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

How I Learned about Annuities


My wife and I don’t agree on politics, so we don’t talk about it.  I’ve always been up for a good argument or debate but she doesn’t like confrontation.  Whenever the topic comes up it’s unintentional.  She asked me how I became such a conspiracy theorist.  Well that makes me sound like a bit of a whack job.  Since when has questioning the popular narrative been such a bad thing?

I explained to her that my current belief system really started to develop around the time I was 20.  Initial inspiration and ideas certainly came from other people but my opinions are my own.  To get to where I am today, I read just as much information that would prove my beliefs wrong as I did information that would strengthen my position.

My career is no different.  Popular thought supports one course of action but I’ve always challenged mainstream ideas.  Some I have been able to verify and others I have proven to be completely wrong and inadequate.  The basic reason is that circumstances and opportunities are always changing so solutions to age-old problems need to be able to change with the times.  For 18 years the inquisitive mind has never failed me.

I got into the financial services business because I had a successful uncle that we all looked up to as kids.  He had beautiful homes, several businesses and waterfront on Flathead Lake.  Plus he was a really nice guy.  I asked him once how he made it all happen.  He basically told me it takes a combination of knowledge and imagination along with the courage to take action at the right time.  It wasn’t exactly the concrete answer I was looking for and we didn’t talk about it again for several years.  I thought he forgot I ever asked the question but he didn’t.

When I graduated from college with a finance degree he took me aside one day and reminded me that I had once asked how he became successful.  Again he didn’t give me the exact recipe but said meeting his financial advisor, Andy, might give me a better idea of how to get started.  So he made an appointment for us to meet and in a few days I was sitting in a conference room with Andy, a guy who had become pretty successful in his own right.

Rather than learn the secret path to success, Andy taught me the common building blocks successful people put in place.  He told me that if I could provide value to others then I myself would become valuable and indispensable.  It was more of a job offer than anything but the opportunity would allow me to build my own structure based on the path of business leaders that came before me.  In 30 years, I would be sitting where he is and my friends and clients would be just like my uncle.

So I started my career in financial services and spent most of my time selling life insurance and setting up IRAs for people my age.  At the time I was used to living off $2000 per semester so it didn’t take much to increase my standard of living.  Sometime in the first year a family friend called me and said his mom’s 2nd husband just passed away and she had some money laying around that she wanted to protect.  He asked, “do you sell annuities?”  Knowing better than to turn down a good opportunity, I confirmed it could be taken care of and my friend set an appointment with his mom for a few days later.

I had heard of annuities and knew that the older guys in the office sold them regularly.  I brought one of the experienced agents into the deal because I didn’t have time to become confident enough to present the right solution.  Needless to say it was a pretty easy sale of a fixed annuity and I ended up getting a commission check for about 3000 dollars.  Wow!  That was more money than I had ever seen at one time before.  Obviously my interest was piqued but I didn’t have a whole lot of other friends with widowed moms and money in the bank.

But I had to learn more about the asset so I could handle the next opportunity on my own.  At the time I literally had to go to the library to learn about annuities.  Immediate or deferred, fixed or variable, so many options that it required volumes of notes to organize all the product choices and that’s before we start on strategies for using annuities.  In many ways it was the gestation period for this website.

Many of you know that I was a fishing guide in Montana and Alaska during my college years and on a part-time basis for several years after that.  Most of the people who can afford to take an expensive fishing trip are successful and I got lots of advice as well as several long-term friendships from the experience.  Long days floating down a remote river was excellent training for keeping conversations going with people of retirement age.

Some of those guys did business with me and a few of them were just throwing me a bone because they liked me.  It gave me the opportunity to learn what’s good and bad about annuities.  I made sure they all got something simple and effective, without the catchy stuff that complicates the contract and restricts movement of the money.

In the beginning it was simple.  Fixed annuities had it all.  Variable annuities only worked in some very specific scenarios that didn’t apply to most of the people I knew.  When index annuities and guaranteed income riders became popular, it threw a wrench into everything.  Without the base of knowledge I already had, it would have been much more difficult to make sense of it all.  Like everything else in my life, I didn’t believe the new products could match the value of the older, simpler contracts.  No matter what the institutions, wholesalers and senior agents said, my gut told me there was a better way.

It took some time to figure it out but when it hit me, I knew I was on to something.  It’s not hard to understand.  Make more money, avoid fees and have control over your money.  The standard approach may be popular but you have to decide what level of flexibility you want as times change.  Do you want to be able to change as well?  Next week I’ll get into the next part of my evolution.

Have a great weekend…


Review of Annuities and 2020


Before we look forward to all the things that may change this year let’s get our bearings and review the past year.  You’ve all heard me say over and over that perspective is important and that’s never truer than when we may be facing a dramatically different financial environment.  2020 was an interesting year to say the least but I’d have to say that annuities were probably the most consistent thing and I’m going to show that by sharing a link to several newsletters last year and adding a little commentary to each.

From the standpoint of market valuation we are no different than one year ago.  When markets are at record levels, no one wants to get out, thinking that some extra yield will be left on the table.  I can’t predict the future any better than the next guy but looking back to last year I am reminded of the cyclical nature of this stuff.  A year ago no one wanted an annuity after an up and down 2019 that ended on a good note.  Does this seem familiar to anyone else?

January 4th, 2020.  Why Would Anyone Want an Annuity in 2019?

Many people feel like using an annuity will eliminate the potential for yield.  If you’re not in the stock market then how will you make any money?  Thinking like that defeats the purpose.  Annuities are meant for some of your money, not all of your money.  Protected assets insulate a portfolio so market corrections don’t have the same negative affect.  The right combination leads to MORE growth over time with less time needed to recover asset values.  Traditionally bonds have been the choice for safety but I showed you how annuities can give you even more.  And who can argue when you see proof of double digit yields?

February 21, 2020.  Double Digit Annuity Yield

We all know that the party didn’t last forever.  Last year in March brought a rude awakening for many.  Aside from a few US Senators who had the privilege of some early briefings, almost everyone was hit hard with assets in the market.  It was a nervous time for many reasons and much of that persists to this day.  Consistency is what gets you through uncertain times and there were several good lessons we all learned from the experience, not the least of which is that safety helps you sleep at night.

March 12, 2020.  Don’t Sell Stocks. Do This Instead.

March 21, 2020.  Fixed Annuities Have Never Been So Sexy

April 3, 2020.  A Look at an Insurance Company’s Balance Sheet

Only a few of the people I work with came through the year with little to no yield.  Obviously it was the timing of the purchase and the correction last year wasn’t kind to anyone.  The market crawled back and it didn’t seem logical.  Analysts kept telling everyone not to buy the dip and it makes sense considering the fact that many businesses are still struggling and our economy has a bruise that seems like it may never heal.  The Federal Reserve came to the rescue and saved corporations and retirement accounts alike.  Plan on seeing plenty of this in 2021 as well.  I am a firm believer in the fact that federal spending deserves credit for much of the economic expansion over the past 20 years.  I try to tell the kids all the time that it’s more important for them to understand than me but they just think I’m crazy.

June 18, 2020.  What’s Your Plan with All the Free Money?

Uncertainty seems to be the only thing we can be certain about.  I can’t think of a single year in the past 20 where everyone was optimistic.  It’s consistency that’s important and having a plan for the alternative, whether good or bad.  You don’t have to protect everything and you sure as hell should never risk everything.

July 11, 2020.  Consistency is the Key to Index Annuities

July 25, 2020.  How Mules are Like Annuities

Those who don’t know me well naturally think that I’m just trying to sell as many annuities as possible.  While I do have some big goals, nothing could be further from the truth.  There’s not enough time in the day for me to have a 30 minute conversation with everyone who signs up on this site, let alone spending the time it takes to work through the process for those who do come forward for more help.  My goal is to offer information that helps you, period.  It’s all about providing useful advice and being a sounding board for people when big events suggest more uncertainty may come.

August 8, 2020.  I Don’t Care If You Buy an Annuity

September 24, 2020.  Will This Election Ruin Your Retirement?

Looking back, through the summer and into the fall, life seemed to return to normal for most of us in Montana.  Much of that has to do with my semi-hermitic lifestyle.  I get to see what’s going on everywhere else but it doesn’t usually affect me the same way as those of you who live near big cities.  A wakeup call was in store for me and I got a real taste of how that damn virus disrupted so many lives last year.  Everyone in my home is just fine and my thoughts and well wishes go out to anyone who had a similar experience.

November 13, 2020.  Annuities Can’t Solve All Problems

When I finally got back on track, I finished 2020 the same way I plan to start this year.  We’re going back to the basics.  I often take for granted my evolution of thought that has occurred over the past 18 years of studying annuities.  Reviews like this are good because some of you have been reading this for a couple years but many others have not.  I no longer plan to expect people to know how I have arrived at the conclusions I have.  Annuities are meant for consistency and security.  You can accomplish just about anything with an annuity including market protection, inflation hedging, retirement income and even just overall portfolio management.  Opportunities with annuities have changed over time to offer a solution for almost every situation.  Don’t hesitate because of low rates that may be here for a while.  A different approach may be just what you need.

