Annuity Trends & Insights | The Safe Money Singer Blog

Asterisk Free Annuities

Thu, 18 Jun 2020 21:31:30 GMT

Built on Attraction - Not Promotion

It is always useful, in whatever industry employs you, to study the methods, the marketing and the message of your contemporaries, competitors

and colleagues. (now that was a twister that was...)

I was doing just that the other day, perusing various sites that purport to deliver annuities to consumers, most of which are vapid, cookie cutter sites that

contain only a landing page along with the standard "free annuity guide" to download in exchange for your most coveted email address.

But I noticed something on even some of the more detailed sites that actually contain videos, articles and other substantive information. In between the doublespeak I noticed a certain subtle keystroke more than once or twice.

And it dawned on me that for some of these insurance purveyors, there is a part of the computer keyboard that their copywriters must find extremely useful in the marketing of their message.

In fact, without this particular keystroke, the spirit of their message would have to adjust substantially.

Surely you know what I am referencing !!

Shift 8!

The Almighty Asterisk!

It's right above the "U" on my keyboard and it surely is one of the most coveted pieces of real estate on a copywriters keypad.

With the Magic of "Shift 8", a copywriter can craft a tantalizing message, even promising the sun, the moon and the stars and with full legal immunity, merely by placing this little snowflake (and I am going to enlarge it for dramatic purposes) right here:

and what the big print just gaveth upstairs, the little print doth ripped right out of your hungry hands downstairs....

So, what is my problem with this entirely legal manouever, so commonly used in the marketing of soup to nuts?

Well, I guess I just have a small problem with it in the business of annuities - and I am sorry in advance to all you loyal "Shift 8' ers" !

( hmm, I guess I could be called a "Shift 8 er, Hater". - I like that!)

Anyway, here is my beef:

1) Are you physically capable of reading the fine print?

I mean, you're an annuity prospect, you are probably 50, or 60, or 70 years of age and your eyesight is not as good as the young chap who put that fine print in the brochure. Surely you are under your own responsibility to read the fine print.... but....can you even physically do it?

I mean while you were reading the main message, everything was fine and you were getting the gist of it all, and then the writer suddenly suggested a really sizzling concept like an "8% lifetime return" and there was this little snowflake right beside the concept and...

(at this point you could have just pressed "shift and the "+" sign" to enlarge the font in order to read the fine print a few inches below, but you were born before 1955 and you're not that tech savvy.. )

So instead you had to get up and go into the bedroom and get your special reading glasses in order to read the fine print but by the time you got to the bedroom the Mrs. reminded you about your appointment with Dr. McCracken, your chiropractor, to see him at 3:00 pm this afternoon, and since you had forgotten about the appointment you then decided to call Dr. McCracken's fine young secretary to tell her that you are going to be a little late since you had entirely forgotten about the appointment. Then after you get off the phone with Dr. McCracken's secretary (who is very friendly and flirtatious), you now have this lingering feeling that you had something else you were supposed to be doing, but for the life of you, (maybe you had too much coffee this morning) - you simply cannot remember what it was.

Except there was this little seed planted, unbeknownst to you, in your cerebellum, about an 8% annuity rate, that is going to sprout - like an alfalfa sprout - at some (in) opportune time. And you may not know if it translates in your mind as true interest - or something else that the writer was talking about.

2) Did you remember to read the fine print?

Now, even the most Ambiguous Annuitants amongst us can forget to scroll south from time to time.

But, reading, by its very nature, is a linear process, and by that I mean that to fully understand a line of thought you must read from left to right, through the entire paragraph, like going from one end of a line to the other. Now, what often happens for many of us, is that by the time we have finished a certain paragraph, new "juices of thought" have already been stimulated so that we may forget the necessity of going back to the bottom of the page to read the respective * asterisk * that referenced a particular anecdote that was mentioned 3, 6, or 9 sentences earlier. I am sure you know what I am talking about,

although I did not consult any social scientists for this piece.*

I hope you appreciated the hypocrisy at the end of that last sentence.

Anyway...in addition...

3) We are dealing with a pretty important subject here, your $$$, sometimes even the savings that physically represents the fruit of a lifetime of work and service.

We are not:

a) Selling automobiles and telling you the "miles per gallon" with a curious " * " at the end of the sentence. - or -

b) Selling a weight loss formula with a 30 day money back guarantee that you will lose "X" amount of weight by such and such a date.... and then comes the good old " * " at the end of the sentence.

etc, etc, etc..

after all this is America, where Capitalism is enshrined in everything we do...

