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Why are Markets and Annuity Sales at All Time Highs?

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Equity markets increasing and annuity sales increasing at the same time is a little like cats and dogs playing together. It does happen, but an inverse relationship has been the norm.

Author Dan Kadlec (cited below) stated in his article that “Lifetime income has emerged as perhaps the biggest retirement challenge of our age. The gradual shift from defined benefit plans to defined contribution plans over the past 30 years has begun to leave each new class of retirees without [continued below video…]

Video: Watch the Annuity Guys, Dick and Eric, discuss about these and other possible explanations as to why annuities are now so popular.

Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

{continued] …the predictable, monthly stream of cash needed to cover basic expenses. ”

It is a fact that more and more employers are moving to a 401k style retirement plan and away from the defined benefit plans enjoyed by past generations. Some of the biggest national employers are doing everything they can to unload their pension obligations by offering lump sum buyouts or turning the pension program over to insurance companies.

So we can postulate that the reason for increased annuity sales now and perhaps in the foreseeable future have more to do with the financial needs of today’s retirees as compared to past generations; and some of the increased sales may also be the lack of safe money options from other sources such as low bank interest rates that have left income needy retirees without many other alternatives for safe income or moderate growth options.

Need Retirement Income? Here’s the Hottest Thing Out There

by  Dan Kadlec

Sales of fixed annuities are surging as income-strapped retirees seek ways to rescue their retirement plans.

Annuity sales are exploding higher as retirees look to lock up **guaranteed lifetime income in an environment where fewer folks leaving the workplace have a traditional pension. In a sign of wise planning, easy-to-understand basic income annuities are among the fastest growing of these insurance products.

In all, net annuity sales reached $56.1 billion in the first quarter—up 13% from a year earlier, based on data reported by Beacon Research and Morningstar. Variable annuities, often seen more as a tax-smart investing supplement for the wealthy than a vehicle for lifetime income, account for most of the market. These annuities, which essentially let you invest in mutual fund^s with some insurance **guarantees, saw first-quarter net sales of $33.5 billion—down slightly from a year ago.

Meanwhile, net sales of fixed annuities, which offer more certain returns, surged to levels last seen in the rush to safety at the height of the Great Recession—totaling $22.6 billion for the quarter. Fixed annuities come in simple and complex varieties—those indexed to the stock market can be confusing and laden with fees. But the subset known as income annuities—the most basic and straightforward of the lot—grew at a 50% clip versus 44% for the index variety.

Basic income annuities, also known as immediate annuities, remain a tiny portion of the overall $2.6 trillion annuity market. Yet they are what most investors think of when they ponder buying an income stream. With an immediate annuity you plunk down cash and begin receiving pre-set over a period of, say, 10 or 20 years, or life. Rates have been relatively low, as they are for most fixed-income investments. Recently a 65-year-old man investing $100,000 could get a lifetime payout of 6.6%, according to [Read more…]


Using OutCome Based Planning™ for Your Retirement

We practice and recommend a "Holistic - OutCome Based Planning™ process when considering annuities." This approach has the effect of balancing your overall portfolio so you can meet your retirement objectives by "first identifying the least amount of your investments or savings (if any) that should be considered for annuities." OutCome Based Planning™ analyzes and models multiple outcomes so you can clearly identify your best income and growth opportunities.

"The Annuity Guys will only call if you request help". Hence, when you are ready for specialized help we will be available.
"Working with an Experienced Fiduciary Financial Planner can help you Avoid a Trial & Error or Risk Based Retirement"

This type of approach does take considerably more time, effort and analysis which will show you mathematically the successful possibilities by comparing various outcomes rather than trying to sell or convince you of that "so-called one best solution." Clients frequently tell us that this process removes some of the confusion and emotion to help them objectively identify a better retirement plan; rather than just ending up with the most convincing salesperson or advisor.

When requesting help you can be assured of working with an experienced Annuity Guys' Retirement Planner who is independently insurance licensed and securities licensed as a fiduciary financial planner having access to the vast majority of annuity companies in helping you choose the best annuities using a holistic-outcome based planning approach. We consider the high quality advisor recommendations we make to our website visitors as a direct reflection back on our commitment to serve all client's with a high standard of excellence in financial planning for retirement.