November 27, 2020.  Index Annuities Have Evolved

December 12, 2020.  20% More Income

I want to thank everyone on this list for a solid 2020, in spite of all the things that could have made it go the other way.  Communicating with all of you this way provided a diversion for me and I hope that it likewise gave many of you an escape from the insanity of everything else.  Many things in this world change, but I’m not one of ‘em.  As we look toward 2021 please freely offer your thoughts, ideas and any feedback so I can make this as high-quality as possible.


All my best,


Allianz Benefit Control


More than a dozen people have asked me about this in the past month which tells me that many multiples of that have also seen it.  Allianz has always had the largest distribution system for index annuities and that’s why so many people see the products, not because there is an incredible value for consumers.

In this case it’s no different.  Many of you will recall the Allianz 222, which spent a few years as the top-selling annuity, of any type, on the market.  My aversion to this product was not the product itself.  In the right circumstances it was just fine but I heard from hundreds of people who bought without having been explained the proper use and inherent restrictions in the contract.

For anyone who doesn’t know, the 222 requires a ten year deferral to capitalize on all the juicy bonuses in the contract.  Many agents represented otherwise so a lot of people got into it not knowing that their circumstances would require them to use funds in the annuity in a way that works against the purpose of the contract.  There are people who are happy with the 222 but there are just as many or more who are disgruntled because it was never meant to do what was falsely promised.

Enter the Allianz Benefit Control (ABC) to solve many of the problems.  The ten year deferral requirement of the 222 eliminated it from being suitable for most people I’ve met.  The ABC works exactly the same way except you can take income with bonuses included in any year of the contract.  Given that, it seems this would make it a suitable product for more people.  Plus, neither contract has a fee for the guaranteed income rider so that catches the attention of agents and consumers alike.

Both contracts are considered to be performance-based guaranteed income contracts.  A base level of income is guaranteed for life and increases for each year of deferral by a factor of the growth in the account.  Rate of payout is based on your age when income starts and the bonus only increases the amount of income you receive.  One contract makes you wait ten years to factor in the bonus for income and the other lets you use it at any point in time.

In order for a performance-based income contracts to produce substantial income, the account has to grow so I look at the index options along with caps, participation rates and spreads to see what kind of potential the contract has.  This is where anyone can see what type of potential the contract has.  Short of giving you a detailed list of each index option I’m going to give you a clear indication that this contract really won’t go anywhere.

All viable index crediting options in the contract charge an allocation fee of .95% annually to use them.  Cap rates max out at 2.5% and all other index options with a spread or participation rate have not credited more than 2.5% at any point in the past ten years.  Once you factor in the allocation fee then it’s easy to see this contract will not grow any more than one and a half percent in the best of years.

Growth is extremely important for more than just maximum income.  Allianz offers a feature that doubles the income for long-term care but you don’t get it if the account value goes to zero before you need it.  Income payments decrease the cash value of the contract and if growth does not replenish what was taken then you’ll run out of residual value quicker than you would with more growth.  It leaves you with no additional benefit when you need it most.

Yes there are better options if this is something that interests you and there are some instances where the ABC provides the highest payout.  I say it over and over again but am not sure it sticks.  If you’re going to use an annuity to protect assets or provide income in retirement, go with the product and strategy that gives you the most in return.

I have nothing against Allianz personally but never felt their product line gave me a competitive advantage.  If that changes I will be happy to represent the new products.  And if someone shows you an Allianz contract that I can’t beat I will happily give you my blessing to do business elsewhere.  I’m only trying to give you the whole picture so take it for what it’s worth and make an appointment if you’d like to shop some alternatives.

Merry Christmas and Happy New Year!


Make an appointment here…

20% More Income


Payouts on income annuities have been low for years.  It’s a situational problem since in some scenarios a person can get a really good deal.  But for the average retiree the numbers don’t always seem to be compelling.

Early in 2020 I decided to introduce people first to the most complex use of the Flex Strategy to show just how much better the numbers can be if you use the right strategy rather than relying on an annuity alone to produce a safety net in retirement.  For anyone who has been around a while it wasn’t much of a jump to see an index annuity used primarily as a portfolio management tool.  For those who are new, however, I left out some critical points in the middle.

I’m going back to the basics so that anyone who doesn’t have enough information to make the connection will hopefully add these building blocks on their way to a complete understanding of how best to use annuities in retirement.

Over the past couple months I have run into several cases that are similar to the one I’m going to show you.  The specific premium amount doesn’t matter so much because the math works out the same no matter how much money you have.  Rather than explain the full details of this case I’m just going to show the numbers to illustrate the difference between two ways to approach retirement income.

For one couple in their late 50s we looked at using $300K to fund guaranteed lifetime income that would start in about one year.  It’s easy to find the highest guaranteed income payout for any situation and takes no more than a 5 minute search in a database.  In this case it was Protective Life that would offer the couple $13,260 annually, guaranteed for life.  Age, single or joint life and the number of years you will defer will produce different results for every person and that’s why an independent broker is important.  What works for you most certainly won’t work similarly for another person.

The table below shows what this contract would look like with growth, fees and income all taken into account over a 20 year time period.  I didn’t call the company for an illustration because I don’t plan to sell this but the numbers are plenty easy to recreate using the past 20 years of the S&P 500 along with the maximum cap rate for growth offered in the contract.  In exchange for the year of deferral, the income base is increased by 4% to $312K and a 4.25% payout rate produces the income figures, while the annual fee is taken from the account but calculated using the higher income base.

As you can see, after 20 years, fees amount to nearly $75K, total income is still less than initial premium and there’s not much money left in the account.  For these guys to not only get their money back but also capitalize on the contract they would need to live well into their 90s.  For older individuals the payouts would be higher but you’ll collect it for fewer years.  In most cases it’s six of one and a half dozen of the other.

Why do people do it?  Aside from not knowing about any other options, there are two major benefits to doing it this way.  First, bonds would only provide about half or maybe less than that for income.  While the bonds would have a residual value that is greater, a person would need additional funds in something else to match the income so that essentially says that using bonds would be much more expensive and definitely more risky.  Second, some people enjoy the carefree nature of knowing a check is coming in the mail every month and will continue for life.  It’s easy and takes a lot of pressure off retirement concerns.

Still it’s been hard for me to justify a low payout even if the actuaries and Monte Carlo simulations prove that it helps a portfolio.  Plus, most everyone else is selling it this way and if I can’t differentiate myself then there would be no point to any of you doing business with someone in Montana.

I realized there could be a better way years ago when I added up the fees on one contract and added them back to the residual value of the account.  Let’s also not forget lost opportunity cost.  If those funds had not been subtracted they would have grown also.  In the above contract, the $74,880 paid in fees would amount to an additional $90K remaining if the fee had been zero.

You may also notice that in the above contract there isn’t much growth to begin with.  2.35% maximum annual returns shouldn’t get anyone super excited about signing away a big sum of money.  Where other contracts without income riders have no fees and also come with growth potential that can be more than twice as high.

The below example shows just such a growth contract with a similar premium, no fees and a conservative blend that produces an average yield of 4.21%.  Using free withdrawals that match income payments from the guaranteed income contract you can see that the residual value matches or exceeds the initial premium throughout.

Click here to expand for a larger image

The benefits of doing it this way cannot be understated, even if you doubt the ability of the contract to yield that well over time.  If this contract yielded 0% then income payments would last for almost 23 years.  If you split the difference on yield then more than half the money would be remaining.  Of course you all should know that we can take this even one step further and make it even better but that’s not the point.

Why an annuity at all?  Perhaps any doubters can tell me which asset would be better.  As for 20% more income, use your imagination.  Clearly a larger remainder means you could withdraw more aggressively or even allocate less to the annuity in the beginning.  Either way you slice it, you get more by doing it this way.

Again, there are several benefits to using this strategy, not the least of which is more control over your money and flexibility to make changes throughout retirement.  There are all sorts of caveats, disclaimers and unique situations that make this different for everyone so comment below or respond to my email if you have a question, suggestion or disagreement.  For my benefit and yours this doesn’t need to be four times as long.

Enjoy your weekend…


2020 Annuity Index Performance Comparison


This started last year as an exercise for one person who wanted to see all growth options in one place.  It can be hard to decide which annuity to use when so many people will tell you that one product is better than the others.  Not a whole lot has changed but a few things have so I decided to make this an annual deal where I show performance figures for indices used in some of the more popular contracts.

It was a rough year for markets and whether the S&P 500 is at an all-time high makes no difference to most portfolios.  People who participated in broad-based market indices were more consistent than those who invested in individual stocks.  Federal bailouts funneled money to large companies that were exempt from shutdowns and many small cap companies underperformed dramatically.  So the overall stock market may look good but it didn’t necessarily spell success for everyone.

