exceed market returns with much less risk. No, it’s not a sales pitch for a fantastic annuity illustration, rather a reminder of how you got the high retirement account balances you enjoyed at the top of the market.
Not everyone was convinced. The entire point of this website is to help people justify the use of annuities in retirement. Additional profit with less risk is certainly a nice benefit. For about the last two years, the market has been nearly flat. Yep, all that risk and very little to show for it. The volatility along the way increased the damage to portfolios that were being used for systematic withdrawals. It doesn’t have to be that way so I showed you how reducing volatility with an annuity can actually increase long-term performance.
Aside from the financial side of retirement, there are so many distractions that cause panic in our society. I’m a firm believer that many of the crises are manufactured to keep us at odds with each other. So long as we are arguing about politics and social issues then we’re not paying attention to the real stories being hidden from the public. Who really trusts the media anymore? When the war in Ukraine started, it was more obvious than ever. But there’s no reason to worry if you are financially prepared. Things like this shake markets and cause a lot of concern. If you are ready for it, then you either don’t have to worry about it or you can even profit from other people’s panic. That’s what professional traders do.
To this point we had been content heavy, rates were rising and I decided to take a little break from research and tell you a story about how I got into this. Lots of people enjoyed the stories of my days as a fishing guide and how it prepared me for communicating with retirees. This one was mostly about fishing in Montana and Alaska, a highly recommended trip if you are inclined, but I saved my bear stories for something down the road.
It was a tiny break and things were changing fast so I had to get back to creating content to help people make sense of it all. The market started to sell off in March but when it kept going it was time to call it. Volatility was here to stay and I expect it won’t leave us any time soon. John Balmer was back for this one to tell us where to focus.
I sold a lot of annuities this year and everyone was rushing to take advantage of rates we hadn’t seen for more than a decade. It’s a good time to retire. I probably answered more questions than any other year of my career. One set of really good questions came from a new client that sent me a long email to clarify every last detail. For anyone who doesn’t know what questions to ask before making the commitment, this episode is for you.
Competition is fierce in this business and lots of advisors and firms work hard and spend a lot of money to attract your business. One of those companies creates scripts for agents and put them on radio stations all over the country. It may work for you but it’s a pretty hard driven sales pitch so it’s not my style. I called it out so you can see the difference.
By the middle of the year, rates were in a really good spot. Fixed annuities are very simple and many people chose to stick with a multi-year guarantee. That is perfectly fine but I wanted to tell everyone that when rates rise, so does the growth potential of index annuities. I recommend everyone go with the product that matches their preference but it’s good to know all the information before getting into it.
By this time, John Balmer had been on the podcast to talk about market analysis about a half dozen times. My question to him was whether any of his clients ever did everything he advised. He showed me two client portfolios, one owned by a person who took his advice and the other who disregarded it. The difference was dramatic and it points out what you should look for when considering the benefits of paying someone to manage your market investments.
After the June 24th episode above, several people asked if they should reconsider their choice of annuity contracts. Fixed annuities are for those who want a simple guarantee over a period of years. Index annuities work for those who still want to protect principal but like the idea of trying to get more yield. Both work just fine and for those who can’t decide between the two, splitting it up may be the answer.
That got a lot of people off the fence. Rates continued to go up and people all over the country jumped into annuities. The flood of new applications bogged down insurance companies and processing times slowed dramatically. Some companies did just fine with the influx while others grinded to a halt. The below episode was a reminder for people to be patient with processing because millions of new buyers hit the market this year. It also indicates which companies can handle increased business in a professional and timely manner and it still holds true today.
I feel like the volatility this year caused many people to lose perspective. Those who didn’t get out on top felt regret and were hoping for a recovery. No one likes to make the same mistake twice. But you have to understand that with risky assets and endeavors, drawdowns are a necessary part of long-term performance. Annuities protect what you need so short-term market events don’t matter as much. In the below episode I likened it to gambling. It’s not a big stretch and most of you will recognize that.
Right before I went elk hunting in September, the market was enjoying a decent recovery. John Balmer called it a head fake because indicators suggested it wasn’t over yet. We urged caution but did not want to panic anyone. That’s not the point. We saw a subsequent sell off so our timing was good with this one and anyone with an annuity didn’t seem to care.
I became a little less consistent after going on the hunt and I told everyone to expect that this year. I took a couple weeks off and even had a road trip to Kansas in November. Everything after the ones I pointed to above can be found on the first page of podcasts on the website. To finish out the year I covered more on interest rates, cryptocurrency and even an episode on the importance of communicating with your spouse. It was all fun for me and I plan to add to it next year.
I am eternally grateful for everyone who contributed to an active year. Whether you bought something from me or just tuned in for several of my musings, you contributed to a product that has helped hundreds of people this year. Pat yourself on the back and buckle up for more content next year. Enjoy time with your family and feel free to reach out. I’m in the office but it’s pretty quiet this time of year. That’s not gonna last so give me a call if you’d like to say hi.