Based on survey feedback on advisors from our website visitors, we eliminated about two-hundred local advisors and now only recommend a few that we consider experienced vetted Annuity Guys' Fiduciary Advisors. Many local advisors continue requesting us to recommend them as a vetted advisor. However, our reputation and future business is driven only by satisfied website visitors. So, unfortunately we've had to tell the vast majority of local advisors no, since we changed our business model four years ago. At that time we stopped trying to satisfy everyone with local advisors, we now primarily work with individuals who are comfortable using today's internet technology to their fullest advantage by working with a select group of vetted, experienced and knowledgeable Annuity Guys' Fiduciary Planners.


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Selecting the Best Annuity & Retirement Income Advisor

Are you willing to work with one of our retirement and annuity advisors based on their experience and expertise as a first priority rather than being limited by a local or regional area? The good news is that technology has forever eliminated our geographical limitations and leveled the playing field for everyone! As a result of today's technological advances, all of us can now work confidently with experts in any field including personal finance. We are no longer confined by regional or local boundaries limiting our choices and ultimate success. A high quality advisor is now as close as a click or phone call away.

Video:"Choose a National or Local Advisor"?
"There is no room for trial and error when it comes to choosing MarketFree® Annuities or a Successful Retirement Planner."
When you think about it, your money is almost always in some other state with a custodian; whether invested in the market or with an annuity insurance company, the advisors competence is primarily needed when positioning your money initially. So working with a specialized expert in a financial discipline like investments or retirement planning is imperative. There are no undo buttons in retirement! Once the annuities get set up correctly, it is customary and more efficient for owners to benefit by having direct access to the issuer instead of having to go through the agent. And, of course any reputable advisor, local or national, is more than willing to assist their clients if needed after they are implemented.
Video:"Why These 3 Types of Annuity Advisors are Not Created Equal"
"There are no undo buttons in retirement so it is vitally important that you do it right the first time!"

We are fortunate to have a select few who we believe are truly the highest qualified advisors out of about two hundred licensed insurance agents that we eliminated. Your survey feedback is what helps us make these tough decisions. Our advisors have an independent financial practice, specializing in annuities and retirement planning, which helps ensure that you are given the best options available for your retirement planning.

Video: "How Much of Your Money Should You Consider Placing into Annuities"?
"It takes an experienced expert to know how to structure annuities for income, inflation, growth, return of principal, and tax advantage."

"Anyone can sell you an annuity; however, it takes a truly qualified and experienced advisor to know how to structure them for income, inflation, growth, return of principal, and tax advantage. Typically, there is not just one that can accomplish all of these objectives. It is how an advisor structures multiple annuities in balancing your total portfolio that makes it possible to achieve your most important retirement objectives."

Video: "How to Choose a Great retirement Advisor"?

Why Searching for the Best Annuities on Your Own Can be so Frustrating...

Almost everyone nowadays turns to the internet for answers on everything - from buying new widgets to researching just about everything under the sun; and finding the best annuity is no exception!At first, it may seem that researching will be straightforward but the more time you spend researching them, the more frustrating it can be. Why is this? First of all, it does not take long to realize that gimmicks abound - such as warnings and alerts from salesmen who just want your attention so they can sell you one or the "too good to be true" claims of 8% to 14% **guaranteed interest and of course the claim that you can get the full market upside with no downside risk! If you have done any research you have heard all of these claims in advertising which are mostly half truths and not fully explained.So how can you find the best annuities on the internet? The truth is... you can't! And what is even more frustrating is all the conflicting points of view from so called experts. There are well over 6,000 different annuities - all designed for different reasons, so is it any wonder that the deck is stacked against the average researcher or do-it-yourselfer. Add to that the fact that they pay high enough commissions to attract a plethora of both good and bad agents. This does not make annuities good or bad; they are simply a financial tool that truly benefit those who use them correctly.How can you find the best annuities for your unique situation?
  • Use the internet cautiously;
  • Work with a vetted and experienced specialist;
  • Do not settle for that one dubious best plan. Compare multiple Outcome Based Plans to decide on the one that is truly best for you;
  • Be keenly aware of scare tactics and hyperbole - avoid those advisors and websites;
  • Avoid websites that are focused on rushing free reports, rates and quotes to get your contact information they are rushing you to speak with them, instead, take your time and choose someone you are more comfortable with that works on your time-table;
  • Know the Five Vital Factors (listed above) that an experienced specialist must answer before helping you select the best options for your situation;
  • Watch this telling video "Avoid Annuity Gimmicks, Amateurs and Charlatans"...