Just like individual stocks and mutual funds, index annuities this year produced performance that was all over the map.  For my clients I feel fortunate to have had most in risk controlled indices that turned out nice returns for all except a few people who reset contracts at the bottom of the market in March.

The main point:  safety good yield is possible if you know where to look. Without further ado, here’s a little light reading for your Sunday morning.  Last year’s article is linked at the bottom if you’d like to go back and compare this to 2019.

Let me first offer two disclaimers:

  • Each of these index returns will be limited by a cap, participation rate or spread and in some cases a combination of two out of three. Since those are changing constantly I’m not going to go into details of the actual contract yield.  Let’s just see how each index performs.
  • Most index annuities offer annual resets, meaning that’s how often you lock in gains. Some of the below options exist on a two or three year reset so there’s an extended period of time to either achieve more growth or have it wiped out by a downturn in the market.

Below you will see first the company, then the contract surrender term options and then the available index with annual performance from the past 12 months.


Midland National – 8 and 10 year surrender options

S&P MARC 5% Excess Return Index 8.67% annual yield

Fidelity Multifactor Yield 5% Index 4.69% annual yield


Great American – 5 and 7 year surrender options

S&P 500 Low Volatility Daily Risk Control 10% Index 5.09% annual yield

SPDR Gold Index 23.74% annual yield


Nationwide – 5, 7, 9 and 12 year surrender options

JP Morgan Mozaic II Index 1.12% annual yield


Allianz – 7 and 10 year surrender options

Bloomberg US Dynamic Balanced Index II 6.44% annual yield

PIMCO Tactical Balanced Index 5.29% annual yield

Blackrock iBLD Claria Index 5.32% annual yield


Lincoln National – 5, 7 and 10 year surrender options

Fidelity AIM Dividend Index 1.83% annual yield


Athene Annuity – 7 and 10 year surrender options

  • Old Indices: Phased out for new contracts issued in 2020
    • BNP Paribas Multi-Asset Diversified Index 3.79% annual yield
    • Morningstar Dividend Yield Focus Target Index -5.06% annual yield
    • Janus SG Market Consensus Index II -4.81% annual yield
  • New Indices: Have only been available on new contract issued after February 2020 (both include partially back-tested performance data)
    • AI Powered US Equity Index 4.47% annual yield
    • NASDAQ FC Index 23.59% annual yield


Fidelity and Guaranty – 7 and 10 year surrender options

Barclays Trailblazer Sector 5 Index -0.13% annual yield

Balanced Asset 10 Index 9.63% annual yield

The above indices represent some of the more popular options that are most aggressively pushed by other agents and marketing organizations.  The annuities themselves will not have much difference but the performance potential will be tied to the index options you have.  Going back to my disclaimers, each of these will be limited by cap, participation, spread or even a reset that goes longer than one year.

For me it’s interesting to see how some of the highly touted index options of the past have actually performed in the real world.  Lincoln and Fidelity & Guaranty came out with big claims of a hot new index and each of those fell flat.  Athene completely revamped index options for new contracts because of poor performance and it looks like they have at least one new good option, but the new ones haven’t even been around for a full year so it will be interesting to see how actual performance looks going forward.  If there are any other indices you’ve heard about but don’t see on this list, just drop me a note.  I’ll dig into it and offer an honest opinion.

Check out last year’s article here:  2019 Annuity Index Performance Comparison



Index Annuities Have Evolved


Using a good indexed annuity, with the right perspective and strategy, can solve all the concerns a person might have in retirement.  This week is a shout out to Carl in Florida who bought one from me about five years ago.

Carl came to visit last summer and after several years of working together we have become good friends.  He’s not the only one but he is more vocal than most and is more than happy to tell me when his expectations are not met.  I don’t know about you but my best friends are the ones that give me the most grief.

Casey, Jim and Chunk are my fishing and hunting buddies.  None of them would hesitate to give me a hard time if I did something wrong in the field or on a stream.  And it goes right back at them if I see something that isn’t right.

Carl reads just about every one of these newsletters and he asked me a direct question after seeing what I sent out last week.  The link is at the bottom if you missed it.  He basically asked me how one person can get an average over 6% in two straight years when he’s never been able to do more than 4%.

Well, I think he is averaging over 4% so he has done better at times but it’s not his job to give me the benefit of the doubt.  Now, part of it has to do with timing as annuities all hit differently at any given time of the year.  Carl’s contract resets in July while Neil’s contract resets in October.  Each is going to perform differently in any given year.  It stands to reason since index annuities are tied to the market and the market is always changing.

But what’s more important is that several changes have happened in the annuity market since Carl bought his contract.  Diversity of index options has increased across all products which has provided more opportunity for people with newer contracts.

Back in the day, or 5-10 years ago, most products had simple options like a basic cap rate on the S&P 500.  I’ve seen a lot of old contracts that don’t have much else.  So it’s not a bad thing but in many cases the yield potential is more limited than it is with the new options.

Over the past few years, insurance companies have continued to offer new indices that offer more potential using participation and spread rates with no cap.  A new index with very little performance history doesn’t always inspire confidence so you have to be selective and it pays to have at least a couple years or real data to analyze so you can see how it tracks with the general stock market.

There are a couple reasons why this happened.  First, insurance companies want to differentiate and all of them are trying to beat the competition so partnering with an investment firm to create an index is something all companies have embraced.  Some of the indices work out and others don’t so you have to hope you guess correctly.  Second, the S&P 500 is a heavily traded index with lots of volatility and speculation involved in the pricing so options are expensive.  That brings cap and participation rates down and limits potential.  Using a proprietary index, an insurance company can much more easily predict cost so rates are higher and more likely to remain stable throughout the contract.

The benefit for consumers is that you now have more options.  Carl and Neil have the same contract but Neil’s was purchased three years later so it has a couple more options that Carl doesn’t have.  There’s the performance difference, along with the timing of Neil hitting two good performance years back to back.

Many contracts in the past were limited to a few index options whereas some of my favorites today have more than a dozen.  When I look at a new contract in its entirety, I always tell people that there’s a double digit yield in there somewhere and a solid 5% average if we do it right.  Choose wisely and be patient.  Everyone with a good contract, including Carl, has the upside potential.  Index annuities have evolved and that provides more opportunity for growth on safe money.

Have a nice weekend…


Case Study: Annuities and Volatility


Two years ago the S&P 500 hit an all-time high, just shy of 3000 points in the fall of 2018.  It was a level that seemed almost unthinkable.  Bulls were arrogant and bears were skeptical or maybe just jealous because they missed out on the rally.  By the end of the year sentiments had switched because the market lost more than 15% to bring things back to reality.

I met Neil right around the time when the market topped out.  He had sold a business and wanted to put some of the funds in a safe place and draw cash flow for a few years.   As soon as his wife could collect social security he wouldn’t need to draw near as much from his assets so all he needed was a short-term solution.

This is the case with lots and lots of people.  Early retirement, delayed pensions or trying to maximize social security require much more cash flow in early years than later.  This makes the traditional approach with income annuities irrelevant and the solution is quite simple, even if most people don’t use it.

Neil was also talking to a person who thought he should use a variable with all the fixings so he could have lifetime income and market participation forever.  With the fees being around 3.5% and Neil’s aversion to market risk I thought it was right to give him another option that was safer.

The numbers are what is important in this case.  Neil wanted to set aside $400K and needed to draw $3000 monthly for the first two or three years.  It’s a really aggressive withdrawal rate of 9% and I don’t recommend anyone banking on that for the long run, no matter what type of luck you have with investments.  But for a short term deal it works just fine and I have many clients who are on an accelerated withdrawal plan for a few years at a time.

The variable annuity would have been really risky.  The income guarantee in the contract would not meet his short-term spending goals so additional withdrawals would be needed.  Taking extra money from a guaranteed income contract is possible but it waters down the income benefit and defeats the purpose of paying the fee.

My instinct was to avoid fees entirely, protect the money, withdraw what was needed and make sure the contract had adequate growth potential to replenish the basis as much as possible.  Needless to say we looked at a lot of numbers and he went with my approach.  Here we are two years later so I thought an update would be worthwhile.

Neil has pulled $72K from his annuity contract and at anniversary his account still had roughly $378K left.  When cash flow is accounted for, the internal rate of return for this investment is more than 6.5% average over two years.  Safety, liquidity and growth potential.  But how would the variable annuity have done?

I like to look back in time and test past recommendations to see how my advice performs.  It helps me get closer and closer to appropriate recommendations for anyone in the future.  Well, including fees and market performance in a stellar two year period, the variable annuity would have had a remainder value of $389K.  I’m a little behind but my deal isn’t costing Neil 3.5% per year and it has no market risk.  And at the low point earlier this year, the VA would have been just under $300K at one point, which is enough to make anyone nervous.

If he would have avoided annuities altogether and used an asset manager to invest directly in the market he’d have $408K left.  It’s not bad but there are also fees and market risk.  Ken Fisher charges 1.25% or more for his smaller accounts so that’s the fee I used for those numbers since Ken says that he’s cheaper than everybody else.  I’m not sure that’s true but he gets away with saying it publicly.

