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

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…


All about Annuity Fees


It’s a common misconception that truly comes from an uneducated place.  You’ll often hear, “annuities would be fine if not for the hidden fees.”  In almost every case that is nothing more than a scare tactic because all but one annuity that I’ve seen has the fees clearly disclosed up front.  There is a reason why fees are valuable and a reason why fees don’t exist on a lot of products.  You need to understand both.

Ken Fisher does a really good job of warning people about annuity fees.  So much so that many people disregard annuities altogether because of the perception that what he writes pertains to all annuities.  That is not the case.  Many are surprised to hear that I actually agree with most of what he says.  I do, however, think his writing is misleading because he never says that he is speaking specifically about variable annuities.  So what he writes doesn’t apply to the majority of products available.

For purposes of this article I’m going to reference fixed and variable annuities.  I’ll use the term ‘fixed’ to generally apply to both fixed rate products and fixed indexed products.  Both have the same foundation so that’s where you need to focus.

Fixed annuities don’t have fees.  Before anything else is added, every basic fixed contract is a spread product.  It means an insurance company invests your money, earns yield and subtracts a portion for expenses and profits.  What’s left is the yield stated in the contract.  You don’t buy a higher rate minus a fee, you get the advertised rate and the insurance company took their piece before you even came into the picture.  Anyone who complains about this should look into just how much money a bank makes when you buy a CD.

Fees only come into play when you add something to the base contract.  Some people want an income guarantee, additional death benefit or some kind of long-term care payment.  If you want the additional benefit you will have to pay a fee.  If you don’t want to pay the fee then don’t take the benefit.  Fees are a choice in fixed annuities.

Variable annuities have fees for many similar reasons, only to add benefits you may or may not want.  Again, the base contract has no fees but the costs go up when you add mutual fund expenses and any insurance you want on the account value, future income payments or even a protected death benefit.  Total costs can approach 4% only because insuring all those things against market risk is very expensive.  The blend of risk and insurance inside a variable annuity makes for a complicated list of considerations so if you don’t want the benefit, don’t pay the fee.

In most cases, the difference between fees for Ken Fisher’s management and a variable annuity only come down to the cost of a guarantee.  Go ahead and ask him how much he would charge to guarantee what he says, and he might pull down that one-sided report of his.

I don’t sell variable annuities, not only because high fees create sticker shock but also because I’ve found you can do better with the right mix of a fixed annuity and market securities.  On one side you have the protection you need while on the other you get the upside growth you want.  This combination can reduce fees to near-zero, depending on how you invest in market securities.  If you want to see how much this saves you over time then check out my newsletter from last year:  How Fees Affect Investment Performance.

Fees always cost something in the end.  Aside from the out-of-pocket cost there is always an unrealized cost, which is often much bigger.  I suggest you avoid fees if at all possible.  Knowing how to do that requires you to understand why fees exist and how you can avoid them if you don’t want the benefits provided.  Like everything else this is very simple and it’s best to avoid the hysteria if your goal is to find the best solution.

I have sold some contracts with fees to those who wanted an additional guarantee.  But, 90% of the contracts I’ve place with customers have no fees whatsoever.  I wouldn’t mind a few comments from current contract owners who can confirm my claim, for the benefit of any pessimists in the crowd.

Enjoy your weekend…


What’s Your Plan with All the Free Money?


I didn’t get a direct payment from the federal government because of Covid-19.  Some of you who are still working did but I’ll bet most did not.  This isn’t about welfare, rather that every one of you has been propped up financially by federal spending whether you realize it or not.  In order to truly profit from it you have to plan for what’s next.

Obviously March of 2020 caused plenty of financial panic.  After the exuberance following historic market levels in February, many reverted to a feeling of despair with losses approaching 30% or more.  As nonsensical as it seems, the market has now rebounded so we should all be breathing a collective sigh of relief.  Yes, the US government flooded the economy with cash so everyone is out spending money they didn’t earn, although that’s not what really created additional value in the market.

There are several reasons for it but I’m going to focus on one that explains is better than anything.  The Federal Reserve is buying loans so banks can keep lending and junk bonds from companies that might otherwise fail without consistent revenue.  News of something like this gives investors confidence that a recovery will come quickly and stock prices rise because of future optimism, not because of fundamental value.

It can be summarized pretty easily.  Money was created out of thin air and funneled to major corporations which translated to your IRA or 401(k) growing.  Yes, you all received a federal bailout.  But the party won’t last forever.  With nothing backing it up, the stimulus will run out and things will normalize.

Anyone who got the one-time $1200 probably doesn’t have it anymore.  Enhanced unemployment payments stop at the end of July.  Paycheck protection for small business will fizzle out and at some point both businesses and people are going to have to go back to earning money the old-fashioned way.