Video: "Avoiding Gimmicks, Scams & Charlatans"

  ** Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. Annuities are not FDIC insured and it is possible to lose money.
They are insurance products that require a premium to be paid for purchase.
Annuities do not accept or receive deposits and are not to be confused with bank issued financial instruments.
During all video segments, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

  *Retirement Planning and annuity purchase assistance may be provided by Eric Judy or by referral to a recommended, experienced, Fiduciary Investment Advisor in helping our website visitors. Dick Van Dyke semi-retired from his Investment Advisory Practice in 2012 and now focuses on this website. He still maintains his insurance license in good standing and assists his current clients.
Our vetted and recommended Fiduciary Financial Planners are required to be properly licensed in assisting clients with their annuity and retirement planning needs. (Due diligence as a client is still always necessary when working with any advisor to check their current standing.)


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  9. MarketFree™ Annuity Definition: Any fixed annuity or portfolio of fixed annuities that protects principal / premium and growth by remaining market risk free.
  10. Market Free™ (annuities, retirements and portfolios) refer to the use of fixed insurance products with minimum guarantees that have no market risk to principal and are not investments in securities.
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Sell in May and Go Away or Buy Annuities?

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Life is full of profound statements and sayings that stick in our minds. For investors and brokers, the saying “sell in May and go away” has held some degree of truth for those who are looking to avoid the volatility and declines of the equity markets from May through October.

This topic seems to have some momentum among the popular investment media advisors where we have seen no less than a dozen Wall Street insiders telling everyone who will listen…[continued below video]

Video: Watch as Annuity Guys, Dick and Eric, discuss as to whether the best way is to sell in May.

**Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

[continued]…that this is not the year to sell in May. The question is… who do you believe the historical adage or the so called experts of our day? Or, is there a third option for those looking to avoid the volatile days and declines of summer by positioning some of their assets into a holding where they can take the risk of loss due to negative investment performance off the table? Using fixed or fixed index annuities as an alternative asset class is becoming more popular with people looking to mitigate the risk of potentially decreasing bond valuations based on rising interest rates and also to seek stock market protections from the current bull market possibly screeching to a halt.

Annuities may not be the right choice for everyone; but for those in or nearing retirement, they are certainly worthy of consideration. Annuities are the cornerstone of safe income options for many retirees but also offer some safe market upside growth potential to consider when evaluating whether to sell stocks in May and go away or buy annuities in May and go play!

[continued]

For stocks, the best time to sell and go away starts today

CHAPEL HILL, N.C. (MarketWatch) — Should you sell in April and go away?

It’s an odd question, I admit. Widespread talk of selling usually doesn’t begin until late April, when investors each year are reminded of the famous seasonal pattern “sell in May and go away.”

But it’s precisely because it is so well-known that some followers of this seasonal tendency wonder if they should act sooner rather than later. Waiting until May Day runs the risk of selling at the same time that a large number of other investors are doing the same.

Fortunately, we have real-world data on two attempts to get a jump start on the “sell in May and go away” pattern. The first is the “Almanac Investor Newsletter,” edited by Jeffrey Hirsch, and the other is Sy Harding’s “Street Smart Report.”

Both pursue surprisingly similar modifications to this basic seasonal pattern. Each relies on a technical indicator known as MACD to pinpoint the precise day on which they enter and exit the market. (MACD is a short-term momentum indicator, standing for moving average convergence divergence.)

The Hulbert Financial Digest has track records for both market timers’ modifications of this seasonal pattern dating to mid-2002, nearly 13 years ago. The HFD calculates their returns on the assumption that, when they are invested in stocks, they earn the return of the Wilshire 5000 Index; otherwise they are assumed to be invested in 90-day Treasury bills.

As you can see from the accompanying table, a buy-and-hold strategy since mid-2002 has produced a 7.7% annualized return. Automatically going to cash every May Day and re-entering the market on Halloween would have done slightly better with a lot less risk — which is why it comes out well ahead of buying and holding on a risk-adjusted basis (as indicated by a higher Sharpe Ratio). [Read More at MarketWatch…]


 

 

Index Modified Endowment Contract vs a Fixed Index Annuity

By

A while back, we attended a training where one of our colleagues waxed poetically about what he called “the best financial product”.  He lauded about how his clients loved him for solving many of their core desires – safety, growth, and liquidity with tax advantages; not to mention benefits for long-term and chronic care with this little known–under used financial instrument. [continued below video…]

Annuity Guys, Dick and Eric, reveal why some call an IMEC “the best financial product ever”!

Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities and Non-Variable Life insurance unless otherwise specified. 

