It’s Time You Learned The Truth About Fixed Index Annuities With Income Riders

In our book, Momma’s Secret Recipe For Retirement Success, we devoted a large section to help you understand fixed index annuities with income riders because a fixed index annuity with an income rider is the only financial instrument that can provide you and your spouse income guaranteed for as long as you both live, protection from stock market volatility and losses, an opportunity to participate in a portion of index gains, potential for future income increases, a low fee structure, the opportunity to pass all funds remaining in your account at death to your named beneficiaries, access to your funds for income purposes either immediately or within 12 months, and a legally binding and enforceable written contract regarding the promises made to you about your money.

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The Secret Ingredient

The best recipes are usually secret because the chef doesn’t want to disclose the ingredients, the chef wants to keep the ingredients secret.

If you don’t have that secret ingredient, your dish will not come out as planned unless you get very lucky. The same thing can be said about your plans for retirement. If you don’t have the proper plan without the proper ingredients, your success may depend on hope and luck, because you will be hoping that you will be lucky. This type of planning, or lack of planning, may create an endless amount of stress, anxiety, and worry, and could potentially lead to a lack of financial success.

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First Things First: Annuities 101

What would you guess is the number one reason why people decide not to purchase a fixed index annuity with an income rider as part of their overall retirement income plan?

It’s not because of surrender charges, fees, or lower returns. It may be because the benefits of a fixed index annuity with an income rider can simply sound too good to be true:

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How Does All Of This Work? How Do You Set Up A Fixed Index Annuity, And What Do You Get Back?

You give a fixed index annuity company a lump sum of money by writing them a check or by transferring your IRA/457/403(b)/SEP/retirement plan on an income tax-free basis. In turn, the annuity company gives you an annuity contract which is a legally-binding written contract enforceable in a court of law.

Every single thing the insurance company promises and guarantees you is in writing in your annuity contract including your principal being protected against all stock market losses, your income being guaranteed for as long as you live, all remaining assets passing on to your beneficiaries, how you access your money, the fees you pay, and how you earn interest in your account.

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Losses Are Very Hard To Recover

Brokers and advisors love to talk about the huge gains you have made in the past, are currently making, or will make in the future, in the market.

Hey, we get it, talking about huge gains and making a lot of money is a lot more fun than talking about big losses. We have previously discussed that huge gains may happen for the moment, but they can just as quickly and easily disappear if your assets are left “naked in the market.” You may get a good gain in one (1) year or two (2) years only to have the gains and part of your original principal wiped out with a big loss in year three (3). We have found that the vast majority of brokers and advisors love to talk about big gains, but they don’t like to talk about big losses. This blog was written for retirees, so your focus should be on risk mitigation first, and return second. Why? Because our clients, retired people just like you, do not want, and literally can’t afford, to lose any of the assets they worked so hard to accumulate. They want to make competitive rates of return, but they do not want to take excessive risks in doing so.

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Do Market Highs Mean Good Things For Investors?

The stock market has hit all-time highs. That should be great for investors. Over the last few years, how many times have you heard the stock market has hit all-time highs? Probably a thousand times, sometimes you hear it twenty times in a day. Well, that should be great for investors. What we found is most retirees and soon-to-be retirees don’t feel like their portfolios have hit all-time highs. Do you? To understand the true effect of stock market high points, let’s examine the Standard & Poor’s 500 Index, the Dow Jones Industrial Average, and the NASDAQ, starting on January 1, 2000, and ending on December 31, 2018:

Based on this data, it looks like all three (3) major stock market indices did extremely well; and that is what the financial industry and your broker/advisor want you to think. It looks like a home run and makes you feel like all the risk you took was worth it because you made a ton of money. The problem is that these numbers are very deceiving. The following graph shows the actual compounded annual increases to all three (3) indices before any reduction for fees you would have to pay.