Just like the above, you won’t have your balance forever if you just sit on it.  Unfortunately you have to make a move to capitalize on your part of the bailout.  A stock isn’t worth a penny until you sell it.  I’m not saying you have to buy an annuity but what’s wrong with taking some chips off the table?

Back in March I told you all to sell bonds and suggested further protecting assets or even buying more securities.  Anyone who took that advice did extremely well.  How about this time?  Check out that post if you need a reminder:  Don’t Sell Stocks.  Do This Instead.

All of you got the level of assets you now have because of dollar cost averaging and consistently saving over time.  Retirement is a different game and traditional management advice suggests you play it the same way.  Nothing could be further from the truth but putting a realistic plan in place takes a big commitment.  Hesitant people don’t have to do it that way.  Since all of you averaged in to gain your wealth you can just as easily average out to preserve it.

Use the relief provided by the recent rally, however fake it may seem, to evaluate your goals and make a plan before things go the other way.  It may not be tomorrow or this year but you’ve all recently seen how quickly it can happen.  Call, email or comment below if you have anything to add.


What It’s Like to Own a Good Annuity


This started just one year ago.  A standard case came across my desk and I showed one couple how my approach might give them more control over retirement assets.  They had been to a seminar and got the usual pitch.  Being a few years from retirement they had already decided to protect some assets and an annuity is a good way to do that while also making sure all retirement income is secured.  But as is common, they felt like there might be a better alternative to the usual pitch.  At the time I wrote the below newsletter to remind everyone of the benefits of a different approach.

How to Beat a Guaranteed Income Contract

It works for some but not others.  Many people are skeptical of annuity performance and a common sentiment is that an insurance company is going to change the rules and offer nothing on the back end.  For those it’s a risk to not take the guarantee but I’ve tried for a long time to convince people it’s not that hard to beat a guaranteed income contract.

On a side note, there was something really cool about that post last year.  An advisor left a comment to the article asking if I’d recommend a contract for his personal portfolio.  It’s not the first time that has happened.  I know of at least a dozen retiring advisors who have designed their personal plans based on information from this website.  Food for thought…

This couple decided to skip the guaranteed income contract and go with something that had no fees and much more growth potential.  It was a good move that just paid off in the first contract year.  It may have been hard to see the money not moving when the market was at an all-time high earlier this year and then a relief in March when 30% of the value was stripped away in a matter of a couple weeks.  Sure it’s coming back now but what a wild ride.  For anyone who isn’t a professional trader the past year has not been a settling experience.

Over the past few weeks I showed you some things to avoid and then something that works.  Rather than another hypothetical performance, below is actual proof of something that worked well in spite of all the global drama.  I’ll explain a few important points below but first click the link below to view the pdf.  It should be all the explanation anyone needs.

Annual Statement

Yes, this contract gained a hair over 12% when the market had one of the wildest 12 month periods ever.  The market is up from a year ago by about the same amount, but which was the better ride to get here?

Correct, there are no fees in this contract.  Interest credits are net to the account value and death benefit.  Many have a hard time believing this but it’s quite true.

They could surrender this contract and still walk away with a 4.5% yield, but that would be silly.  Having those out of the way in the first year opens up a tremendous amount of flexibility

Don’t forget, the earnings are now locked and guaranteed in the contract and can never be lost or taken away.  Again, no ongoing fees to drain the principal if it doesn’t grow next year.

For the critics who think insurance companies are out to take advantage of people, all cap, participation and spread rates for the available indices remained exactly the same for the second year.  You’ll have to take my word for it.  You only get to see what I show you with consent from the client but you can always buy your own to get a look at the full five page document in a year.

Annuities aren’t scary or too complicated.  Protect money and get upside growth potential.  You can take the guaranteed income and there’s nothing wrong with it but it’s a good idea to explore alternatives as well.  Some contracts are good and others aren’t all that great so it pays to work with someone who is used to competitive situations and has a broader view of all the options.

I am happy for these guys and I really just want to see all of you be successful in retirement.  It won’t always produce like this but it’s nice to see at a time when the world seems to be falling apart.  I’ll continue working to dispel myths and offer education so people can make objective decisions.  It is just not as hard as you think.

Enjoy the weekend…


An Annuity that Works


I guess it’s not enough for me to just tell you what products to avoid.  After a couple weeks of pointing out hidden issues and over-hyped contracts, a few people reached out to disagree or say they don’t want to hear about what doesn’t work.  So again I will encourage any of you who can’t find what you’re looking for to hit the green button at the top right of the page that says “Newsletter” and you can search all my posts.  There is all sorts of information about retirement planning, interest rates, annuity performance and so much more.

If you still can’t find it then ask a question, suggest a topic or start your own website.  I will write about what I want to write about and if that means I’m not good at what I do then so be it.  Most criticism comes from other advisors who don’t want to do their own work but it’s kind of forgivable if you consider where information comes from.  Most advisors choose to trust someone else to recommend a product for your situation.  I wrote about it last year so if you missed it hit the link below so I don’t have to explain it again.

