Review of Annuities and 2020

Newsletter

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,

Bryan

6 replies
    • Bryan Anderson
      Bryan Anderson says:

      Tom- the shortest right now is a three year contract and the best rate is 2.4% but I don’t have a whole lot of confidence in the credit rating of that company. If you needed a solid company with good financials then the best rate I would offer is 1.85% for three years. It’s slim pickings for short term assets and unless you have billions then you don’t get to dictate the terms. If two years is a must then you are likely stuck with CDs with about .55% leading the market. Best of luck!

      Reply
  1. David Cherek
    David Cherek says:

    Hey Bryan,
    Thanks for your info, I enjoy reading them and I am gaining a better appreciation for annuities in a portfolio. Question: I am over 59.5 and was thinking of using some of my 401K gains for an annuity. Is there a pre-tax annuity vehicle that I could transfer the pre-tax 401K monies and delay paying the IRS until we start withdrawals from the annuity? Looking to retire in 3-4 years.

    Reply
    • Bryan Anderson
      Bryan Anderson says:

      Yes Dave – all annuities can be purchased with pre or post tax money with taxes deferred in either case until withdrawals are taken. 401(k)s that are transferred would become a traditional IRA. That is probably the most common type of account I set up. Technicalities like that cause hesitation for lots of people so don’t be afraid to ask any other procedural questions you might have.

      Reply
  2. Linda
    Linda says:

    Hi Bryan, thanks for all the information you provide. I had just gotten a fixed index variable annuity before I received your first newsletter. I was glad to see my advisor had explained annuities the same as you. Also I had read up on the difference between Fixed annuities and fixed index variable annuities.

    I only had my 401K that I turned into an IRA after I was laid off in 2018. I turned 62 right after the lay off but ended up receiving SS disability. I purchased a fixed index variable annuity in April 2019, transferring the total IRA balance because I knew I’d need to take a monthly income in 2020. My annuity growth is based on the performance of the S&P with a cap of 5%.
    As you said purchase date can impact your growth. In April 2020 the market took a deep deep dive due to the virus. Therefore I earned nothing for my first year, but lost nothing. However I still needed to take a monthly income which was at least less that the maximum amount I could withdraw.
    Are there any fixed index variable annuities that pay quarterly? Getting any growth income once a year seems like a roll of the dice on the performance of the market.
    Holding my breath for April 2021. Taking a monthly income is reducing my base amount.

    Reply
    • Bryan Anderson
      Bryan Anderson says:

      Hi Linda,

      I’m glad you found what works for you. To answer your question, you should be able to structure the payments however you’d like. Monthly, quarterly or even annual payments are possible and your agent should be able to help you find a stream of income that works for you. Don’t be afraid to reach out if you need a second opinion on anything…

      Reply

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