In January 2000, the Standard & Poor’s 500 Index was at 1,498. Then 19 years later on December 31, 2018, the Index was at 2,506, an increase of 1,008 points, which sounds like a huge gain. The problem is that’s only a 2.85% average compounded increase per year for 19 years. And it’s important to note this 2.85% average annual compounded increase includes the huge gains the stock market produced since 2009 in the longest bull stock market in history. If you think about all the volatility, you went through during these 19 years, all for a 2.85% average increase, ask yourself, if it was worth it? Did the risk equal the return? Was it worth going through two (2) separate approximately -50% market crashes for this type of growth? And maybe even more importantly, the 2.85% average annual compounded increase is without any reduction for fees. If you earned 2.85%, but paid 3% in fees like you may very well be, what was your real return? Right about -0.15%.

Then we can look at the Dow Jones Industrial Average. The Dow looked like it really made a lot of money. In January 2000, the Dow was at 10,940. Then 19 years later on December 31, 2018, the Index was at 23,327, an increase of an astonishing 12,387 points! Your brain right now is shouting “HUGE GAIN! HUGE GAIN! HUGE GAIN!” But alas, this isn’t the case. This is another example of financial illusion. The Dow had an average annual compounded increase of 4.06% per year for 19 years before any reduction for fees. How about the NASDAQ? The NASDAQ started in 2000 at 4,069 and ended on December 31, 2018, at 6,635. Looks like a big gain, but the NASDAQ had an average annual compounded increase of 2.61% per year for 19 years before any reduction for fees.

When retirees think about their assets, and what has happened to them since 2000, most people think they have done exceptionally well. Many thinking they have earned between 8%-12% on average every year. But to date, we have never seen one (1) person who has earned these types of returns during the time period we are examining.

Retirees think they have earned huge rates of return because:

  • The stock markets as outlined previously have hit all new record highs.
  • The index numbers look like they’ve made huge gains.
  • You have made some very big gains in individual years.
  • If you were working during this time period, your main growth was from your ongoing contributions.
  • You have recovered from large losses.
  • Your broker or advisor has told you that you have made huge gains.

Here is why you probably didn’t come close to getting an 8%-12% annual compounded rate of return:

  • The data shows the S&P 500 Index averaged an annual increase of 2.85% during the 19-year time period between 2000 through 2018, the Dow averaged 4.06%, and the NASDAQ average 2.61% per year, all before fees.
  • It’s very difficult to earn stock market rates of return, as we believe based on our research that less than 5% of all money managers can beat the stock market over any five (5) year-time period. DALBAR reported the average equity mutual fund investor earned 3.98% per year in stock mutual funds over the last 30 years ending December 31, 2016.
  • You had to pay fees, in many cases 3% or higher per year.
  • You lost close to -50% in 2000 through 2002 and then had to make a +100% gain just to recover, before you made any gain.
  • You lost approximately -50% again in 2007 through 2009 and then had to make another +100% gain just to recover, before you made any gain.

The majority of retirees we have met with to provide them a 2nd Opinion About Their Money stated that just recently they have finally gotten ahead from where they were before the stock market crashed in 2000 and again in 2008. This assumes they did not make any more contributions to increase their portfolio values.

Sit back and think about these questions: Have you ever wondered why your account didn’t grow as much as you thought it should? Did you ever lose far more than you ever imagined? Did it ever seem like the only growth you realized was from the additional deposits you were making to your accounts? Did it seem like a long time from when you lost money to when you finally recovered? Did you worry about your money? Did you feel confused about your money? For most retirees, if they are honest, they have to answer “yes” to all these questions.

We recently performed a rate-of-return audit for a new potential client:

 

  • In 2000, Bob had $1,500,000 in his portfolio.
  • By 2002, his portfolio was worth $810,000 after the 2000-2002 stock market crash.
  • By 2007, his portfolio was back up to $1,425,000.
  • By March 2009, his portfolio was back down to $785,000.
  • By December 2017, his portfolio was back up to $2,250,000.
  • Bob feels like he has made a huge rate of return, his portfolio value is now $2,250,000! He started with $1,500,000 and now he had $2,250,000!
  • Bob made a net 2.27% annual compounded rate of return.
  • Bob was sad to hear he would have made more money if he would have bought 5-year CD’s.