How Commissions Affect Annuity Sales

If you didn’t see it the first time, I’m going to remind you of something that works well and point you to where I wrote about it.  Before I get there I’m going to tell you all there is probably only one company that I’d recommend buying an annuity from right now.  Others are fine and I have active contracts at a lot of insurance companies that are doing well but we are in the midst of unprecedented financial times.  Midland National has far and above the best things going right now.  This does not include variable annuities so let me disclaim that right now since VAs account for the majority of sales in the market.

If you read the above article, the reason makes perfect sense.  Midland is a direct-to-agent company so there’s no marketing organization playing middle man.  If you think that reduces costs and provides more benefit for the consumer then you’re on the right track.  This isn’t the first time I’ve mentioned it but I will go into more detail this time.  It started last fall when I compared index performance for several companies.  Without saying which the best is I simply provided information for anyone who wanted an easier way to compare annuities.

2019 Annuity Index Performance Comparison

In the article I left out one big thing.  All the rates are subject to a cap, participation rate or spread and some require a two or three year wait to hit a reset.  So only looking at the index will not give you everything and the numbers could be updated but it’s a good start.

In that article I wrote about the S&P MARC 5 index that Midland uses.  As of the market close yesterday this index is up 13.83% for the year.  Midland will give you a 95% participation rate with a one-year reset.  That comes to a credit of 13.14% which is not just really good for an annuity, it’s really good for any investment in light of current events.  One client has this contract who is set to renew next week.  He’s going to be happy and there are several others that will follow throughout the year.

Let’s take this one step further.  Coming next week, Midland is offering an OPTION for enhanced participation in exchange for an allocation fee.  I capitalize the word option because you have the choice to use it, not like that product I wrote about a couple weeks ago.  For a 1% fee the participation jumps to 140% and up to 200% for a two year reset.  That’s 19.36% over the past year.  Over the past two years the index is up 17.48% so if you took that option then you’re looking at a shade under 35% for two years.

It’s not just gonna blow other annuities out of the water, it will likely compete neck and neck with market returns but without the risk.  If you look at how the index is managed it’s similar to a managed portfolio that you’d probably be paying close to 2% for someone else to do.

There are other indices available in the contract so you’re not limited to just that and options can be changed around every year to position for the most advantage.  So you can get a really high participation rate with no fee or pay a fee and get an even higher participation rate.  I like having options while I’m beating the hell out of bonds and not floating around with the stock market.

And that, ladies and gentlemen, is an annuity that works.

Have a nice weekend…


Overrated Annuities


It’s time for me to pick on a couple different products that have proved to not be worth the hype.  About once a month, on average, I get an email touting the incredible opportunity of some new contract or index.  I look at all of them just to see if the claim merits me adding something else to my list of recommendations.  Most things that gain traction with other advisors don’t immediately get my attention but when I start seeing a change in sales trends, I keep track so I can compare performance.

Just like when a first-round draft pick never makes an all-star team, plenty of these past ideas have not lived up to the hype.  I have more inside knowledge than other because I service several contracts that I never sold in the first place, which suggests the agent didn’t stick around to explain the lack of performance.  That’s why I feel I’ve earned the right to label some contracts at overrated.

Two companies come to mind since both have been popping up a lot lately.  I’m going to specifically explain why I don’t like the New Heights products from Nationwide and speak more generally about why Athene seems to be pushed harder than it should.  Each of these companies has products that many agents claim to be the absolute best opportunity so I’m calling that out and will show you why.

Six or seven years ago, Nationwide got into the index annuity business with the New Heights line of products and to this day they don’t have much else.  This is a good company and the products are safe but the growth potential was tied to the JP Morgan Mosaic Index and according to sales literature the index had never returned less than 8% in a single year.  Agents clamored to sell the contract using illustrations that would turn Warren Buffet’s head and I just kind of sat there and watched it.

The problem?  I will always be hesitant to push something that does 8% every single year but whether that was true or not, the contracts required a three-year reset on all options.  That means you had to wait three years to see if you made any money.  Longer resets come with higher participation rates so the illustrations looked outstanding but the longer resets also bring about a lot of risk.  And that’s exactly what happened.  The index never did quite as good as promised and at a few key points the market cratered and several people went three years while making little or nothing.  That puts a whole lot of pressure on the next period since one could theoretically go a whole six years without earning interest.  One quarter of retirement could be gone and you only have two chances to lock in money.  I don’t recommend it.

Athene was a B rated company back in 2013 when it acquired the US operations of Aviva, a major British insurer with roots going back to the 18th century.  It’s not often that a small company buys a big one but it’s beyond my pay grade to explain that one.  Since then, Athene has been growing rapidly and at times is creating new products faster than they process applications.  To me it seems like this company has too many things going on at once.  When another agent says this is the best opportunity available, it really depends on which contract.  Athene has 21 index annuities up for grabs.

