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Misunderstanding #6 - "My Money's All Tied Up!"

11/5/2020

 
Annuity Truth:  If you need 100% access to 100% of your money, 100% of the time, you can have it.

I hear the following statement frequently:  “Annuities 'lock up' my money, and I want to be able to get to my money if I need it.”

Yep, there are indeed annuities which have surrender charges (similar to bank CDs), and there are many good reasons for those charges to exist.  

If you're someone who likes the safety and guarantees of annuities, but you absolutely need and require 100% access to 100% of your money, 100% of the time, you're in luck...

You really can "have your cake and eat it, too!"

There are 166 Fixed Annuities offered in Texas by A-rated carriers that offer a no-cost Return of Premium (ROP) guarantee.

The ROP guarantees all provide the same thing – a contractual guarantee that, at ANY time, the owner of the annuity contract can cancel/terminate the contract and receive NO LESS than 100% of the original money placed into the contract, less any withdrawals made by the owner.

How’s that for “100% access to 100% of your money, 100% of the time?”
==============================================================================================
So...  if you’d like to:
  • Protect your nest egg from any losses if/when the stock market declines/crashes, and lock in gains for your nest egg when the stock market moves higher,
  • Have a “private pension” – a contractually guaranteed monthly check you and your spouse can never outlive,
  • Have 100% access to 100% of your money, 100% of the time,
you can have it – there are 160+ Fixed Annuities that offer Return of Premium, so the “problem” is solved – your money is NOT tied up…

BTW, there are many creative ways these "ROP" annuities can be used, and I'll be happy to share these strategies with you.

I’ll also be happy to provide a list of the 166 Fixed Annuities offered in Texas (and the list for any of the other 49 states) that provide the contractually guaranteed Return of Premium option.

100% access to 100% of your money, 100% of the time – "Misunderstanding" Solved!

==============================================================================================
​If you have a question or comment, just fill out the "Ask Rick A Question" box - your question will come directly to me.  If you want to remain anonymous, that's OK - just make up a name and an email address, and I'll answer your question in a future post...

BTW - check out the "USDebtClock.org" link just below the "Ask Rick A Question" box, or just click this link - you might find the site interesting...

Misunderstanding #5 - "I've Never Heard Of Annuities!"

8/22/2020

 
Annuity Truth - One comment I hear fairly often is:  "I've never heard of annuities." 

So, here's a little background on annuities:

  • Annuities have been around since Roman times - here's a link to check out:   https://en.wikipedia.org/wiki/Annuity_(American)#History 
  • One of the early recorded uses of annuities in the United States was by the Presbyterian Church in 1720. The purpose was to provide a secure retirement to aging ministers and their families, and was later expanded to assist widows and orphans.
  • Some prominent figures who are noted for their use of annuities include: Benjamin Franklin assisting the cities of Boston and Philadelphia; Babe Ruth avoiding losses during the great depression, O. J. Simpson protecting his income from lawsuits and creditors. Ben Bernanke in 2006 disclosed that his major financial assets are two annuities.
  • Annuities are the only financial products that will pay a guaranteed income for as long as a person/couple lives - this is something that no other financial product can match! 
  • Nobody knows how long he/she will live, so annuity payouts are based on actuarial, or longevity, tables and are only issued by life insurance companies.
  • So, life insurance companies issue life insurance contracts that pay a death benefit when the owner dies, and they also issue annuity contracts that pay an income as long as the owner(s) is/are alive.
  • Social Security payments and pension payments are two examples of annuities - Social Security and pensions are both "lifetime income annuities."
  • The Baby Boomer generation is living longer than any previous generation, and one of the biggest fears of the Baby Boomer generation is the fear of outliving their money.  Boomers are learning that they can permanently solve this problem, and create additional guaranteed monthly income, in addition to their Social Security & pensions, by using a small, calculated portion of their Retirement Savings to create their own "private pension." 
  • Here's a link that provides more information:                  
           https://www.safemoneyhouston.com/withdrawal-guarantee.html
  • Fixed annuities can also earn interest that's tax-deferred, and when the owners of the annuity have died, the account balance will pass to their heirs outside of probate.
  • Fixed annuities are "insurance" products - they're "risk transfer" products and are not "investments" - they literally provide "insurance and guarantees" for your retirement savings. 
  • These "risk transfer" products literally allow the owner to transfer the risks of              a) running out of money, and b) losing money if the stock market crashes "onto the backs" of insurance companies. 
  • We use other insurance companies (health, auto, homeowner, long term care) to "manage and underwrite" the risks and expenses we don't want to deal with, e.g. hospital expenses, auto accidents, our homes burning down, having to move into an assisted living facility.
  • Because their money is literally "insured" against loss, owners of Fixed Annuities receive contractual, legally binding guarantees that their contracts will never lose money if the stock market declines or crashes.
​
Questions?  Comments?  Fill out the "Ask Rick A Question" box - your questions come directly to my email Inbox... ​
          

Misunderstanding #4 - "The annuity company only gives me some of the stock market gains, and it keeps the rest!!