Join Us For An Educational Dinner Event

Claim your seat and join Peak Financial At Piatti on Thursday February 8th. You and a guest are invited to this educational workshop. Attendance is by invitation only, first time attendees age 55+, no financial professionals. Seating is limited!

Two Ways To Register:
To reserve your seats, call or text keyword PIATTI to 916-842-3372 (24/7).  Seating does fill up quickly, call or text now to secure your reservation. Please, arrive at 5:45 p.m. Doors will close at 6:00 p.m.

  • IS YOUR 401K & IRA IN THE RIGHT PLACE? We’ll discuss the 7 RULES TO LIVE BY FOR RETIREMENT SECURITY.
  • TAXES IN RETIREMENT: The tax implications of our latest administration and why you should act NOW!
  • REPLACING YOUR PAYCHECKS: Create dependable lifetime income from your assets – kind of like a PENSION.
  • RISING INFLATION: Learn to protect your investments and income from rising INFLATION.
  • RETIREMENT INCOME: Will your nest-egg be enough, and will it last, to maintain your current lifestyle in retirement?
  • SOCIAL SECURITY: Important changes and strategies to help maximize benefits for you and your spouse.
  • MITIGATING RISK: The BIG mistake most Americans are making with their retirement accounts… are you one of them?
  • LONG-TERM CARE: We’ll discuss solutions to increasing costs and skyrocketing premiums.
  • WRITTEN RETIREMENT INCOME PLAN: Why everything about your money needs to be in writing to succeed.

If you own an IRA, 401(k), 403(b), 457, TSP, retirement account, managed portfolio, brokerage account, or just have money in the bank, you don’t want to miss this educational dinner event!

  • This event is for those whom are Retired or Pre-Retired who have saved $500,000.00 or more for retirement. Please, no guests under the age of 55. Limit 2 reservations per invitation.

Location: Piatti, Sacremento

Driving Directions: 571 Pavilions Lane, Sacramento, CA 95825

Retirees Want Seven (7) Main Things From Their Money

With 10,000+ Americans retiring every day, there have been countless studies completed detailing what retirees want from their money.

There are many opinions and differing answers depending on the study and the participants. We have reviewed many of these studies, with some focusing on risk, some on investing, others on generating income, several on longevity, and many on the fears and concerns retirees have about their money in general. While all of the studies differed, we noticed a common core, basic similarities, in the results of the studies we reviewed. We found retirees want seven (7) main things from their money:

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Questions You Must Be Able To Answer To Have A Successful Retirement

Most retirees have not gotten answers to their most pressing questions about retirement from their current brokers, advisors, employers, or own research.

If you can’t answer basic questions about your retirement, how can you expect to succeed, feel secure, and feel confident you are making the right decisions about your money? You can’t feel good about it. If you can’t answer basic questions about your money, it means your plans for retirement are based on hope and luck. It means you are hoping you will be lucky, and things will work out. Your broker or advisor might seem to know a lot about your portfolio and managing the assets because that is what they mainly talk to you about. Your broker or advisor may say you are diversified, state they have great money managers, let you know you are positioned for good rates of return, tell you if you want less risk they can put a larger percentage of your assets in bonds, and will often confirm you can expect an 8%-10% average annual rate of return. However, when you ask the important questions about your money, they don’t have any answers. Moreover, your broker or advisor has never put your plan in writing. This means your current broker or advisor is comfortable with you basing your plans for retirement on hope and luck. Are you? In our 50+ years of experience, we have found there is certain data (see diagram on following page) you must have to build a secure plan and to be able to stop worrying about your money:

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Peak Financial Freedom Group
2520 Douglas Boulevard, Suite 110
Roseville, CA 95661

DISCLOSURE:

All of the information presented here is provided and intended to be used for general educational and informational purposes only and is not intended as a solicitation for you to buy or sell any security or financial product. The content is developed from sources believed to be providing accurate information. None of the information presented is intended to give you specific tax, investment, real estate, legal, estate, or financial advice but rather to serve as an educational platform to deliver information. The ideas, thoughts, and strategies presented here are those of the Management Team and provide an insight to our views on Peak Financial Freedom Group, LLC. Some of this material was developed and produced by Peak Financial to provide information on a topic that may be of interest. Every detail in this website is subject to change without notice. Seminar, radio shows, TV productions, book releases, magazine and book promotions are sponsored, promoted and paid for by Peak Financial Freedom Group, LLC.

