To answer this question, a more comprehensive analysis was performed. We went back to 1996 and reviewed every 15-year time period starting with 1996 through 2010 and ending with 2003 through 2018. The results from the analysis are eye-opening:
Let’s look at a 15-year graph of the S&P 500 Index starting in 1999 and ending in 2013, that’s when we finished writing the text of one of our books titled Don’t Bet the Farm. We did a significant amount of research on the S&P 500 Index to complete that book. Because we only work with retirees, we wanted to review what happened over the previous 15 years in the stock market to prepare for what types of pitfalls may lie ahead in the next 15 years based on normal average life expectancies. There was volatility, and there was growth. But what we ultimately found out was nothing short of astonishing.
From the beginning, you have been told, “You cannot control your money.” What if all these things you have been told are incorrect, and not in your best interest? What if you could control your money, actually make your money act any way you want it to? Don’t let your broker or advisor control your money; it’s not their money, it’s yours. You must learn how to control your money the way you want it to act. If you are like most people, you have probably been given two (2) main “pillars of knowledge” that have guided your investment decisions:
The word annuity is believed to be derived from the Latin word “annua” – translated as “annual stipends.” The first annuity-like financial instrument in the world is believed to date back to 225 AD. If you can imagine back almost 2,000 years ago in Roman times, if you passed away and had assets, instead of leaving your beneficiaries lump sums of money, you might very well have left them income for as long as they lived. It seems like the Romans didn’t trust their kids with a big chunk of money any more than we do! This lifetime gifting of income practice created the need for the taxing authorities to quantify the amount of money that would ultimately be paid to beneficiaries.
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.
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.
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:
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.
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.
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?