This is one that I hear about nearly as much as Allianz and that’s because of the distribution structure.  Athene is paying marketing organizations a lot of money to push the products so you have a really good chance of running into one of them when someone solicits you.  It’s hard to pick one specific product but if we’re talking growth, just about all of the 21 have the same index options so it’s easy to lump them all together.

The index options are just OK but participation rates are not very high right now so I think most of them will do well to yield 3% on average.  That wouldn’t be the worst result but it’s not that exciting and that’s not my problem with Athene.  All contracts offer a blend of one and two-year resents.  Again as above with Nationwide, longer resets come with higher participation and more risk of not making any money.

It’s fine if you want to pursue that strategy but agents are pushing it mainly for one reason.  It’s not because it’s best for you, just that it is the only way they can make an illustration look good.  My experience from the past suggests you are better off sticking with the consistency of one-year resets.  You have to think about more than the potential of an index and right now is not the time to enter a long crediting period.  The market is down from the historic top but up about 5% over the past year.

Again we have an overvalued market and an absolutely miserable economic outlook.  Going long on an extended market run right now makes no sense to me.  Go short and reevaluate next year.  If you have a Nationwide contract you may not have much choice and the agents for Athene are more interested in making a sale than giving good advice.  Maybe they should switch to or at least branch out to other companies to provide more opportunity for clients.

The best contract is partially a matter of opinion.  Certain things can be verified but in the end it comes down to what you like and who you trust.  Beyond any opinion, Nationwide and Athene do not have the best contracts.  As I was writing this I realized I should have done more detail on each individually because there’s a lot more to it so comment below or send me an email if you’d like me to work on the extended version.

Enjoy your weekend!


Hidden Fees in the Allianz 222


When was the last time you had a moment when something complex became crystal clear to you?  It happened to me on Thursday morning.  I ran up against the Allianz 222 again and called a rep at a different company to get some clarification on a competing product.  We talked about a lot of differences between the two contracts but one thing he said is something I had never realized before.

It’s no secret that I never liked the product but until now there was nothing specifically wrong with it.  Most of my aversion came because too many people bought it with the wrong impression of what it could do.  For those who are suited for this annuity the contract just ends up being so-so.  It will never be as great as the illustration makes it seem since growth potential is quite limited, but you will get guaranteed lifetime income even if you have to wait a long time to maximize it.

To understand the catch, first you have to know what an allocation charge is.  This is a disclosed fee charged against the contract in exchange for higher growth potential.  Athene, Nationwide and several others use them regularly but I’ve always stayed away from them because it’s one way an index annuity can lose money.  If the index returns zero and you are charged a fee for the allocation then you’ll go underwater for the year.  It completely defeats the purpose of having a protected asset.

For too long I focused on the features vs. benefits of the Allianz 222 but didn’t go into the fine print because I refused to sell it years ago.  So the rep informed me that Allianz does in fact have an allocation charge and he pointed me to the fine print at the bottom of the spec sheet.  For convenience it’s copied below and I apologize for it being so small.

You can see that it clearly starts at 0% and will never be higher than 2.5%, but when would they ever charge the fee?  Well it states that the fee will only be charged when “specified criteria are met.”  Your next question is the same as mine.  What are those specified criteria?

I don’t let things rest until I solve a problem so I had to call one person I know who owns it.  I’d like to read the contract front to back so I can find how it’s disclosed but this person didn’t have immediate access to it so I’ll have to wait.  The good thing is that she is an attorney so will be able to find and interpret the language very effectively.  Based on what I’ve heard from others, one criteria relates to low treasury rates, with a specific level that is really low just like now.  I’ve been told the other criteria seem more subjective and relate to poor conditions in the market or economy.  When the answer comes I’ll update this post but for now this is mostly speculation.  Regardless, the fee is in there and it wouldn’t be if the company didn’t plan to use it if needed.

Why would they do that?  Obviously because the contract as illustrated is not actuarially sound so the company needs another pricing lever to make sure liabilities don’t get out of control.  I hate clichés, but ladies and gentlemen that’s the definition of a bait and switch.  It’s in the contract that a buyer signs and an agent is supposed to disclose all contingencies.  But I’m not surprised that those idiots who sell this contract don’t actually read a specimen before presenting it to someone.  Anyone considering it now has a very specific question to ask the agent selling it.

I’ve convinced a lot of people to avoid this deal but several went ahead with it anyway, preferring instead to trust the guy who fed them a steak.  Had I known this before then it would have been the equivalent of dropping an atom bomb on that sales pitch.  The best lessons are learned the hard way, of course.  It’s just unfortunate when it happens with large sums of money.