But, really, No, no, no..not in my business, please....it just does not seem good.

We, us, and by us, I mean us insurance agents, we are offering something much more serious aren't we?

I mean you are laying down your life for 40 years as a butcher, baker or candle stick maker, and then you just plop the fruit of all those years of butchering, baking and candlestick making onto the desk of the nicest looking young man with the shiniest of desks who has this beautiful glow about him emanating from above, ......and that wondrous glow is coming from the most glorious of white snowflakes above him, oh, hang on, it's that, oh my goodness, don't tell me, but it's another....

SHIFT 8! *

******************

Eee gads, there it is again! There is simply no escape!

or..... I say, is there?

Let's digress slightly...

Wikipedia has a fascinating discussion on the asterisk and it's history and uses.

http://en.wikipedia.org/wiki/Asterisk

and it states that one of the labels computer scientists often informally use when referencing an asterisk is the word "splat".

To prove my point here all I can say is - "how convenient."

Ironically, I too have personally used this word, "splat", when referencing the past tense of "spit" as it rests on a blacktop playground, or sometimes I have used it for the past tense of what a bird may have jettisoned onto my windshield, or, come to think of it, countless other dishonorable functions of existence.

And I might suggest you consider thinking about the * in the same manner, especially when it comes to the marketing of annuities (since this is the only industry I can speak on behalf of).

In fact, if you follow my advice here, I would first recommend you purchase a spitoon..these fellows sell them: http://www.mudjug.com/

And when you see an * in an advertisement for annuities, promising 8% or 9% something or other, instantly launch away with the best sample you can muster into that shiny new spitoon, because if you don't, someday you're gonna wish you did.

In fact, if you don't use the spitoon today, you're gonna use it tomorrow.

Hmm, now there's a slogan for a sideways sales practice.

So, that's why, I have vowed to make the Safe Money Singer an :

"Asterisk - Free Zone"

Kind of like those cities you drive into that say "Nuclear - Free Zone"

"Yes siree, In these here parts pardner, we are Asterisk-Free, yes, siree! if you dare use one of them

round here young city slicker, you're gonna have to leave!"

Now if this means I get less annuity business, gosh darn it, I

suppose I can live with that.

And this should help with my Catholic guilt issue. A lifetime of the stuff can make one pretty nervous in fact. Even today, 40 years later, if my pinky should venture too close to the “shift 8" key, my hand tends to tremble slightly.

So I'll just go ahead and make "Shift 8" pure contraband from this point.

Now....a Major Caveat here! I am not slamming the efficacy and usefulness of the Annuity per se, OBVIOUSLY, since I make a living offering them to you!

But I am commenting on how they are improperly marketed, of course.

And, by the way, I could have said - what I just said above - by merely putting an asterisk somewhere..

But I can't! I am in an "Asterisk - Free Zone !"

Oh, I have been set free!

How liberating!

Amazing Grace!

Hallelujah !

So, in Conclusion, I am hoping you feel the same way.

Signing off,

Jim, The "Shift 8'er hater" !

"Asterisk - Free" Annuities - Built on

Attraction, not Promotion

I Am Waving the White Flag Cuz I Want My Money Now

Sat, 30 May 2020 06:58:40 GMT

Demystifying the surrender schedule in your annuity policy is as easy as reading the policy itself — which most people do not do.

The fact that most folks do not seem to read their policies is understandable, perhaps not excusable, but certainly comprehendible. Many policy owners purchased their contracts at the suggestion of a trusted advisor while they were in the midst of doing something else...like signing legal documents, or moving funds hither and fro, or simply running fast from a declining stock market environment. Maybe the advisor simply said "your principal is guaranteed" , and you signed the policy just like that without giving it much thought .

But the reality is, your annuity contract has guarantees that exist for a period of time, and this period of time is called the Surrender Schedule . This schedule represents the length of time that your annuity contract runs for until there are no penalties if you wish to withdraw 100% of your funds. Annuity contracts can run for as short as 3 years to as long as 16 years. Typically there should be some significant bells and whistles (in terms of bonuses or interest guarantees) if you are willing to commit to the longer surrender schedules out there.