It also took some terrific market performance for either market investment to compete.  I guess the lesson is that when the market does well, the annuity does well and when the market doesn’t do well the annuity decreases the volatility in your portfolio.

For the record, it doesn’t have to be all or nothing one way or another.  Neil has more money than what he put in the annuity.  You should all remember that I advocate balance.  Safety AND growth but if your safe assets have enhanced growth potential, then you do better in the long run.  Bonds can’t do it.  CDs and money market funds can’t do it.  Index annuities are clearly the best option.

For an asset that gets no love, I’d say it did pretty well to stay within sight of what a top manager might be able to do during an extended market rally.  I don’t know of any other safe asset that would have been in the ballpark.  Lots of people had this option a couple years ago and passed on it for one reason or another.  If you bought a different annuity I hope you did just as well or better.  If you didn’t buy an annuity I hope you got into the market and didn’t bail during rough times.

What does the future hold?  Well I believe that this market has been purely propped up by stimulus funds and I’ll bet we get more of that no matter who ends up being president.  When the CEO of Walmart suggests more stimulus is needed then you know he knows that sales would be sluggish without it.  Aside from a few hiccups here or there the market may well do just fine in the next year.  Of course it’s risky but you know who to call if you want a protected downside along with some of the upside.

Happy Thanksgiving to all…


Annuities Can’t Solve All Problems


I was supposed to be out of the office for 3-4 days but when the call came saying I wasn’t allowed to come home for a while, it turned into me being away for almost three weeks.  It didn’t take long to realize how ill-prepared I was for that type of absence.  Had I known from the beginning that I’d be away so long it would have been much easier to handle.  Regardless, my family was at home dealing with Covid, so business issues were the furthest thing from my mind.

My friends drove all the way from Pennsylvania to hunt elk so there were plenty of things to keep me busy.  We got likely the worst fall storm I’ve ever seen with nearly two feet of snow, sub-zero temperatures and wind that made it impossible to even stand in one place.  The horses at times had basketball-sized chunks of ice and snow balled up beneath their feet.  Along with cutting firewood, chipping ice kept us plenty busy.  Fortunately we had a chainsaw so the firewood wasn’t much of a problem.

The heavy snow made it difficult to travel and the elk all moved out of the high country onto private land where we can’t hunt.  A meaningful hunt was replaced by survival and we stayed warm and well fed thanks to the carrying capacity of a mule.  You all know how much I love those animals.

My exile didn’t work out all that well.  Normally a mandatory two week hunting trip would be very productive but it wasn’t in the cards this year.  My creativity took a dive as well and I didn’t feel like working on my laptop in my truck, using the cell phone as a hotspot.  Business stopped for a while but what’s the big deal?

Nobody was going to lose money.  Anyone expecting a monthly check would still get it.  Annuities make life easier for you and me.

I was available via phone and email on a sporadic basis so everyone who had questions got an answer and I was able to speak with a handful of them while I was gone.  A few of those people gave me some perspective.  One person lost a loved one.  Another was laid-off and forced to retire early.  Both are examples of things that made my predicament pale in comparison.  Sure, it was one of the least enjoyable outdoor experiences of my life but other people have real problems.

Annuities don’t solve all problems and are only meant to make your financial life less stressful.  Family, health and career are all things that should come first and each of you has a couple extra things on that list that deserve attention.

I can survive under any conditions so don’t worry about me.  When the time comes for you to make lasting financial decisions, I’ll be ready to help with whatever you need.  Yes, I’m back so send your questions, ideas and comments along and I’ll get back to you ASAP.

Have a nice weekend…


A Clear-Cut Case for Annuities


Bryan Anderson: A Clear Cut Case For AnnuitiesNot everyone gets to choose when to retire.  Quite often I meet people who have been forced out of the workplace for any number of reasons.  When this happens, retirement decisions have to be made when people are not mentally prepared.  This year it has been a much more common occurrence because of Covid layoffs and a shaky economy.  Sure, the stock market is doing fine but that doesn’t mean we are all as financially healthy as we were a year ago.

No one likes to have major decisions forced upon them.  It’s one thing to feel sales pressure but another completely to feel as though you NEED to do something.  No one likes to be told what to do and when someone forces a major financial decision on you, it’s within reason to be skeptical.

There is almost never a clear-cut case to use an annuity.  I define clear-cut as an unequivocal justification for using an annuity to meet a specific goal.

This week I had the privilege of speaking with one woman for the first time.  She was laid off from her job a couple years ago, way earlier than she had planned, and has had a difficult time of finding the right job because of Covid-19.  She is nearly 64 years old and is now approaching the age she had planned to retire but the past couple years did not allow her to approach it on her terms.

In her mind that put her retirement plan in jeopardy so she has been out meeting with local financial advisors to help her figure out how to do it.  Initially she had planned to collect social security at either 64 or 66 but after living conservatively off of savings for a while, the drive to maximize social security has increased.  Many people are the same, looking for maximum assurance because of a lack of confidence in available advice.  Could that mean that many advisors won’t give you answers because they have the same questions as you?

It’s only a matter of simple math so it doesn’t take long to determine whether a person can retire, but it does take time to educate a person against mainstream information and restore individual confidence.  In this case the answer is simple.  It turns out that this lady could take social security in a couple months and that alone would cover almost all of her living expenses.

Aside from that she has a very reasonable amount of money saved in both Traditional and Roth IRAs so has no demonstrated need to tap into either.  Any of the spending she might do from retirement accounts would only be on a discretionary basis. If she spent around 5% of her savings each year she would have more than enough to survive and be happy until well into her 90s and likely beyond.  Since spending 5% of her assets each year is not in her plans then it seems as though she has plenty of options.

This is a very basic example that does not represent a clear-cut case for annuities but it’s a real example.  She hasn’t been working for two years and may feel as though things didn’t happen on her own terms but it doesn’t mean that everything she wants isn’t possible.  This didn’t stop another advisor from recommending she defer 60% of her assets in an income product requiring ten years of deferral.  In what world does that make sense?

She may need additional “discretionary” income now but I can’t even imagine a scenario where locking up assets for ten years or more would be beneficial.  There is no need in ten years, the need is now.  Deferring income for several years when she doesn’t need it in the first place will only extend the current stress she is feeling.  There is no reason to do that when retirement is a financial homerun, as it is in this case.

Many of the retirement commercials you might see on TV show you a seemingly successful person or couple who have worked hard and saved plenty but are still stressed about whether they can retire as planned.  That is misleading to say the least.  It makes it sound like retirement planning is really difficult but if you have worked hard and saved plenty then retirement is easy.  I’ve got a 7th grader in the house and her math homework is harder than that.

There is no clear-cut case for annuities, but there are several reasons to use them that will make retirement easy.  Too many people spend time focusing on what annuities can’t do that they fail to realize all the things annuities can do.  You don’t have to defer income for ten years, you don’t have to take income at all.  There are lots of ways to use annuities and it all comes down to protection.  What do you want to insure?  Income, market volatility, inflation, control of assets or legacy?

I wrote about it last year if you forgot or were absent:  Annuities Are Not Just for Income

Those things are mutually exclusive so focus on what’s most important to you and keep it simple.  Annuities are a choice and in many cases better than the alternative.  Don’t make your decision too complicated and let me know if you’d like to boil it down to specific terms.

Enjoy your weekend…


How Much Should You Put into an Annuity?


This is a question that has a different answer for every individual.  I try to keep things a lot more open than the traditional management crowd that suggests a specific blend of stocks and bonds depending upon age and retirement needs.  Some people replace stocks with annuities and some replace bonds.  Some people put almost all of their money in annuities while others put none.

Most people approach retirement faced with the decision whether to make a major change to their current asset allocation.  While a major change may be the right answer it is still emotionally difficult for everyone.  This week I had a second meeting with one man who had seen my videos and was curious about this new approach to retirement allocation.

When we first met, he sent me specifics about his assets and spending goals for a pending retirement date of two years from now.  Like every other time, I take what he writes and form a basic opinion of an appropriate course forward but that’s before we even speak.  In talking to him the first time, I learned more about his personal preference and pre-conceived ideas about how to approach retirement.  It’s never my job to change your mind, rather it’s my job to offer solutions that fit with your expectations.

I can give you the math all day long but it never means that my solution is what suits you.  That’s why communication is the key to proper planning.  I can tell you how the math works but it’s up to you to tell me how the math works for you.  When someone gives me the right amount of feedback I can more properly offer solutions that not only work mathematically but also work emotionally.

Before we spoke the first time, I had already decided that this man could mathematically put 50% or more of his assets into an annuity.  Big payday for me, right?  But I still sat down to run the numbers just so I could verify my recommendation.  My advice needs to stand up to scrutiny so I never take the math for granted and try my best to walk slowly into the eventual solution.

