Why I Call It The Flex Strategy

Regardless of your expectations when you first hit the website, you should know by now that I try to get everyone to think about annuities differently.  Most of you come here with a general interest in annuities, trying to find a solution to a specific problem.  If I join the chorus and just stick with saying things you already know then you wouldn’t have an opposing viewpoint with which to judge a potential option.

Most people don’t believe that I started this website because I didn’t like annuities.  Agents get pitched products too and my initial reaction was to question the motivation of anyone who said I should sell one thing or another.

I realized that many retirement concerns can be solved using basic contracts stripped of all the options that make for good commercials and ad copy.  No matter why you’re here I know you didn’t come in expecting to see the AST Flex Strategy, much less know what it means and why it’s a really good strategy.

I want to give you a quick summary of the AST Flex Strategy.  This will outline all the benefits of approaching retirement this way so you can see it all in one place.  I gave it this name because I promote flexibility with retirement assets and this strategy provides it.  There are six major benefit categories and each individual puts more importance on some over others.  The result is more effective income production and increased wealth accumulation in retirement.

  • No Fees

Cost is only an issue in the absence of value.  I’ve run the numbers and most annuity fees will not give you anything that you can’t already do for yourself.  Fees erode the growth potential of your assets.  So much so that this point deserves its own newsletter.  Eliminate fees and keep as much of your money as possible in your own pocket.

  • Short-Term Uncertainty

The market is top-heavy and interest rates are low.  It’s a bad time to be over-committed to risky assets and if interest rates rise you don’t want to be locked to a contract paying lower rates.  I’m not predicting a market correction or sharp increase in the inflation rate but I do recommend that you keep your options open so your assets can be rebalanced if rates rise or an excellent opportunity arises for buying securities at lower values.

  • Pick Your Start Date

Lots of people don’t make a move because they don’t have a planned retirement date.  And a few years ago I read a statistic that said the average person who buys an annuity with a deferred income rider takes income several years before they had initially planned.  That means they end up changing plans and settling for less income because the contract had fewer years to increase.  A better approach is to implement a plan that can be activated at any time without negative effects.   

  • Changing Income Needs

I spend more money in the summer than I do in the winter.  Some years I spend far less than I did the year before.  I don’t expect retirement to be any different.  I want a plan that is flexible enough to choose the amount I want to spend each year.  Some people retire before they collect social security or are eligible for Medicare, meaning expenses in the first few years of retirement are higher than expenses that are offset by additional income or reduction of insurance premiums.  There are lots of reasons why you will spend more or less than planned at certain times.  It makes sense to have a plan that makes it possible.

  • Lower Cost

In the marketplace today, guaranteed income products are expensive to the point that lots of people shy away and are afraid to make a lifetime commitment.  I don’t blame anyone who is hesitant for that reason.  Because the Flex Strategy produces more I often see a 25% or greater reduction in the amount of annuity required to make the plan work.

  • Greater Wealth Accumulation

If you spend less on an annuity and don’t have any fees then it stands to reason you have more money available for long-term growth.  And if you’re not locked in for life you will have the opportunity to rebalance assets toward more growth or preservation.  After people see what the Flex Strategy can do the most common response is something like, “well I’m not greedy and I don’t need all that money.”  Well I’m a competitive person and I like to win.  I want my clients to win so I won’t apologize for showing someone a strategy that gives them a substantial wealth increase in retirement.  Besides that, there are plenty of unexpected things that can happen in retirement like inflation, long-term care and legacy wishes that might be easier to deal with if you can continue to grow your assets.

All of the above benefits individually give you more control over your assets and more potential income and growth over time.  If some part of it isn’t working you can change it.  That’s not possible with a standard approach.

I am reminded of a simulation I did with Bill last year.  We had talked several times and run a bunch of scenarios.  He liked the Flex Strategy and decided he wanted me to run the presentation by his CPA before he bought any annuities. 

The CPA’s first request:  Explain to me your reasoning for this recommendation. 

I said, “Interest rates are low and that has made guaranteed income products expensive and also suggests that making long-term commitments to fixed products is not advisable.  Since Bill would need to spend 2/3 of his assets to secure guaranteed income for life, my solution cuts that to less than half his assets.  He can use the annuity to draw income when his market assets are down in value and take gains off the market when it’s up in value.  The result is more money working for long-term growth and enough in the annuity to survive the worst market periods in history.  Bill is planning on splitting the funds between a five and seven year contract so if and when rates increase he’ll be able to shift to a better opportunity in the future, and at laddered intervals.  Since Bill has half his money in bonds right now anyway this doesn’t at all change his current asset mix except to give him more flexibility.”

I have a nice little spreadsheet that allows me to illustrate this over various historic market scenarios.  After seeing it the CPA replied that it was the most creative use of an annuity he had ever seen.  Like me, he also didn’t like annuities but realized there is value in the basics.  The CPA blessed the sale and Bill put it in place.  After one year the annuities had modest increases and his securities were all over the place but flat.  He’ll start taking income next year so we haven’t made a decision yet where it will come from but it’s only going to take us about two minutes to figure it out.  He has no reason to worry since half his money is safe and there’s enough in annuities to weather any storm in the market.

It’s simple, easy and effective.  Take out all the things you don’t like about annuities and use them for what works.  If you haven’t seen it already then you need to give it some thought.  If you’d like to see it give me a call.



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Episode 9: The Flex Strategy

Last Updated on February 5, 2024 by Bryan Anderson