The subject of the Surrender Schedule in an annuity strikes fear in the heart of many insurance agents because the agent is often afraid that their prospect may be afraid to commit to the term of the annuity that the agent may be offering. The consequence of the agent's fear and silence on this matter is that a multitude of annuity policy holders are out there who are literally clueless as to how long the annuity runs for. This is really quite a phenomenon — and I have only seen it a million times!

The one industry that bills and prides itself as the royal custodian of safety for all matters financial at the same time prefers to dole out piecemeal petite tidbits of nourishment at arms length to the heathen masses as long as those masses grovel, whine and surrender themselves?

More soup please? I suppose it is possible that the bean counters at High and Mighty Insurance Company, headquartered out of Arrogant Falls, Minnesota could theoretically take delight in such medieval procedure. But this would only happen in the dreams of conspiracy theorists. The reality is, businesses that don't brand well, don't end well. Unfortunately, the surrender schedule is often discovered in more detail after the owner has purchased the policy. Come on people! Make something attractive even after you have sold it to them.

I think that my beloved industry might have an incongruence here - perhaps a case of passive aggression going on. Kind of like a church that does all the right things to get you in the door, then suddenly once you are in, slaps a multitude of rules and customs that are downright annoying and strange.

It looks something like this:

1 2 3 4 5 6 7 8 9 10

10% 9% 8% 7% 6% 5% 4% 3% 2% 1%

Thus, if you withdrew $100 more than your penalty free amount in year 5, for example, it would cost you $6. Keep in mind, you never experience surrender charges if you never withdraw more than your penalty free amount.

Why do these surrender charges exist in the first place? A surrender charge (if it is ever levied at all), is composed of two costs borne by the insurer that must be recouped if the policy owner ever prematurely cancels the entire contract.

Similarly, much like a bank CD, if the insurer is offering higher than average interest rates, these costs must also be recouped for policy holders who depart early. Indexed Insurers also offer caps that limit the amount of stock market - indexed credits a policyholder may receive on an annual or monthly basis. If an insurer has a liberal cap, meaning a high one, sometimes that may be reflected in the size of the surrender charge. In other words, the insurer is giving up more of the earnings to you the policy holder than is necessary or normal.

It is interesting to realize that the insurer bargains in your favor with the element of time . In other words, if you give an insurer the right to use your money for an extended period of time, in turn the insurer can offer some attractive interest, index credits and bonus opportunities. These opportunities normally do not exist in the realm of safe investing, but the insurer is able to accomplish it by the virtue (not the curse) of surrender charges and the long term nature of the contract. Not only do these potential surrender charges dissuade someone from prematurely cancelling the policy (and thus making it easier for the insurer to honor the promises it has guaranteed), but the surrender charges recouped from those who do cancel serve the same purpose.

Demystifying the surrender schedule in your annuity policy is as easy as reading the policy itself — which most people do not do.

But the reality is, your annuity contract has guarantees that exist for a period of time, and this period of time is called the Surrender Schedule. This schedule represents the length of time that your annuity contract runs for until there are no penalties if you wish to withdraw 100% of your funds. Annuity contracts can run for as short as 3 years to as long as 16 years. Typically there should be some significant bells and whistles (in terms of bonuses or interest guarantees) if you are willing to commit to the longer surrender schedules out there.

I mean, really! What was he even thinking? Or was he thinking at all? No wonder annuities seem ambiguous! I mean, the one industry that bills and prides itself as the royal custodian of safety for all matters financial at the same time prefers to dole out piecemeal petite tidbits of nourishment at arms length to the heathen masses as long as those masses grovel, whine and surrender themselves?

It looks something like this:

1 2 3 4 5 6 7 8 9 10

10% 9% 8% 7% 6% 5% 4% 3% 2% 1%

Demystifying the surrender schedule in your annuity policy is as easy as reading the policy itself — which most people do not do.

The fact that most folks do not seem to read their policies is understandable, perhaps not excusable, but certainly comprehendible.

Many policy owners purchased their contracts at the suggestion of a trusted advisor while they were in the midst of doing something else...like signing legal documents, or moving funds hither and fro, or simply running fast from a declining stock market environment. Maybe the advisor simply said "your principal is guaranteed" , and you signed the policy just like that without giving it much thought .

But the reality is, your annuity contract has guarantees that exist for a period of time, and this period of time is called the surrender schedule .