Before the second meeting, I ran his numbers through my spreadsheet so I could find the perfect balance of safety and growth.  His income goal is relatively high in relation to assets so he needs growth and protection at the same time.

I ran the numbers through several historic scenarios and found something very interesting.  Because he was saving a substantial sum for the next two or three years, an annuity would only improve his long-term outlook if he placed a modest amount in it now.  If I showed him putting more money in the annuity now, his long-term profitability decreased.  The right amount of protection truly did give him all the protection needed to weather any storm presented in the market over the past 100 years.  Less in the annuity created a worse result as did more money in the annuity.

It pays to take chips off the table at some point, it’s just that no one knows how to identify the perfect point in time.  I continue working and analyzing different scenarios to come up with solutions that work for you and recommendations that I stand behind.

Therein lies the challenge.  The result for this man was based purely on the sequence of returns for his investments, but depending on what period you choose, the results were roughly similar no matter what period was used.  So for this guy it made sense to put about 15% of his asset into the annuity, which would provide the security to deal with volatility while keeping the opportunity for growth that he needs.  His entry into using annuities for retirement will likely be easier than it is for most others.  A relatively small financial commitment now is a much easier way to get started, so if annuities ever become a larger part of the plan, it will be a much easier transition.

How much should you put into an annuity?  That all depends on assets, spending needs and risk tolerance.  For everyone it is different and the results at times might surprise you like it did me in this situation. Factor in all the variables and run some numbers to see if there’s a magical allocation for you.  Almost every person who has bought an annuity from me in the past has come back to buy even more.  Once you realize it’s not that big of deal then it’s easy to see annuities are a very reasonable safe asset.  It works for retirement income, asset allocation and everything else.  There is a justification for every amount but the starting point is entirely up to you.

Have a great weekend!


Will This Election Ruin Your Retirement?


SPOILER: I really don’t think so.

Regardless, dozens of people have commented that they either need to do something before or after the election.  There is a fear from both sides that things in this country will go south if the preferred candidate doesn’t win.  Will taxes go up?  How will health care change?  Will the federal government have more control over us or less?  These are all intentionally general because I don’t want to try convince anyone either way.  There are literally dozens of issues I could talk about but this isn’t a political website so I’m just going to try to tell you why none of this matters in the long run.

I’ve written about the need to ignore single events when making long-term plans but this is a bigger one that may have ramifications for years to come.  It doesn’t mean you should make major moves just because of this election so relax and think about your options rationally.  Doing that may help you realize there are issues other than the election that make retirement planning more challenging.

I’m going to give you three reasons why the election shouldn’t be an indicator for major investment decisions.  Focus on your own personal reasons for making changes so you don’t have to second guess an ill-conceived strategy.

First, the stock market doesn’t care whether a Democrat or Republican is the president.  The stock market reacts when the incumbent looks to be challenged because the rules may change in a new presidency.  The stock market likes certainty and when the rules change there may be a slight dip while profits are taken at the top but the market usually bounces back once the new economic environment is known.  Traders keep trading and businesses move forward because that’s what America does.

Second, it is rare that one political party controls the presidency and both houses of congress.  Because there is typically a division between the executive and legislative branches of government, there tends to be slower movements for or against the issues that you feel are important.  Major changes can often be delayed or outright crushed by either the house or senate.  I agree with anyone who says the Founding Fathers were geniuses.

And finally, major political parties have been running up the deficit since 1930.  While Clinton claimed a balanced budget in the late 90s, there is debate about how the accounting was done and the federal deficit actually increased over those years, albeit at a much slower pace than in the years since.  Excessive government spending makes interest rates a political tool rather than an indicator driven by purely economic forces.  Lax monetary policy is a far bigger threat to your retirement than either political party because it keeps interest rates artificially low.

I think there is one thing currently happening that is far more important than the election in six weeks.  Stimulus money is running out and the economy hasn’t fully recovered from Covid-19.  Some lockdowns are still in place and it will likely be awhile before we’re moving forward full-steam again.  Raise your hand if you got out of the market before it recently lost almost 10% from the top.

When looking at one single event in time, it’s tempting to use it as justification for making moves that you should probably be making for other reasons.  Perhaps it would be more important to really define your goals and expectations first.  I think a lot of people fail to act because they don’t know what they want.  Keep your long-term goals in focus and forget about single points in time.  If the election motivates you to make a major financial decision then you probably should have done something well before now.

Enjoy your weekend and comment below if you have something to add.


Annuities Slow Down Time


I graduated from college almost 20 years ago.

When I think back to that single point in time it seems as if those 20 years just disappeared. At a college reunion last year it took me by surprise to truly feel as if those times happened just last week. Many of you may feel the same way at different points in your life because time flies by as we get older.

It helped me put things into perspective when, instead of thinking about two points time, thinking about all the points in time between. Then it’s fun to realize all the things that have been packed into that time period. In the midst of my 18 year career in financial services, I took a trip to the Olympic trials, spent more than 40 weeks fishing in Alaska and traveled all over the US by either highway or horseback.

Being a bachelor most of that time certainly helped because it gave me lower living expenses and more freedom. If the next 20 years are similar, it will all add up to a rich life and for that I am grateful.

Yes, time speeds up as we age. Each year that passes is a smaller percentage of our lives. For a child, birthdays and Christmas seem so far away but for me they seem to come and go so quickly that it’s not quite as exciting as it used to be.

Right now I’m headed for my annual fall elk hunt. It has been a year but it seems like yesterday. Time slows down if I stop to think about all the little things that happened in between. 50 weekly newsletters is a great way to help me realize how much has been fit into the past year.

Annuities slow down time because it gives you something to expect that may seem a long ways away. Owners are always waiting for a check to arrive, for performance on anniversaries or for surrender periods to end. When the world is zipping past the annuity just sits there, doing what it’s supposed to and giving you something to look forward to.

Obviously I know this because I deal with people who own annuities and it happens all the time. On an annual basis things may seem to move slowly, but it balances your life just like it does a portfolio.

As I ride into the hills today, I’ll be moving slowly and will take time to think about all that has happened in the past year. For many people, annuities have been the best part of life on the financial side. The world is changing faster than it ever has but annuities will slow it down for you and keep things consistent for those who like more gradual changes.

Wish me luck on the hunt and please be patient with any response. I’ll be able to text and email at least once per day so I’ll get back to you as soon as possible.


Annuity Sales v. Advice


Bryan Anderson - Annuity Sales Versus Annuity Advice

Two years ago I walked onto a car lot to take a look at new trucks just to see what was available.  My truck is old but in good shape so I have no expectation of needing a new model for several years.  That didn’t keep the salesman from telling me how much better a new truck would be as he shoved his card in my face when I tried to turn away.  Nothing down and 0% interest for 72 months… Such is life for a cutthroat salesman.

When you are in retirement or coming toward it, there are several issues and questions that need to be dealt with.  Income planning, health and long-term care, taxes, social security or estate planning etc. are all single issues that have priority for some but not others.  And you need to understand that each of those put you square in the wheelhouse of someone who is selling something.  Whether it be financial or legal services, it all takes time and often money to figure it all out.

Annuities can be seen as just one piece of the puzzle.  In order to place them correctly it takes careful consideration of both objective and subjective variables.  No single solution or approach is correct for every person so all retirement issues have to be factored into a recommendation.  The need for comprehensive planning runs head-on into the wall of a hard sales pitch.

Just this week I had my fourth conversation with a guy who has been reading this newsletter for almost two years.  He is in no real need of doing anything so has spent the past two years talking to just about everyone who hangs a shingle out to sell annuities.  The result is plenty of education but even more frustration over the lack of clarity in this industry.

I had to remind him that not once during our prior conversations did I recommend a specific annuity.  Everyone else tried to show him a favorite product and he knew right away they were just trying to sell him something that he didn’t really need.  At one point he actually said, “If I get pitched another 10 year annuity with an income rider without being asked what I am looking for I’m going to scream.”

He really went through hell to get back to where he started.  I commend him for his resilience and fortitude.  His name was sold to advisors that bought leads and he was called consistently by Ken Fisher and JD Mellberg but he was smart enough not to bite.  The sales pitch never offered what he needed or wanted.  No one actually asked what he was looking for.

Sales are ridiculous and focus on one of the key areas of income, volatility, inflation, control or legacy to highlight the weak spot or whatever is most concerning to you.  It’s called fear-based selling and it is usually the beginning of uncomfortable conversations.

You should be worried about living so long that you run out of money!

The market is going to drop and you’ll be broke!

The government is spending so much money that a dollar will be worthless in 20 years!

Insurance companies just want to steal your money!

Your family will be left with nothing!

Every single retirement concern relates to one of the above examples that attempt to instill fear in retirees and no specific product can solve more than one.  Calm down and approach it rationally.  Solutions require a strategy and to find that takes good advice, not a sales pitch for a fancy product.  We are not all like the guys who buy airtime for local TV on Saturday mornings.  I can do the very same thing but I prefer to help whether you buy something from me or not.