This is something that makes all annuities look bad and in order to find a useful purpose for the good contracts, someone needs to speak up and tell the truth.  Cue the person in my audience who asks how I know the contracts I recommend don’t do the same thing.  Someone is going to read this and get defensive so if you have that question or any other comment then leave it below.

Best of luck out there…


Guaranteed Income Annuities Have Changed


I’ve never been too successful talking about interest rates.  Most people have a pretty light appetite for fundamentals which unfortunately leads to the majority settling for something less than the best deal available.  So I’m going to give a simple example of how recent conditions have changed annuities in a way that will underscore my recommendation to defer and grow money safely.

In a case I’ve been working on for the past few months, I started by showing a 65 year old couple the payouts for a single premium immediate annuity.  In the beginning they could expect to receive 5.3% of the investment as guaranteed annual income for life.  This was back in February when the 10 year treasury was trading at about 1.5%.

As many of you understand, my first objective was to compare the guaranteed income payout to a deferred contract while using free withdrawals to match the income.  With modest growth, you can match income but have a substantial remainder down the road while staying in control of your money the whole time.  It’s so simple that a redneck from Montana can figure it out.

The main point of me suggesting you approach income that way is because most people think rates will rise in the long run.  Payouts increase with age as well so if you defer the income decision there is a high likelihood you will get greater cash flow in the future and quite possibly much greater.  Whether or not it’s the easiest way to do things, it is the most profitable.

As with many people, this couple had a hard time making a decision for several reasons relating to a general skepticism of annuities.  That’s ok because I promote detailed research as the best way to make a decision you can live with.  As time dragged on we entered into some serious economic calamity and interest rates dropped significantly.

Last week, I ran the numbers again and the same couple was now looking at a 4.9% payout from an immediate annuity.  In just two months the payout dropped by a meaningful amount because the ten year treasury had come down by almost a full percent.  When things turn around the exact opposite will happen and you will get paid more for the money you put in.  Or it will take less money upfront to meet the same income goal.

Please don’t argue with me about deferred products or bonus rates and the like.  Waiting to take payments is a lost opportunity cost and with all factors considered the IRR is identical to immediate income payments.  I love to argue so call if you’d like to be proven wrong.

Low interest rates are not the problem as commentators will suggest.  You just have to think outside the box and I’m not talking about anything complicated like finding a vaccine for a rapidly mutating virus.  It’s only a matter of a few simple principles that make sense.

A return to normal is the first thing that needs to happen before payouts recover.  Low rates have required the insurance industry to dial back offerings and several companies have been rated with a negative outlook.  That speaks more to company profitability than safety of your money, but such is life for those insurance companies who not only need to protect policyholders but also appease stockholders.

Private companies, however, don’t have to worry about stockholders and can build greater levels of reserves to keep business running smoothly during volatile time periods.  There’s no more magic to it than finding the stock with consistently high dividends.  The ability to reinvest profits without concern for stockholders sets them apart when you find slim pickings elsewhere.  These few companies are currently standing above the crowd with reasonable offers while others are pulling back in order to maintain stock values and financial ratings at the same time.  Where would you rather have your money as we wait for a recovery?

About seven years ago I helped a similar couple find the highest payout for an immediate annuity.  Their annual lifetime income equated to a 7.2% payout of the initial premium.  That amounts to 50% more annual income than the same couple could get today.  Rates don’t have to go to hyper-inflationary levels in order for you to get substantially more income for the money.  Modest growth will keep you in position to capitalize on the opportunity when it becomes too good to pass up.  The right strategy along with the best companies will put you in position to do just that.

I approach things the way I do because of what I’ve seen in the past.  Grow your money safely and access the funds as you see fit.  As conditions change you’ll be in position to make the most of it when the timing is right.  It’s really not that hard to figure out.

Let me know what you think… comment below or send a response to the email.


My Biggest Mistake with Annuities


There’s a lot to learn in this business.  Much of it requires consuming massive amounts of information and just about everyone is capable of doing that.  The rest is experience that only comes from seeing things change and develop over years.  My experience with using annuities has made me ever more confident in the advice I give but I recently realized that I missed something obvious.

My numbers are solid and I don’t make a recommendation unless I believe it’s the best option.  I’ve sent hundreds of people away because I didn’t have the solution they needed.  But for those I can help there will always be justifiable skepticism for a variety of reasons.  My approach is different, I live closer to Canada than any other state and retirement planning changes are big commitments.  It can be a difficult transition.

So after looking back at several prospects, clients and seasoned contracts I’ve learned something that can make it much easier to move in the right direction.  Since retirement allocations are kind of a big deal, it makes sense to step into things slowly.  Some have more money than others but no matter who you are, moving 25% to 50% of your portfolio isn’t something you do every day.