The Surrender Schedule represents the length of time that your annuity contract runs for until there are no penalties if you wish to withdraw 100% of your funds. Annuity contracts can run for as short as 3 years to as long as 16 years. Typically there should be some significant bells and whistles (in terms of bonuses or interest guarantees) if you are willing to commit to the longer surrender schedules out there.

This is really quite a phenomenon — and I have only seen it a million times!

I mean, really! What was he even thinking? Or was he thinking at all? No wonder annuities seem ambiguous!

I mean, the one industry that bills and prides itself as the royal custodian of safety for all matters financial at the same time prefers to dole out piecemeal petite tidbits of nourishment at arms length to the heathen masses as long as those masses grovel, whine and surrender themselves?

But this would only happen in the dreams of conspiracy theorists. The reality is, businesses that don't brand well, don't end well.

Unfortunately, the surrender schedule is often discovered in more detail after the owner has purchased the policy. C ome on people! Make something attractive even after you have sold it to them.

It looks something like this:

1 2 3 4 5 6 7 8 9 10

10% 9% 8% 7% 6% 5% 4% 3% 2% 1%

It is interesting to realize that the insurer bargains in your favor with the element of time .

In other words, if you give an insurer the right to use your money for an extended period of time, in turn the insurer can offer some attractive interest, index credits and bonus opportunities. These opportunities normally do not exist in the realm of safe investing, but the insurer is able to accomplish it by the virtue (not the curse) of surrender charges and the long term nature of the contract.

Not only do these potential surrender charges dissuade someone from prematurely cancelling the policy (and thus making it easier for the insurer to honor the promises it has guaranteed), but the surrender charges recouped from those who do cancel serve the same purpose. Of course, my goal for you as an Ambiguous Annuitant would be that you would not need to do that — especially if we structured your annuity policies at varying maturities.

Rate the Raters: Is it the Rating Game or the Dating Game?

Thu, 28 May 2020 21:04:35 GMT

This article may shed some light on how the Rating Industry works in the insurance business here in this country of ours. I know of 5 rating agencies for life insurance and annuity companies in the United States.

Ambiguous Annuitants always study the rating services thoroughly.

4 of these 5 are:

A.M. Best
Standard & Poor's
Moody’s
Fitch

Each of these companies has their own scale in which to measure insurers. Unfortunately, all 4 agencies have different methodologies on how they measure an insurers solvency. Because of this procedural variance issue, it can be difficult for consumers to figure out which company to choose, assuming of course that the subject of "company rating" is even important to that consumer (which of course it should be).

Ambiguous Annuitants always study the rating services thoroughly.

4 of these 5 are:

A.M. Best
Standard & Poor's
Moody’s
Fitch

Ambiguous Annuitants always study the rating services thoroughly.

4 of these 5 are:

A.M. Best
Standard & Poor's
Moody’s
Fitch

However, there is a statistically honest way to become clearer on the relative value of an insurance company's rating by simply knowing where the rating of that insurer lies in comparison to the other insurers that the agency rates. A "percentile score" (a numerical score out of 100) can then demonstrate how many companies have higher and lower scores than a particular company within each agency's system. Our schools often do this with the test results of their students.

Similarly, XYZ insurance company, for example, may be in the 85'th percentile of all insurers with Am Best, the 91'st percentile with Standard and Poors, the 81'st percentile with Moody's and 74'th percentile with Fitch.

If you add the 4 results together, and divide by the 4 agencies, you get an average score, in this case, of 82.75. Thus XYZ Insurer is rated higher than 82.75% of all other companies.

Not bad.

The company that does all these calculations is the Ebix organization, a leading supplier of software and eCommerce applications for the insurance industry, and the final result of their company specific evaluation is called the "Comdex Score" . There are approximately 675 insurers in the US that are rated for Comdex evaluations, and of those, there are (at the time of this writing) 129 are above an 85 (on a scale of 1 - 100) or about 1 out of 5 insurers.

Also keep in mind, the Comdex evaluations are updated several times each year. You can buy the Comdex Score on a company for yourself, (or just ask me for it for free). And, the Comdex is not a rating; it is a composite score of at least 2, and as many as all 4, of the aforementioned rating agencies (some agencies do not rate some insurers).

Not bad.

If you add the 4 results together, and divide by the 4 agencies, you get an average score, in this case, of 82.75. Thus XYZ Insurer is rated higher than 82.75% of all other companies.