Seek advice that helps you sleep at night but don’t fall for a sales pitch in the meantime.

Have a nice Labor Day weekend!



I Don’t Care if You Buy an Annuity


Most of you should know by now that I operate differently than others who advertise online for financial services.  Last week my marketing partner, Jeremy, came here from Texas so we could brainstorm some new ideas for getting people the exact type of information they want.  Keeping this environment low pressure for you is a major priority for me and it’s important to send just enough but not too much information.

That lies in stark contrast to most others who operate in a similar fashion.  I know with certainty that if you sign up on another website you are likely to receive endless phone calls until you change your phone number or give in to the sales pitch.  All those guys want is a warm body with a rough demographic match and they will do everything they can to sell you an annuity.

I’m different because I don’t care if you buy an annuity but I do want to make sure you find useful information regardless of the outcome for me.  Over the years I estimate that more than 30,000 people have signed up to get more information from AST.  I have probably had extended conversations via phone or email with maybe 20% of those people.  We had interactions and some became clients because they called me.  The others have received the same information as you without being harassed or bothered in any way.

I keep track of all the appointments I have and run numbers to analyze whether my ad spending is worth the eventual payoff.  So far this year, of all those meetings, I recommended an annuity for just about 43% of the people who asked me for advice.  That means more than half of all people came to me, shared their information and goals and I told them that they didn’t need an annuity.  Some people who don’t need an annuity buy one anyway because they like the security and opportunity provided but most do not.

It’s safe to assume that this year matches prior years and that I have communicated directly with about 20% of the people who signed up on the website.  If I only recommended an annuity for 43% of those people it translates to an annuity recommendation for only 8.6% of the people who come here.

That’s seems pretty low-pressure to me, especially considering how far others will go to get you on the phone.  I don’t expect any sale to make my week, month or career so it won’t do me any good to shove you into something that doesn’t work.  All advisors, whether fiduciaries or not, are looking out for self-interests but I promise I’ll never look out for mine at the cost of yours.  Knowing that my pitch rate is so low should allow you to relax and be more comfortable reaching out for a fair assessment.

Just this week I emailed back and forth with a man who has been reading this newsletter since the beginning.  He was interested in buying a product that I could sell but didn’t want to.  There are some that fall outside the scope of what’s appropriate for the type of planning I do.  He understands the product and likes the opportunity provided.  I recommended he go for it with another advisor who had shown him the contract but reminded him to reach out to me any time for a second opinion on the advice he gets elsewhere.

He got what he wanted and I kept my principles intact.  That approach makes what I do more enjoyable.  I sell annuities for a living but I will never sell one that doesn’t fit.  I don’t care if you buy an annuity because it’s not going to change my life.  You should only buy an annuity if it changes your life.  As you field the constant phone calls from others, take some time to consider which approach works best for you.

Have a nice weekend…


7% Annuities


This one takes me back to the very beginning of this website.  In the early years of my career, variable annuities came out with guaranteed income riders.  Since VAs have mutual fund sub-accounts the cash value of the contract goes up and down with the market.  But the guaranteed income rider assured the owner that future income would be based on a phantom number that increased regardless of market performance.  Many of you already know this and many who know it have experience with such products.  Some worked out well and some didn’t so I’m not here to convince anyone to regret a past decision but I do want to remind those who don’t know what 7% actually means.

Last week I highlighted a fixed annuity offer that had a boosted rate for the past few months.  It wasn’t the highest possible fixed rate on the market but considering credit quality of the insurer it was a very valuable offer.  That offer, of course, is relative to what’s available in today’s market.  Those who would rather accept risk might have thought the payoff wasn’t good enough and others may have liked the guarantee but thought the rate was too low for the commitment required.  Everyone has a choice to make and I’m here to help with the guaranteed side of things.

When I post things like that it’s common for some people to challenge me with a better offer found elsewhere, which drives me to justify my nature to be particular about the opportunities I support.  Some of you may recall there was an offer that expired last week with a 3.25% guaranteed rate.  That’s nothing more than an annual interest rate on your money.  It’s very simple.

One person responded by email asking if I had an opinion on a 7% annuity.  I knew what that meant but I assumed he may have thought that my offer was nearly four percent less than something else he had been pitched.  While several other mediocre companies are offering something that is a touch higher there is certainly nothing that offers a guaranteed yield of 7% when treasury rates are near zero.

I admit it is confusing because several companies are offering 7% yield or something similar, so what gives?  Well this goes back to the beginning for me.  To spare you the whole story, I’ll just cut to the numbers.

Your account value is the money you put into an annuity.  That value grows according to a fixed, indexed or variable rate of interest, depending on the type of annuity you choose.  The account value is your money that you can use for anything you want by way of up to 10% free withdrawal or the full sum at the end of the surrender period.

The income rider adds a guarantee that provides a phantom value with a guaranteed increase for each year of deferral.  In this case that guaranteed increase is 7% which means the phantom value grows by that amount each year until you take income payments.  When you take income, the phantom value has grown by 7% each year and then lifetime income is based on that accumulated value and the age at which you take income.  The older you are when income payments start, the higher percentage of the phantom value is guaranteed.

The cash value of the contract is quite different from the phantom value used to generate lifetime income.  When an annuity offers 7% it doesn’t mean that’s how your cash value grows.  It simply shows you how much your income will increase for each year you wait to take it.

7% or anything like it only refers to the deferred annuitization of your money and not the growth of your assets.  It may sound complicated but it’s not.  Everyone knows exactly what this means because everyone counts on social security for retirement income.

Social security is not an asset, it is income.  No one puts it in the asset column but everyone uses the income figure to reduce the burden on a retirement portfolio.  What happens with social security?  It’s just like the 7% annuity.  You are eligible to collect at age 62 but get more at 66 and two months and get the most at age 70.  Every year you wait means a guaranteed increase in the income you will receive.  Everyone loves social security but no one likes annuities.

Therein lies the problem.  For years agents have been selling the 7% guarantee without explaining what it really means.  Many people thought to expect a healthy yield on their investment each year, only to get a complicated statement that showed nothing close to it in cash value.  The biggest omission in all of this is that most all income riders also charge a fee that further reduces cash value.  I can’t count the hundreds of people who have called to tell me they were sold on a different idea.

If a guarantee matches your expectations then a lifetime income contract will work great.  But if you think you are making 7% on your money then you have to ask the salesman some hard questions.  Guaranteed income contracts work well when the guarantee matches expectations.  If your expectations are different then you need a second opinion.

I’m raising my hand…


Surrender Fees Are Not a Big Deal


This one is sure to hit home with a few critics but there’s an important lesson here.  Surrender fees are probably the biggest negative that come with annuities.  Since most other investments have nothing like it, declining fees over the years are new to everyone who is a first-time user.  There is a reason they exist and several reasons why it doesn’t make a difference for the average person with an annuity.

Most of you have been saving into retirement plans and accounts for 30 years or more without ever touching the funds.  So what’s wrong with being able to pull 10% each year from an account penalty free?  Plus for portfolios with a long-term objective, it’s not common to move more than 10% of a single account for rebalancing or any other adjustments, especially while in retirement when you should be focused on other, less stressful things.

While some may think it’s a raw deal to have money held hostage by a large fee on the back end, others understand how it works and it doesn’t bother them.  Most of my clients who have had annuities for several years have never touched the account.  For those it’s just safe money without fees and some good growth on top of it.  No cares or worries at all…

Those are just a couple of the ways I’ve always explained it but I’m not sure it resonates.  It’s justified to want a better explanation for how commissions and state premium taxes affect the contract and there is more to it.  Consider that the insurance company invests in long-term bonds to back an annuity.  If you bail out early the company would have to sell assets in a potentially unfavorable environment.  Within an annuity, the insurance company bears the interest rate risk which is one of the primary threats of income planning.  The fact that you can get 10% per year without fees, penalty or risk of loss is actually a pretty good deal.

Well aside from the mechanics there are some other reasons that might make sense.  Two things I’ve seen consistently over the years actually give you more control over the outcome.  The first is the fact that most index annuities have growth in the first few years that exceeds the surrender fee.  The account goes up and the fees decline meaning a person could walk away with more than the initial investment.  This is the point where most realize they have a pretty good deal.  Because they realize it’s a good deal, no one walks away.

The second one is something I have mentioned in passing for several years.  I always told people that you can maximize the withdrawal from a potential contract and get a substantial amount of money out of it before the surrender period ends.  I was recently running numbers on an income scenario for one couple.  We thought about maximum withdrawals so retirement income could be combined with Roth conversions in the first ten years of retirement.

I looked at the illustration and did some basic math.  At the guaranteed minimum, meaning no growth in the account, this couple could maximize free withdrawals each year and at the end of ten years would have drained more than 68% of the initial contract value.  If consistent growth of 4% is achieved the withdrawals would be bigger and amount to almost 80% of the initial value plus leaving behind an even larger remainder value.