For years I’ve been telling people that I have the luxury of looking at a situation objectively because I’m detached from the emotional connection that you have with your money.  So I’ve always taken the information a person gives me and worked things around until I found a solution.  It’s easy for me because I’ve already seen all the things you really won’t know about annuities until you’ve owned one for a couple years.  People who have them usually buy more so it stands to reason you should start small if you’re hesitant.

There are several reasons why this can make things even better but the biggest reason is that you don’t have to jump into a major commitment until performance is proven.  Get through a year or two, see some performance and realize the company isn’t going to screw you by dumping rates a couple years into the contract.  In most cases, growth in the contract offsets surrender fees in 2-3 years and that’s an enlightening moment for many people.

Make a call to the company and ask to make a withdrawal even if you don’t want one.  You’ll find out how nice the employees are.  About the only question you have to answer is, “would you like us to mail a check or do you prefer direct deposit?”  A lot of the contracts I recommend work just like an online bank account.

Aside from starting with a smaller commitment there is also an advantage to having multiple contracts.  With a single contract you either win or lose based on a single point in time.  Recently, contracts that reset in February did great while those that reset in March did not yield much.  It won’t happen like that every year but it will happen.  If you have the contracts laddered with different starting points then you have the chance to catch the market at different points and your fortune won’t rest on one single day.  This will result in more consistent performance for those of you who question the ability of a contract to yield as illustrated.

There are plenty of people confident enough to make rational decisions quickly but it’s not everyone and not even most people.  Most people need to see proof and I support that.  There are several of you who didn’t take my recommendation, yet, but would probably be better off if you had done a little bit of it.

As an example, if I say your plan requires 50% of assets in an annuity my recommendation has changed.  If you are comfortable making the big commitment then at the very least split the purchase between two or three contracts on different starting dates.  If you’re skeptical then start with much less and take time to understand how things really work.  It’s long-term planning so it won’t hurt anything to put the plan in place over a few years and it may enhance the benefits even more.

Keep it simple and take it at a pace that works for you.

Enjoy your weekend…




Case Study Update: Annuities at Work


One year ago I wrote a quick story about Bill.  We had been working together for about a year after he called asking for help with a retirement plan.  Initially he was looking for guaranteed income and came with a long list of requests in regards to benefits and company rating.  I came back to the second meeting with the best contract on the market only to find Bill had decided he needed more income than he had previously thought.

This illustrates the problem with guaranteed income.  As great as it is, in many cases it’s pretty expensive and takes more money to secure than most people are willing to spend.  I mean, the mathematical models and academic research based on historic numbers have all proved that the security from guaranteed income provides the highest level of growth to offset inflation and leave a legacy, but most people still don’t buy it.

When Bill’s income needs increased so did the amount of premium required to make it work.  In his case it would have meant 2/3 of his portfolio, where previously he was expecting to be able to do it for half.  So I showed him the Flex Strategy and why it would likely be a more efficient way to provide the security needed.

I’m not going to go through all that again so if you’d like to go back a year and read the basics of Bill’s story you can read it here:  Why I Call It the Flex Strategy

The result was a plan that met his expectations with respect to both cost and benefit.  He we are two years later and we each got a renewal letter in early February.  When we spoke I asked if Bill wanted to make any withdrawals from the annuity.  He said that because his equities were up so much in value he had already decided to sell off some gains and bank the cash to cover his income for the next year.  His annuity credited a solid yield as well so things were right on track.

A couple weeks later, all hell broke loose and I don’t need to remind anyone what happened.  I called Bill and told him that with all the market losses his portfolio was way out of balance and he still had a 10% free withdrawal that could be accessed if he wanted to pursue more growth after the decline.  So he did it and bought back all the securities he sold at a 30% discount.  Poetry in motion…

Now, it will not always happen this perfectly but then again, free withdrawals can be taken at any time during the year.  I’ve been seeding the idea for reinvestment of additional cash for the past year now and if any of you get the chance to do it two or three times in retirement it will make a phenomenal difference in portfolio values in the long run.

Timing the market is difficult and every professional trader will have an opinion one way or the other on the subject.  But it’s clear to me that if you make 30% or lose 30% you ought to think about making a move.

Bill never did anything besides replace the bonds in his portfolio.  I’ve been banging that drum for more than ten years and it might be time to get a bullhorn and start shouting!  Why does everyone hang on to an asset with almost no upside?

You made some money and lost some money.  The market’s coming back but will it last?  You don’t have to do anything crazy but you should do something.  I told you all a few weeks ago so go look at it again if you need a reminder.  Don’t sell stocks. Do this instead.

Have a nice weekend…


Help at Home for Covid-19


I’ve had the privilege of meeting several exceptionally talented people that contribute to society from all sectors of our economy.  Most people wouldn’t want to be mentioned on the website so I’ve not made a habit of featuring clients, but we are in the midst of unique circumstances.