The four rating agencies mentioned above not only rate insurance companies, they also rate and provide research on:

Banks
Bonds
Utilities
Pensions
Corporations
Asset Managers
Governments & Government Debt
Real Estate Investment Trusts (REIT's)

The four rating agencies mentioned above not only rate insurance companies, they also rate and provide research on:

Banks
Bonds
Utilities
Pensions
Corporations
Asset Managers
Governments & Government Debt
Real Estate Investment Trusts (REIT's)

The four rating agencies mentioned above not only rate insurance companies, they also rate and provide research on:

Banks
Bonds
Utilities
Pensions
Corporations
Asset Managers
Governments & Government Debt
Real Estate Investment Trusts (REIT's)

The list goes on and on — and ratings agencies are businesses that get compensated in a variety of ways for the ratings that they tabulate.

As such, they have come under some criticism ( especially since the 2008 Sub-Prime crisis ) as to how objective an agency can be if that same agency is compensated in some cases by the company whom it is tabulating a rating for — a fair question indeed!

However, a study of the ratings industry itself can be quite complex, time consuming and of a significantly larger scope than this lowly blog can accommodate. In addition, each agency, once again, has a different style of doing business.

However, not to dismiss this genuine concern, there is one more Rating Agency (#5 of 5) that does not receive any compensation from the entities to whom it rates, and that is the Weiss Ratings Agency . The Weiss Ratings Agency not only considers itself an independent adjudicator of institutional financial health, the company also tends to be a severe task master . Typically, a Weiss rating (their grading system is similar to your 6'th grade report card, from A+ down to an F), is usually a letter grade or more SOUTH of any one of the big 4 agencies respective grades.

Many insurance agents and agencies are often not familiar with (nor friendly to) the use of the Weiss Ratings for the reasons just mentioned. Agents might recognize, for example, that the public might assume anything rated even a "B +" might be considered a sub-par institution and thus not worthy of a prospects hard earned money. However, in reality, a "B +" from Weiss is actually a good rating. However, I myself do use the Weiss system in conjunction with the Comdex Score together, just so I have the clearest conscience on what I am leading my clients into. Weiss also has a good track record in forecasting institutional failures of the past that they are proud to have you see, which I must admit can be interesting.

So, in conclusion, I hope you have learned something here. Since this subject is so important, I put absolutely zero humor in it. I hope you did not notice this, and laughed anyway.

The list goes on and on — and ratings agencies are businesses that get compensated in a variety of ways for the ratings that they tabulate.

So, in conclusion, I hope you have learned something here. Since this subject is so important, I put absolutely zero humor in it. I hope you did not notice this, and laughed anyway.

The list goes on and on — and ratings agencies are businesses that get compensated in a variety of ways for the ratings that they tabulate.

So, in conclusion, I hope you have learned something here. Since this subject is so important, I put absolutely zero humor in it. I hope you did not notice this, and laughed anyway.

Financial Dentistry & The Often Uncomfortable Process of Annuity Shopping (Part 2)

Thu, 25 Apr 2019 13:56:38 GMT

As a 20-year annuity agent, I began to recognize several years ago the uncanny parallel that the emotional process of shopping for an annuity, from your perspective as a consumer, is not all that much different than the psychological process of scheduling a trip to the dentist.

Check this out and tell me if I am wrong:

Both services are preventative. Both services promise to fill a big hole in your life: at the dentist – it’s those darn cavities. From the insurance agent – it’s the inevitable future gap between your guaranteed income and your guaranteed expenses in retirement. After all, an annuity is an insurance policy designed to prevent this from happening.

Both services are NOT commonly recurring procedures. How often do you see your dentist anyway? Once a year, once every five years? Ten? (I confess to being on the latter end of that scale, sadly). And how frequently might you visit with the insurance agent to whom you have chosen to handle the unique responsibility of managing your lifetime income?

Both services are vital! If you never see the former, one day, you’re going to wake up with sore gums, sickness, toothaches, and it’s going to be hard to finish your apple each day. And if you skip the latter, it will be even worse; you’re going to wake up someday and not know how to pay the cable bill. And if you had skipped both – no apple and no TV for you! You’ll have to resort to reading good old fashioned books made out of paper and sucking on gummy bears.

But here is where I have found the most significant similarity:

Many people feel the internal resistance to meeting with both of these professionals despite the necessity of doing so. As far as the dentist is concerned, it is obvious: physical pain, the anticipation of physical pain, and the anticipation of sitting in the waiting room while anticipating the physical pain. That is enough emotional turmoil to cause any cavity-prone individual to consider putting off a preventative health issue that should not be ignored.