8/19/2020

 
Annuity Truth - The 1st part of the statement is correct, but the 2nd part is false.  Here are the details:
  • This "Misunderstanding" is speaking about one of the ways in which a Fixed Index Annuity, or FIA, is able to capture & actually "lock in" interest if/when the stock market moves higher over a 12 month period.  Then, if/when the stock market declines or crashes in subsequent years, the interest captured will not be lost.
  • Let's be clear - comparing the stock market to an FIA is NOT an "apples-to-apples" comparison. An FIA will NEVER capture ALL of the stock market gains - it's an insurance product -it's a "risk transfer" product -  and it's NOT an "investment." 
  • The FIA gives the owner the opportunity to earn an interest that's higher than what he/she could earn in a fixed rate CD, but without any risk of losing money if the market crashes.
  • If you want all of the "stock market gains," you need to be willing to accept all of the "stock market losses," and the possibility of losing some of your money if the stock market declines.
  • People who own  FIAs decided that they didn't want any part of that - they decided they didn't want to risk losing any of their money by placing it in the stock market .
  • Instead of getting an R.O.I. (Return On Investment) like stocks and mutual funds, Fixed Annuities earn interest - (remember when we were young and had our 1st savings accounts, and we earned the standard 5.25% "interest" on our "passbook savings account? " Once that interest was added to our accounts, it couldn't be lost - it was "locked in"...) - that same concept applies to Fixed Annuities. 
  • "R.O.I" (Return on Investment) is not the same as "Interest Credited" to your account
==========================================
  • Re: the 2nd part of the statement - it's 100% FALSE.  Annuity companies DO NOT "keep the difference" - it's in the annuity companies' best interest for their clients' annuity contracts to perform well, since that will lead to additional clients for the annuity companies...   
  • Watch this short video - it does a great job explaining what the annuity carriers that issue annuities actually DO with the money they receive, and about the regulations they must deal with to maintain their designations as "legal reserve" insurance companies:  https://www.safemoneyhouston.com/safe-money-contracts.html
  • The bottom line is this - money placed into a Fixed Annuity contract is literally "insured & guaranteed" against any losses in the stock market, and money placed into the stock market is NOT  "insured and guaranteed."   Period.
  • I'll be happy to visit with you and discuss, in detail, exactly how annuity carriers stay in business and are able to pay their employees, but "keeping stock market gains" from their clients' accounts is NOT the way their business models work.       

Misunderstanding #3 - "When I die the annuity company keeps my money!!"

8/18/2020

 
Annuity Truth - the short answer to this Annuity Misunderstanding is:

"The annuity company only keeps the money if you let them..." 

Here's what I mean:
  • 99.5% of my clients receive their guaranteed lifetime income payments by using an Income Rider.  Then, whenever the client or the client & spouse die, 100% of the balance in their Retirement Account goes to their heirs outside of probate - the annuity carrier does NOT keep the money 
  • For the other 0.5% of my clients who are receiving their lifetime income payments, they decided not to use an Income Rider, and they specifically chose to receive their payments as "Single Life" or "Joint Life"  annuitizations, similar to the payouts from their pensions or Social Security.  They had specific reasons to receive their payments as "Single Life" or "Joint Life" payments.
  • And, let's not forget people who die when their annuities are simply earning deferred interest, i.e. they're NOT receiving a lifetime income from their annuities - they're simply using an annuity to safely grow their money tax-deferred.        
         When those people pass on, 100% of the money in the deferred annuity passes to                 their heirs outside of probate.

So...  the only way in which your money remains with the annuity company when you die is if you agree to it when you complete the annuity application by specifically stating that you wish to "annuitize" your contract with a "Life Only" or "Joint Life" option, and then you agree a 2nd time when the annuity contract is delivered, and you're able to review the contract during a 2 week "free look" period.

And, even if a client chooses to "annuitize" the contract with the "Life Only" or "Joint Life" option, the money can still be set up so that any remaining money goes to the heirs with a "Life with Period Certain" or "Life with Cash Refund" option.

So, for the 99.5% of my clients who did not "annuitize" their annuities, their heirs will receive the balance of their Retirement Accounts when they pass on - the annuity company will not keep the money.


Questions?  Comments?  Fill out the "Ask Rick A Question" box - your questions come directly to my email Inbox...

Misunderstanding #2 - "Annuities Have High Fees!"

8/16/2020

 
​Annuity Truth:  At Conservative Retirement Solutions, the only annuities we offer, i.e. "Fixed Annuities," "SPIAs" (Single Premium Immediate Annuities), and "DIAs" (Deferred Income Annuities), have NO mandatory fees.  Period, end of story.

There is ONE type of Fixed Annuity, known as a Fixed Index Annuity, that does have an optional rider available, and there is an annual fee if that rider is added to the Fixed Annuity. 

The annual fee is ~ 1.0% - 1.2% for this optional rider.  Many clients want it and love it, and other clients decide they don't want it...  

And, because it's optional, it can be canceled at any time.  

Then, if the rider is canceled, the Fixed Index Annuity no longer has fees of any type.