Take a second and think about how big a change you’d need to make in order to shift +/- 70% of an account over the first then years of retirement.  If you end up with an annuity you don’t like then don’t just sit there.  Doing nothing is the worst thing.  Or maybe you should just start with a good one.  There’s all sorts of opportunity with that kind of liquidity on safe assets.  I showed you all an example last week of what can happen using withdrawals and incremental investments.  There’s a link to last week’s video near the bottom if you missed it.

There are all sorts of examples and ways to improve an annuity.  Eliminate fees and use the protection and liquidity to your advantage.  Yes, I make money if you buy an annuity from me but I don’t make money for writing this letter every week.  You may have a surrender fee on the annuity but my advice is free.  As long as you get a plan that works then I’d say it’s a pretty cost effective way to plan for retirement.  All things consider, surrender fees are really not a big deal.

Enjoy your weekend…


How to Beat the Market with An Annuity


Yes, it is possible but you have to think about it differently than most everyone else.  The annuity itself may or may not beat the market but how you use it can definitely give you an advantage.  Too many people get stuck on evaluating a single assets rather than finding ways to build a portfolio of assets that work together.

It might help for some to have a little context.  I’ve been hinting at this for over a year and have shared the idea with several people.  Two of the past newsletters will give you some background and show you how long I’ve been working on this.  First, you can click here to read “How to Get Out of An Annuity”.  It talks about the myth of liquidity and how annual free withdrawals give you plenty of opportunity.  Second is the “S&P 500 over 25 Years” that shows you a chart and gives you an idea of the real yield you should expect with risky assets.

Then it comes to this, my latest idea.  I’ve been playing around with it for more than a year and have since found out that this approach has been academically verified to maximize assets in retirement.  I have compared more than 50 time periods and all have similar results.  So the numbers aren’t cherry picked and if you want to pick your favorite mutual fund or ETF I can pull the chart and make a quick spreadsheet to test it out.

This is just another thing you can do with an annuity that wouldn’t be possible with other assets.  Liquidity free of interest rate risk with a reasonable yield is what gives the annuity an advantage over bonds and cash.  So enjoy the video and let me know your thoughts.  You can comment below or respond to my email.  I’m going fishing today so forgive me if my response time is a little slow.

Have a nice weekend…


Bobble Heads Talk about Annuities


About a week ago, someone signed up on the website, maybe read a couple emails and watched the Flex Strategy videos.  Rather than schedule an appointment to see whether it would work for him, he went and posted a question on the Bogleheads forum.  You can only imagine the response he got from all the “experts” hiding behind an anonymous screen name and a photo.

Here’s the question: Anyone familiar with the guy at Straight Talk Annuity and his flex plan?
Fixed Index annuity with no income riders to get fees as low as possible. Maybe use it instead of bonds in combination with your equity allocation.When stocks do well withdraw from your stocks.When stocks lose you withdraw from your annuity to preserve your stocks.

I have to compliment the guy.  That’s a great synopsis.  But, of course they didn’t answer the question because they have no idea about how to distribute assets in retirement.  I mean no offense to anyone who lives off CD interest, bond coupons or stock dividends, but these guys are all about parking money and not touching it.  I like to talk about using money.

My first problem is I never met the guy.  I had no idea about his financial situation but he apparently took the videos to mean I thought he should buy an index annuity.  Well of all the people I’ve talked out of buying index annuities, it’s hard for me to believe that someone I’ve never met would accuse me of trying to sell one.

What you’ll see on this forum is a perfect example of confirmation bias.  These guys will say anything to back up what they already believe.  I started to respond to each claim but got bored.  No one ever really said anything of substance.  A quick page from a contract or illustration could refute any of the arguments.  Just remember that the question posed was drawing attention to a strategy, not a product.  I’m sharing this because it’s exactly the kind of crap you’ll run into when trying to verify things on your own.  But you have to push through and that’s why I’m doing this.

One guy kept asking for a prospectus.  Aside from the fact that I never proposed an annuity to this individual, fixed insurance products don’t have a prospectus.  A prospectus is a legal disclaimer for securities contracts.  It lets you know all the information about the company and investment offer so you fully understand that you can lose money but can’t come back later with a lawsuit.  A couple other guys thought they were smart and posted links to an annuity prospectus from both Brighthouse (MetLife) and TransAmerica which are obviously from variable annuities because those have mutual funds as the underlying investment.  Since the underlying investment is a security and can lose money then the SEC regulates variable annuities and requires a prospectus.

FINRA is the Financial Industry Regulatory Authority and does not regulate fixed insurance products.  So, I don’t expect them to have completely accurate information when it comes to guarantees in an insurance contract.  I’ll take what the insurance company offers in the guaranteed summary of values over what FINRA insinuates any day.  What FINRA did in this case is highlight how some contracts guarantee less than the initial premium in exchange for higher cap and participation rates, except they left out the part about higher growth potential.  This is a thing of the past and there aren’t many contracts that do this anymore.  It’s much like the fact that I’ve changed a lot of information on this website because annuities have evolved over time to become much more user friendly.

My proof of misleading information from FINRA and the SEC is that I took the series 65 test to become a Registered Investment Advisor a couple years ago.  I passed easily.  All of the questions about index annuities were written as if the products haven’t changed in 20 years.  I had to answer incorrectly to get them right.  And I answered all the questions about index annuities correctly, according to my results.  You can disagree if you want but you’re wrong.

The following comment is one of my favorites…

Stinky says that there is an excessive internal cost to these products.  While the investment banking team required to administer index annuities would certainly add cost over a traditional fixed annuity, the fixed rates on both products are within a half percent.  So I call this one bullshit.  At least he’s somewhat fair and doesn’t think an index annuity will kill a portfolio but I still say he’s off the mark.  You can trust the guy named Stinky if you want but let the current contracts speak for themselves… Below are a couple I shared in the last six months that show no fees, good growth potential and a surrender value that is no less than the initial investment, plus interest in both cases.

Double Digit Annuity Yield

What it’s Like to Own a Good Annuity

Time for a definition for those of you who are new at this.  The ‘surrender value’ is the amount of money you get back if you surrender the contract.

What is really funny is that the thread has evolved throughout the week.  It went from being a criticism of me to being somewhat comical.  Toward the end all the guys seem like they are trying to figure it out; talking about CDs, bonds, dividend stocks, taxes etc.  And they haven’t even come close to designing an income plan for anyone.  It’s not like there was a case study they were asked to comment on, these guys are just trying to be relevant.

The guy who asked for a prospectus added a laundry list of items anyone should look for when verifying if an annuity is legit.  I’m pretty sure that’s the same guy who says he worked at an insurance company for 40 years but obviously doesn’t understand that a prospectus is a very specific legal document that doesn’t apply to insurance products, unless it’s a VARIABLE annuity.  His list of required disclosures is more or less what I go over with everyone before a transaction occurs.  But he doesn’t know me and just assumes I’m an illiterate salesman.

There are lots of individual things I could pick apart if I wanted to start an argument.  They called me out by name and I almost went there and started to respond.  But I have better things to do and didn’t really have time this week.  If I’m going to write a response to anything I’m going to write it to the loyal readers on my list and ask you to decide for yourself.  This actually was some pretty easy material for my weekly newsletter.

Fortunately, the man who started the thread, eventually admitted that we had never spoken and only exchanged a few emails.  I think he actually bought a fixed annuity from a never-heard-of-before insurance company and it seems as though the Bobble Heads are impressed with daily account values.  Either way, there’s proof I never proposed anything since I never had the opportunity, aside from quoting a couple fixed rate annuity options.  That was enough for the Bobble Heads to jump to conclusions and assume I’m trying to do something I’m not.  If any of them had a better idea, they didn’t share it.

Bottom line:  I can prove what I say but they can’t.  One guy claimed to have evaluated three annuity contracts.  Wow!  I’ve reviewed thousands so you can choose who you trust.

Talk to you next week, where I plan to show you something that will make those Bobble Heads spin!


How Mules are Like Annuities


Steady, reliable, strong, intelligent and tough is a good start.  Anyone who uses the first word ‘stubborn’ to describe a mule needs to look in the mirror.  Between mules and annuities, the only people that don’t like them are the ones who don’t understand them.

A few years ago I took Kerry Pechter of the Retirement Income Journal into the Bob Marshall wilderness for a fishing trip.  He didn’t have any experience around livestock so I put him on a mule.  I did the same for my wife on her first trip.  When she became confident enough to ride a horse she looked back and said she felt safer on a mule.

Horses are great but have a tendency to do unpredictable things.  It takes an experienced rider to keep a horse steady in unknown territory.  My horse gets scared of sticks and butterflies on the trail.  It’s weird but the smallest things spook him.  While I work to reassure him that the stick is not going to attack, the mules wait patiently and start following when the threat has been eliminated.  Always there, always ready.

This year it was time to take the kids, and Yellowstone was the place I wanted to see.  It was the first time Erin would let her daughters go on a multi-night pack trip.  I wasn’t at all concerned but a mother will always be nervous.  An old saying suggests that you can spur a horse off a cliff but a mule will never hurt itself.  Therefore the cargo it carries will be equally as safe.