2nd Opinion Package available to Qualified Retirees and Soon-To-Be-Retirees may include free consultations, a free retirement income plan, risk analysis, and fee analysis. In addition, a comprehensive written retirement income plan may be provided to those who complete the entire process. Qualified Retirees and Soon-To-Be-Retirees must have a minimum of $500,000 of investible assets such as IRA’s, 401K’s from past employers, stocks, bonds, mutual funds, bank accounts, money markets, CD’s, etc., but DOES NOT include real estate, businesses, limited partnerships, 401K/retirement plans that can’t be moved to another plan, and other illiquid type assets.

Past performance is no indication of future performance and such information cannot be relied upon regarding future potential gains. Investing involves risk. There is always the potential of losing money when you invest in securities. Asset allocation, diversification and rebalancing do not ensure a profit or protect against loss in declining market. Advisors and agents may only conduct business with residents of the states or jurisdictions in which they are properly registered or licensed and not all of the securities, products and services mentioned are available in every state or jurisdiction.

Nothing is directly or indirectly guaranteed by this information. The planning and ideas presented herein are not suitable for all individuals or situations. Hypothetical examples are used to explain concepts and are not indicative of potential results you could receive; past performance is not a guarantee of future results; and results are not indicative of any particular investment or income tax situation; your results will be different and could be lower or higher. Please consult legal or tax professionals for specific information regarding your individual situation. Peak Financial does not offer tax or legal advice. Consult your financial professional before making any investment decision.

Insurance product features and benefits, such as guaranteed lifetime income riders, are subject to contract terms, limitations, fees, and the claims paying ability of the insurance company issuing the contract. The sale or liquidation of any stock, bond, IRA, certificate of deposit, mutual fund, annuity, or other asset to fund the purchase of any other asset including an annuity may have tax consequences, early withdrawal penalties, or other costs and penalties as a result of the sale or liquidation. Different assets can be complex and carry fees, costs, and surrender charges. If you place assets under management with Fiduciary Solutions LLC, we are paid an advisory fee from Fiduciary Solutions LLC and if you purchase an annuity through us, we are paid commissions from an insurance company.

2019(1), 2020(2), 2021(3), 2022(4), 2023 (5) and 2024 (6) Five Star Professional Wealth Manager Award - Dan Ahmad and Jim Files have been nominated for and have won the 2019, 2020, 2021, 2022, 2023 and 2024 Five Star Wealth Manager Awards. Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. Once awarded, wealth managers may purchase additional profile ad space or promotional products. Award does not evaluate quality of services provided to clients. The Five Star award is not indicative of the wealth manager’s future performance. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or this publication. Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by Five Star Professional in the future. Award winners represent an exclusive group of wealth managers who have demonstrated excellence in their field by satisfying 10 objective selection criteria. For additional information on the Five Star award, including a complete list of the 10 objective selection criteria and their research/selection methodology, go to https://fivestarprofessional.com.

Investment advisory services are offered through Fiduciary Solutions, LLC, a California Registered Investment Advisor. Insurance products and services are offered through PFFG Insurance Agency LLC, a licensed insurance agency (CA Insurance License #0N14013). Peak Financial Freedom Group LLC is a financial planning and umbrella marketing organization, which enables the provision of multiple financial services under one brand. Peak Financial Freedom Group LLC, PFFG Insurance Agency LLC, and Fiduciary Solutions LLC are affiliated entities with common ownership and control. Jim Files is licensed as an investment adviser representative with Fiduciary Solutions LLC (CRD # 1620449) and is a licensed insurance producer with PFFG Insurance Agency LLC (CA Insurance License #0F06511). Dan Ahmad is licensed as an investment adviser representative with Fiduciary Solutions LLC (CRD # 1491561) and is a licensed insurance producer with PFFG Insurance Agency LLC (CA Insurance License #0732913).

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