But as far as meeting with an annuity agent for the first time is concerned, many investors experience reticence for a plethora of reasons as well:

Is this person calling me going to take advantage of me?
Aren’t they going make a commission off of me?
Are they a person of integrity, or are they a financial shark?
Annuities are too confusing; I cannot figure them out.
The guy on TV says I should hate annuities, whatever his name is.
My broker says you can’t make money in annuities.

At the Safe Money Singer, I have endeavored to circumvent such reluctance by sending you a personalized video quotation to your inbox so you can review the appropriate annuity plan while you are in your pajamas, nibbling on Cheez-its crackers and watching Dateline – all at the same time!

A typical video annuity quotation will encompass:

Rates from all 56 annuity carriers
Using all four types of safe annuities
Screenshots of your future guaranteed lifetime budgets before and after annuities
Company Rating information from all 5 rating agencies
Secret strategies on maximizing your income benefits employing timing delays, maximum RMD dates, inflation riders, IRS tax loopholes, and zero-fee options – all were utilizing the four different types of annuities.

And more...

So fear not, dear annuity shopper, YES, you can make intelligent decisions for your retirement income needs from the comfort of your home without the fear of being coerced, cajoled, or lied (which is my home-word for the act of being twisted against your wishes into a pretzel)!

Annuities can stand on their own two feet, and you will get to experience the peaceful easy feeling of this instrument once you get your personalized video quotation that demonstrates how your future household budget might be permanently satisfied.

And in the meantime, don’t forget to follow through on that dental appointment. Most dentists use laughing gas anyway; heck, you won’t feel a thing!

The Inverted Yield Curve

Wed, 10 Apr 2019 13:56:38 GMT

The Inverted Yield Curve of March 22, 2019, is YOUR FRIENDLY REMINDER to purchase your income guarantee sooner rather than later.

Innuendo in today’s title notwithstanding, on Friday, March 22, 2019, money watchers worldwide made a note of the unique anomaly of the “inverted yield curve” which appeared for the first time since 2007 at the close of business day.

Traditionally, bond yields are higher for investors who hold for longer maturities. This makes sense because an investor is taking a risk that inflation will not have eroded his purchasing power when his bond comes due. Therefore, the bond is only attractive to purchasers if the yield makes it so.

Conversely, shorter-term maturities pay the bond investor less, since the investor is taking less inflation risk so that he/she can recoup funds sooner prior to inflation extending its dark hand.

When increasing numbers of investors are purchasing bonds of shorter maturities, it signals a growing consensus amongst investors that longer-term growth is likely not to materialize. One of the side effects of higher demand for bonds, in general, is that the yields on these instruments must fall. As of the time of this writing, the 10-year Treasury has sunk to 2.43% from 3.20% of last year, a drop of about 23%.

When the long term bond yield actually falls to a threshold below what the short term T bills pay, for example, this represents an “inverted yield curve” – which is a phenomenon that most academics and nerds of the greenback have agreed is a signal that the economy will be slowing in more or less than one year. A slowing economy, of course, is called a recession.

In fact, of the last 7 recessions, every single one of them has been preceded by this inversion phenomena.

See the chart below (courtesy of Bianco Research ):

Conversely, shorter-term maturities pay the bond investor less, since the investor is taking less inflation risk so that he/she can recoup funds sooner prior to inflation extending its dark hand.

In fact, of the last 7 recessions, every single one of them has been preceded by this inversion phenomena.

See the chart below (courtesy of Bianco Research ):

Conversely, shorter-term maturities pay the bond investor less, since the investor is taking less inflation risk so that he/she can recoup funds sooner prior to inflation extending its dark hand.

In fact, of the last 7 recessions, every single one of them has been preceded by this inversion phenomena.

See the chart below (courtesy of Bianco Research ):

So, it appears as if there may be a recession around the corner. Should you wait till the midnight hour before you buy your annuity income plan, or should you hedge your bets and lock and load while you can? After all, there may still be some growth left till that “midnight hour.”

Of course, there is no predictable answer to the question, but it might be prudent to recognize that “deferral credits” are a part of every insurance company’s calculation of lifetime income benefits.

When you buy a deferred annuity , the insurance company measures the date that you open your account until the date that you start taking lifetime income. The longer that distance is between these two endpoints, the larger your income guarantee will be. And this reality of the insurance world creates an interesting point of decision for the investor.