==============================================================================================

The confusion comes from the fact that "Variable Annuities" do have mandatory fees that can range from 2.5% per year to 4+% per year, and that's EVERY year.

I think that people hear the word "annuity" and assume all annuities are the same.  

Well, not so much...  

So, let's sum up this "Annuity Truth:"  Many Variable Annuities do tend to have high fees that are mandatory...   

As I mentioned above, we DO NOT OFFER Variable Annuities.

Fixed Annuities, SPIAs and DIAs do not have ANY mandatory fees, and only one type of Fixed Annuity - the Fixed Index Annuity - has an optional fee for a "Guaranteed Lifetime Income Rider."

Questions?  Comments?  Fill out the "Ask Rick A Question" box - your questions come directly to my email Inbox...

Misunderstanding #1:  I HATE ALL ANNUITIES!!

8/16/2020

 
Annuity Truth:  WOW!  That's a pretty strong statement - as my friend Stan (the Annuity Man) Haithcock is fond of saying: 

"Saying you hate all annuities is like saying you hate all restaurants - it makes no sense..."

I have a couple of questions for you to consider:
  1. Do you hate getting your Social Security check every month?
  2. If you retired from a company that offered a pension, do you hate getting your pension check every month?
​
The reason I'm asking those questions is this - Social Security and your pension are examples of annuities - guaranteed "lifetime income annuities."

They pay an amount of money, every month, for the rest of your life, regardless of how long you live.  That's the definition of an annuity.

An annuity can also earn tax-deferred interest, but for the purpose of answering this "Misunderstanding #1," an annuity is a financial product that pays a guaranteed amount of money, every month, for a specific period of time, up to and including the rest of your life.

So - just to be clear - you can't have it both ways - you can't "hate all annuities" while you're receiving your monthly Social Security (annuity) and perhaps a pension (annuity) payments...

Receiving guaranteed "paychecks for life" that cannot be outlived, whether it's from Social Security, a pension or a private annuity that you own,  sounds like a pretty good thing from where I'm standing...

If you have questions about annuities in general, or a specific questions about a particular annuity, drop me a line, call me or fill out the "Ask Rick A Question" box - your questions will come directly to my email Inbox...

Welcome To "The Annuity Truth" Q&A

8/16/2020

 

  "Rick - I HATE ALL ANNUITIES!!"  -  answered
"Rick - I've heard that annuities have high fees!"  -  answered
"Rick - When I die the annuity company keeps my money!!"  -  answered
"Rick - The annuity company only gives me some of the stock market gains, and it keeps 
             the rest!!"  - 
answered
"Rick, I've never heard of annuities!"  -  answered
etc...
etc...
==============================================================================================
Perhaps you've heard people make statements like these, or perhaps you've personally made statements similar to the ones above.

Like so many other "one-size-fits-all" statements, the statements above are not accurate, and need more information.

"The Annuity Truth" page is here to provide that information.

Consider this - you and I have health insurance, car insurance and homeowner/renter insurance because we don't want to "be on the financial hook" if we get cancer, have a car wreck or our home burns down. 

Annuities are issued by insurance companies, and people own annuities because they don't want to deal with two financial risks that every Baby Boomer must face during retirement - the possibilities  of:
  1.  losing money in the stock market, and
  2. running out of money, i.e. outliving their money. 

​People use annuities as a way to "off-load" these retirement-related risks, and "put these risks on the backs of insurance companies" instead of each retiree having to personally underwrite and "be on the financial hook" for each and every retirement-related risk.

You and I go to a doctor if we have health-related questions about a prescription or a medical procedure, and we go to our auto mechanic if we have question about our car's air conditioning or transmission.

We're all familiar with doctors, mechanics, plumbers and other professionals who are experts in a given field, and so we feel comfortable seeking their advice and opinions.  But, most Baby Boomers are not familiar with annuities, and the ways annuities can be used to provide contractually guaranteed solutions for common retirement-related problems and concerns.

That's why I've started "The Annuity Truth" page. 

I'm an expert on Fixed Annuities, Single Premium Immediate Annuities and Deferred Income Annuities, and knowledgeable about the many ways in which these insurance-based retirement instruments are used to a) eliminate stock market losses, b) provide guaranteed income for life for a couple or individual, and c) solve various retirement-related and legacy-related problems.

I encourage you to "A.M.A. (Ask Me Anything)" about annuities - feel free to ask your question in the box on this page.  I'll answer any "A.M.A." question I receive on this page.

And, if you want to submit a question but don't want to give your name, just put "John Doe" and be watching on this page for your answer - I'll address the answer to "John Doe" or whatever name you used...

Finally - here's a link to a video on this website you might find interesting - it's an "Annuities 101" video and it gives an overview of the various types of annuities:

https://www.safemoneyhouston.com/annuity-primer.html

And now... on with the show - let's get some annuity "misunderstandings" cleared up!

Sincerely,
​
Rick Dennis
August 16, 2020


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  • Home
  • VIDEOS
    • Retirement Planning >
      • Annuity Explanation
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      • Indexed Annuity
      • LTC Annuity
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