In the movies, cowboys ride horses and mules pull the wagon.  While cowboys are out roping and shooting the mules reliably bring along the important stuff.  Horses are stocks and mules are annuities.

I planned a route that was pretty simple.  We took the trail on the east shore of Yellowstone Lake and went south into the most remote point in the continental United States.  If it sounds rugged, it wasn’t.  Although high in elevation the trails are gentle and easy, the meadows full of grass and wildflowers, the night sky crisp and bright with early morning temperatures in the mid-30s.  Boy did that coffee taste good next to a nice campfire in the cool mountain air.

We’d stake out the horses at night on a long rope so they can’t wander off and let the mules run free.  Since a mule’s mom is a horse they will stay close no matter what and provide something of a protective perimeter around camp.  The kids were nervous about grizzlies but with three over-sized guard dogs roaming around at all times there is no reason to be worried.  I’ve seen mules tree bears before so I don’t give it a second thought.

Long hours on the trail provide the time necessary to clear your head.  Kids asking questions, me telling stories and all of us continually taking in the changing landscape.  Hiking is great but if you want to look around you have to stop walking.  Sitting on a horse or mule allows you to see more of the country you cover.

Over years I’ve watched mule hooves hit the trail in a steady cadence, mile after mile, and drawn parallels to several different areas of my life.  Mules are just like annuities because they are steady and reliable when everything else is unpredictable.  If you have something you want to protect in the backcountry you put it on a mule.

Years ago I joined a friend and bought five mules from a man whose health no longer allowed him travel in the woods.  One of the mules was named Sarah and she was the nicest mule I’ve ever met.  When the man explained the personality of each mule he said, “when we go on a pack trip, Sarah carries the eggs.”  A couple years later I took my grandfather to a mountain lake to fulfill one of his last wishes.  He rode Sarah and I told him that story.  I said, “Grandpa, today you are the eggs!”

This time with the kids was no different.  The safety and security of good mules kept us comfortable and secure on the trail and in camp.  In turn we were able to more fully enjoy the experience.  There’s not a better way for a family to spend time together and escaping the madness of the world today goes without saying.  If that doesn’t share similarities with a desirable retirement then I don’t know what else to tell you.

Until next time…


Lazy morning in a wonderful meadow and three happy girls after an easy day on the trail.

Lily with a nice hookup and me showing off a grand Yellowstone Cutthroat.

Leaving the deepest part of the trip with Lily and Jitterbug taking us home on the final leg.

The Best Time to Buy an Index Annuity


Boy would I ever love it if there was a best time to buy an index annuity.  Let’s say there was a three month period in the year that always produced the best returns.  I’d work 18 hours a day and seven days a week then spend the other nine months fishing saltwater flats and riding the mountains of Montana and Wyoming.  Sadly that doesn’t exist so it doesn’t warrant a newsletter but timing in other ways causes hesitation for lots of people.

Everyone tries to time the market whether intentionally or subconsciously.  But rarely does anyone pay attention to all the indicators and make every move at the right time.  Market rallies, interest rate changes, politics and dozens of other indicators all give clues but it takes an algorithm to sort it all out, and those are still wrong a lot of the time.

Not only have I heard this a bunch recently but also it has been a common theme with people hesitant to pull the trigger on an index annuity.  Many times I’ve heard someone say, “this looks good but maybe I should wait until the market drops to get it.”  The thinking goes that if you are using a contract with growth tied to the market then a lower starting point gives more upside potential.  Buying low and selling high, right?

On the surface it makes sense but going a bit deeper, I don’t understand why anyone would want to play the market while trying to get out of the market.  It’s going to go one way or the other and most of the time the result isn’t positive.  Bigger money is always moving by way of faster computers and we all have no control over the day to day and year over year swings.

Did you ever think that maybe the ‘buy and hold’ mantra is promoted by institutions because they want you to stay in one place?  That way they can make more money by shaving pennies off of millions of shares and thousands of transactions.  It’s kind of beside the point but these things pop into my head from time to time.  Try reading the book Flash Boys by Michael Lewis for a real eye-opener.

If you are thinking about trying to time the market before buying an annuity it’s not so simple.  And in all honesty it doesn’t make any difference in the end.  An index annuity is built to time the market.  If the market drops in the first contract year then you start the second year from a lower point, giving more upside potential.  What if the market doesn’t drop?  Well you had less risk and probably locked in some gains.

2017 was a really good example of this.  Lots and lots of people thought the market would correct and decided to sit it out in cash.  The S&P 500 was up something like 23% that year so all those people who were risk averse missed out on a year where I saw plenty of double digit annuity yields.  Just remember that big gains are nice but it’s all about consistency, like I wrote about last week.  Hit the green button at the top to go to the main page if you missed it.

Index annuities are all about averages.  People often comment about how the sequence of returns might affect cumulative yield.  While that is very important in stocks and mutual funds it matters much less with index annuities.  Instead of the up, down, up the index annuity goes up, flat, up.  This product alone solves the problem of reverse dollar cost averaging for retirees.

Just look at the lost decade from 2001 to 2010.  It was one of the best times to have owned an index annuity.  The S&P 500 was down around 20% at the end of it but index annuities were positive by a healthy margin.  Volatility creates opportunity when your downside is protected from loss.  Many analysts suggest we are headed for another lost decade and using that as a reason to not buy an annuity is just an excuse.  If any of you really feel that way then what the heck are you doing in the stock market?  In another lost decade index annuities will shine bright.

Is there merit to timing the market before buying an annuity?  Maybe but in the end I just don’t think it will swing the needle.  At best it will give you an extra couple percentage points in one year but you’ll get the other side of it somewhere so I’m sure it will all even out.  If you think this is your reason for waiting I’ll bet that the real hesitation comes from somewhere else.  This would be a perfect spot for me to send you back to an old newsletter:  9 Reasons People Don’t Buy Annuities.

Enjoy your weekend!


Consistency is the Key to Index Annuities


It has been an up and down year, to say the least and coming off of the holiday weekend I thought it best to remind everyone where we were a year ago.  Perspective is valuable when analyzing options for long-term financial health.  Two contracts I wrote about last year are up for renewal again so it seems like a good time to give you all an update on how things are going.

A few weeks ago I showed everyone an example of a contract that did very well in its first year but it is important to remember that while big yields are nice, consistency is far more important.  So I went back to the July 10th newsletter from 2019 to remind myself of the context of the time.  It’s interesting to see how similar the years have been.  Each of the past two years have seen massive volatility in the stock market, political and social distress and wild changes in interest rates.  Both times the market finished positive by a reasonable amount.  Read it below if you’d like to compare the two yourself and see where these contacts were last year.

Read it here:  Index Annuity Performance from the Past Year

Again the S&P 500 is up about 6.5% from this time last year so anyone who rode out the treachery did just fine in the end.  It is nearly identical to the same time last year.  For the most part, no one’s position is a whole lot different than two years ago.  People that like the way I do things appreciate the smooth ride and it turns out that neither person missed out on a whole lot of growth by protecting assets and avoiding the possibility of losses.

One of the contracts is my new favorite from Midland National and the other is my old favorite from Great American.  Last year the old favorite edged the new and Great American locked a 5.3% yield compared to 4% for Midland.

This year, the owner of the Midland contract decided to allocate all funds to the S&P MARC 5 index, which is a blend of the S&P 500, Gold and US Treasuries.  Because rates dropped the fixed asset portion of the account increased in value and gave the index a nice bump.  This is the same index I wrote about a few weeks ago that ended up well into double digits for another person.  But last June the rally in this index started so the contract that started in July missed a few percentage points.  In the end, however, this contract just reset the year with an 8.5% yield.  Not bad at all.

We did something similar with the Great American contract but didn’t have blended index with treasury exposure.  So performance is limited to individual allocations of the S&P 500 and a Gold index.  The combination of the two produced a blended yield of roughly 3.8% and that’s just fine too.  There are plenty of people who have an asset that didn’t do this well.  What’s interesting is that within this contract there were opportunities to get that yield at high as 7% but hindsight is 20/20, right?  Maybe we’ll pick the perfect allocations this coming year.

Each contract owner has a surrender value that is well above the initial investment two years ago.  Each could pull 10% of the account value to spend or reallocate to any other investment, and even 20% if you work with someone who knows how to do it without paying a penalty.  Neither individual had to worry about losing money when the market went to hell, and both will lock these gains and never lose them in the future.  Both contracts have cap and participation rates that have not changed a bit so they each hold significant potential for double digits yields in the future and I have no doubt that each will get it eventually.

Over the past two years the S&P 500 is up about 13% total.  One of these contracts is up a total of 12.5% and the other 9.1%.  I’d say we are doing exactly what we set out to do.  In fact, every contract that has reset in this crazy year has returned a positive yield. It’s not always about the biggest yield rather consistency that makes it work.

Enjoy your weekend…