If you open an annuity today, for example, with the goal of starting income in one year, the insurance company is going to give you what are known in the industry as “longevity credits” for that year of deferral so that your lifetime payment in writing will be higher next year than it will be today.

Longevity credits are essentially written income benefits that increase as you age and hold money with insurance companies. These credits are applied even if there is zero growth (or even a loss in the market for that matter) over the next 12 months while you hold your funds with the insurance company.

In other words, you can “lock in” your pension guarantee, in advance of actually taking it, and it will remain valid even if the market were to disappoint over the time period that you are not using the funds in your annuity.

The parallel reality to this is if you did not buy the annuity today and opted instead to “white knuckle” it with the express purpose of extracting the last vestiges of this bull market economy till that “midnight hour.” You only have a certain chance (let’s say 50%) of depositing more money, from growth, into your annuity policy (this is good) – and a certain chance (let’s say 50%) of depositing less money, from loss, into your annuity contract.

Since you are still starting the income guarantees 12 months from now (whether you fund the annuity now or fund it 12 months from now), then you only have a 50% chance of getting higher income. It is a wager you may not wish to take.

After all, if you were flying on vacation and as you sat in your seat before takeoff the pilot were to announce over the loudspeaker that you only have a 50% chance of arriving at your destination, you might be inclined to exit the plane before it took off.

The conundrum of insurance guarantees – they are always better the earlier you get them.

Longevity credits are essentially written income benefits that increase as you age and hold money with insurance companies. These credits are applied even if there is zero growth (or even a loss in the market for that matter) over the next 12 months while you hold your funds with the insurance company.

Since you are still starting the income guarantees 12 months from now (whether you fund the annuity now or fund it 12 months from now), then you only have a 50% chance of getting higher income. It is a wager you may not wish to take.

The conundrum of insurance guarantees – they are always better the earlier you get them.

When you buy a deferred annuity , the insurance company measures the date that you open your account until the date that you start taking lifetime income. The longer that distance is between these two endpoints, the larger your income guarantee will be. And this reality of the insurance world creates an interesting point of decision for the investor.

The conundrum of insurance guarantees – they are always better the earlier you get them.

Think Like A Tortoise: Comprehend The Real Meaning Behind The Annuity (Part 1)

Fri, 22 Mar 2019 13:56:38 GMT

We both know that there is an emotional bridge that exists between the scintillating idea of an investment and the more mundane concept of a guarantee through insurance.

Peers often assume that to cross from the former to the latter involves a lowering of expectations, or what one might call a “throwing in the towel” of sorts. In other words, you might be crossing this bridge of emotions NOT because you want to, but because you must. As an annuity agent myself, I prefer to straddle this particular chasm in a different fashion – especially as it pertains to explaining these annuity concepts to you.

Instead of furthering your all-consuming preoccupation with (nefarious) future potential rates of return, I am going to ask you the following question: “What financial instrument are you aware of that exists in which you will have more guaranteed spendable income in retirement?”

This loaded question is likely to elicit a response from you such as the following: “That depends upon how well my current portfolio will do.”

To which I must respond with: “You are correct, it depends. And, how would it feel for you if you never had to depend?”

Now, since I know you still pulse with the vim and vigor of “rate of return” expectations, I must at this point gently remind you of the 7 risks in the retirement stages of life. No one has articulated these “stage of life issues” retirees face better than the author Wade Pfau , (Ph.D. Economics – Princeton), a CFA who wrote, “How Much Can I Spend in Retirement?”

A variety of premium amounts placed into different types of annuities (SPIA, DIA, INDEX, FIXED) that serve specific needs for you at future specific times, can mitigate ALL of the 7 Risks in retirement listed above in varying degrees and BETTER than ANY OTHER FINANCIAL INSTRUMENT.

The key to your acceptance of this argument is simply to analyze your current financial allocations ability to meet these 7 risks. The problem you are facing, my dear client, is not a “rate of return” problem ( although you think it is ). The real problem is the viability of your spending monies as future time envelops you – and me – in these 7 inevitable financial perils.

It is a darn good thing that there exists a unique financial instrument in this world that is a synonym of the actual word “time” within the word itself! The Latin origin of the word annuity is “year,” a measurement of time itself.

Stay tuned for Part 2: “Financial Dentistry & The Often Uncomfortable Process of Annuity Shopping”