Meet Jacob Mirman, a physician in Minnesota who has been on the front line of treating deadly illnesses homeopathically for many years now.  His work has been incredibly successful at treating the seasonal flu and even Ebola.  It’s not a vaccine or a cure, just a simple and natural way to boost the body’s immune system.  An excerpt from his website is below:

Homeopathy has been used with great degree of success in influenza and other epidemics for 200 years all over the world. In the 1918 flu pandemic homeopaths reported around 1% mortality in their cases, while conventional doctors were losing 30% of their patients.

I’ve never been a fan of putting chemicals in my body so have always stayed away from antibiotics and to this point my immune system hasn’t been degraded because of it.  In fact, a few years ago I read an excellent book titled “Indian Givers” by Jack Weatherford.  It talks about the contributions of Native Americans to our current society in terms of food production and many other things, including natural treatments for pain, illness and disease.  I highly recommend this book if you like history or like a good book and I’ll bet you would be surprised to notice a few things you take for granted that came from natural remedies of the past.

As for Jacob, he puts similar things in practice and does it effectively.  My wife read through his website and purchased many of the recommended items at our local health food store.  If you have any concerns then you have nothing to lose by taking a few simple and cost effective steps to boost your immune system.

Jacob is able to meet virtually for anyone who needs direct treatment and the list of recommended therapies are available on his website.  Even if we had a cure or vaccine, wouldn’t you rather get through it without putting chemicals in your body?  And don’t forget, the flu happens every year so when this is over you might still want to keep it in mind.

Check out his website below and contact his office if you need help or have questions.

The S&P 500 Over 25 Years


Take a look at the chart below and you’ll see the values of the S&P 500 since 1996.  This was recently released from JP Morgan and I grabbed a screenshot in order to point out a few things.  It maps out the high and low points or extreme volatility of probably the second best market period in history.  Throughout, everyone became addicted to the highs and devastated by the lows.  Exceptional yields were realized along with crippling losses.  It hits home with me because I have worked with retirees in each period, with the exception of the high point in ’99.  What’s interesting to me is how quickly sentiments change because every point along this chart I heard someone make a definitive statement about what was about to happen.  Some guessed right but most guessed wrong.

If you go back to the high point of March 24, 2000 and compare it to where you are today, the yield might not be so impressive.  Had you entered the market at that starting point and exited on February 19, 2020 you would have had an effective yield of something in the neighborhood of 4.25%.  But if you didn’t get out and rode it all the way thru the end of March 2020 your yield over 20 years would be a fair bit less than 3%.  Now, dividends would have enhanced the yield by around 2.5% on average but you’re still not crushing it.

There are two lessons here.  First, reducing volatility DOES increase yield over time.  The second lesson requires a story…

Early in the week I spoke with a guy in his early 50s.  Protection of assets is his mindset so he’s looking at annuities.  He has been following this blog for a few years and figured it was time to reach out and schedule an appointment.  I learned about his strategy of protecting 75% of his assets and only putting 25% in the stock market.  His recent losses didn’t affect him that much and he thought this might be a good opportunity to make a move.  We didn’t talk about how much money he has or what his retirement goals are because that’s several years away but I did get to share with him something I’ve learned of successful people and I’ll share that with you now for the second lesson.

The vast majority of people I know who have been successful got where they are because they were good at saving money.  Investments were calculated moves but setting money aside consistently always produces results.  Most of you look at the assets you have and think that it’s the stock market that produced it, when the money you saved is what made the difference.

The yield on the S&P 500 isn’t that great over the past 25 years but most of you don’t see it so dramatically because contributions created more of your growth than did the actual yield.  Take some time to think about it and you’ll realize that the market never really helped, it only caused stress and now might be the time to change your perspective.

If one more person gripes to me about the yield of an annuity I’m going to use this chart.  I’ve seen a lot of things beat this in the last 20 years but I write about that too much.  Once you realize that the market really isn’t giving you anything then you might decide to keep saving money and spend as you see fit.  How nice would it be to not worry about a portfolio right now?

Call or email any time…


Analytical Approach to De-Risking Your Portfolio


Most people don’t want to get too technical but those who do are able to make much better decisions.  My best clients often take as much as a year to make a decision and as a result they are all comfortable and happy with how things are working out.  I don’t expect deep analysis from everyone but you need to know that I am willing to get in the weeds with anyone who wants to prove a strategy from every possible angle.

Opposite from me is the guy from Tucson who runs weekend annuity infomercials on TV.  He answers softball questions from an adoring interviewer who pretends to be just as gullible as he wants all his clients to be.  I’m never going to do that because I have a conscience that tells me you all should do better with your safe assets if at all possible.

Over the years I’ve met some fantastic people, not just prospects and clients but other professionals in various parts of the industry.  One of those people is Kerry Pechter, a financial journalist and editor of the Retirement Income Journal.  It’s a subscription-based newsletter that takes the reader behind the scenes of the financial industry, offering product reviews, academic research and analysis of current market trends.  In short, it’s what you should hope your advisor is reading.

This week Kerry wrote an excellent article about Equity Risk Premium, which in simple terms is the additional amount of yield you expect to receive for taking risk in the stock market.  Interest rates, stock valuations, inflation and several other factors all affect ERP.  But almost no one thinks about it.  Understanding this will give you a serious advantage when trying to make the right financial moves at the right time.  It’s important now because we are in the midst of rapidly changing times.  The end of 2019 was no different but everyone was so giddy after making a bunch of money in the stock market that most people disregarded any and all fundamentals.

I’ve never succeeded at getting technical with this newsletter so I won’t try to further explain something that’s already been done well enough.  Kerry has given me permission to re-post any of his articles but I feel I’d be taking advantage of his generosity by sending it out to the entire list.  For those who are interested, respond to the email and I’ll send you a copy of this article.

Additionally, Kerry Pechter has some pretty solid contacts of his own.  Next Friday he is hosting a webinar with Wade Pfau of the American College, one of the foremost experts on retirement allocations.  The subject of the webinar is “De-Risking Retirement Portfolios.”  For those interested I will send a webinar invite so reach out to me via email and I’d be happy to have you join the call.

Call or email any time…


Buying the Wrong Annuity Can Be a Blessing


Back when this website was launched the main objective was to catalog my notes, research and ideas about annuities.  A different point of view and some basic math exercises will prove that a good strategy beats any product.  So it stands to reason that I never consider it a good thing when someone buys the wrong contract.  It happens too often and it’s the source of all the negativity about this part of the industry.

About a month ago I had a typical meeting with Sandy who is planning to retire in the next year or two.   She found me like most other people after having been to a nice steak dinner and then scheduling a personal appointment with the advisor.  The result of that was the right mixture of pressure and sweet talk and Sandy agreeing to move almost all of her IRA into an index annuity that wouldn’t work for her situation.

So she pulled all of her money out of the market and fired Ken Fisher but paused for a moment and did a quick internet search before it was too late.  Fortunately my ad budget hadn’t run out and her search triggered one of my ads for a product report that perfectly explained the product she was about to buy.

Now, there are a lot of issues with the plan that was proposed to her but the worst thing was obviously the fact that she shouldn’t put all her money in one spot.  Her instincts told her the same thing which is why she decided to do some research.  Well it turns out that she stopped the transaction before the annuity became a commitment but her assets were in limbo and she was a bit confused about what to do.

One of the things I focus on doing for a lot of people is to simplify problems and solutions.  Retirement planning involves some major decisions so it’s common to see people get bound up with the complexity of products and strategies.  Sandy was no different and after bailing on the annuity her IRA was then sitting in a money market fund without a manager.  She broke her contract with Fisher and had several other people in her ear, trying to get management or a sale out of the situation.

I sensed that she felt a little lost and helpless but I tried to put things in perspective.  I asked when she pulled the money from the market.  As I recall she told me all securities were sold sometime around the middle of February.  Talk about fantastic timing!  She didn’t even have to be a US Senator to time the market perfectly.

To make things simple I told Sandy to look on the bright side.  Maybe she didn’t have a plan yet but taking the money out of the market saved her more than $250,000.  It’s the first time when I’ve ever said her decision to buy the wrong annuity was a good thing.  She didn’t actually buy it but the decision to do so turned into a major blessing.

I don’t know if Sandy has made any moves yet but it looked like an uphill battle with all the other people she had been talking to.  I was able to help her make one good decision and will be here if she decides to call me back.  Most other people are in a similar position right now in regard to not knowing what to do.  Well I don’t suggest buying an annuity that doesn’t work for you, sometimes it’s ok if you don’t do anything.

There’s a time that works for everyone so give me a call when you feel like the timing is right for you.

Have a great weekend…



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Meet My Wife, Erin Sabin


At a time when everyone is looking for a little something to keep busy, my wife would say that personal health and wellness should be a priority.  She is the most diligent, dedicated and disciplined person I know.  When the local gym closed down two weeks ago, she couldn’t teach her popular fitness class so decided to stream it live every Tuesday and Friday from our living room.  It messes up my schedule a little but we all have to work together.  Erin has made it her mission in life to get people active and keep them healthy.  It’s a nice diversion from the general insanity that’s going on all around us.  If you want to know more about me then you should meet my wife.  Check out her website on the link below and if you feel brave, find her on facebook and join the live stream of Body Forge next week at 9 am mountain time on the days mentioned.

Stay safe, healthy and active!

Visit Body Forge Fitness

Erin with daughters Lily and Sage at Braun Brothers Reunion Festival in Idaho

A highly recommended summer trip if you like good music

Another concert – Willie this time