We were slightly surprised when he mentioned it was an Index Modified Endowment Contract – only because it seems that very few advisors understand IMEC’s and how to utilize them properly. Like our colleague we have also utilized index modified endowment contracts often to help our clients balance their retirement portfolios for safety without sacrificing meaningful growth potential. It is important to know that all IMECs are not created equal; just like annuities, there are many different IMECs and companies that make them available.

Are these really “the best financial product”? Let’s look at some of the Pros and Cons of IMECs in general.

PRO’s:

  1. Annual Locked In Cash Account Value;
  2. Lump Sum allocation typically $50,000 up to $1,000,000;
  3. No 1099s or IRS Tax Reporting Required (withdrawals may be taxable);
  4. High earning potential (Cap Rates up to 17%);
  5. Many Popular Market Indices (DOW, S&P500, NASDAQ, Russell, etc.);
  6. Many Popular Index strategies(annual pt-pt., spread, monthly sum, etc.);
  7. Limited Market Upside with No Market Risk;
  8. Minimum Guarantees up to 3% (can offset fees and costs);
  9. Average Interest potential based on back testing up to 8%+;
  10. Third Party Rated for Safety (A+ or Better Available);
  11. Tax Deferred Growth;
  12. Tax Free Wealth Transfer Death Benefit for Heirs;
  13. Heirs are Guaranteed Tax Free up to four-times the initial contribution/premium or more;
  14. Advanced IMEC strategies can transfer tax-qualified wealth Tax-Free to heirs;
  15. Tax Free Long Term Care Options Available;
  16. Tax Free Home Health Care Options Available;
  17. Tax Free Chronic Care Options Available;
  18. Cash Access High Liquidity;
  19. Potential for No Surrender Charges;
  20. Built on a Life Insurance Chassis;
  21. Can be Designed with the lowest insurance costs allowed to meet IRS Guidelines;
  22. Lower commissions paid to agents as a result of intentionally low built-in insurance costs;
  23. Many similarities to Roth IRAs without IRS limits on contributions.
  24. Allowed by Internal Revenue Code 72(e) and 7702.

CON’s:

  1. You must qualify medically; (can be easier than qualifying for long term care insurance);
  2. Four to six week approval period is typical;
  3. Designed for lump sums initial optimization is needed cannot be easily added to;
  4. Minimum lump sum is typically about $50,000 to optimize potential;
  5. Will not accept most qualified money such as IRAs;
  6. Income is available but not **guaranteed for life, like annuities;
  7. Fees can typically run from 1.5% up-to 3% (these can be offset by minimum **guarantees);
  8. IRS imposes 10% penalties on cash distributions before age 59.5;
  9. Not FDIC Insured;
  10. Requires an experienced specialist to structure correctly.

 

MEC Detailed Instructional Video – View Now
Mec Pros & Cons Instructional Video

 

 

An Annuity for Valentine’s Day?

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There are plenty of jokes about giving a gift that keeps on giving; but seriously, an annuity is a gift that can keep on giving income for the rest of your valentine’s life!

What says I love you more than the security and simplicity of safe lifetime income**? Every time your spouse goes to the bank, writes a check or takes out their debit card, they will think of you. Alright, it might not be quite the romantic Hallmark moment that makes for the perfect Valentine’s Day gift, but nothing says I love you more than a lifetime of…[continue reading below video]

Video: The Annuity Guys, Dick and Eric, discuss the perfect gift for Valentine’s Day.

Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender
charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

[continued]…financial caring and security.

As Annuity Guys, we receive numerous phone calls from caring husbands trying to figure out if an annuity would be a good allocation in their portfolios for their wife’s benefit. Many of these gentlemen have been the investment managers for their families – and most of the time they tell us their spouse has little desire to take on the role of the family investment manager. So, they are looking for ways to help their spouse solve her retirement income concerns prior to her facing life without her valentine. Hence, for many couples, the simplicity of annuities creating an income stream that their widowed spouse cannot outlive and that doesn’t have to be managed on a routinely basis is the perfect answer – even if it is not just for valentine’s day!

If you feel an annuity is too practical of a gift, add a box of chocolates or a bouquet of flowers to spice it up. Just remember that long after the chocolates have been eaten and the flowers have wilted, the annuity will be the gift that keeps on giving.

Here is some Valentine’s Day fun reading.

Less Love Expected When It Comes To Spending This Valentine’s Day, Yet Easier Gift Ideas. Here’s Why.

by Nicole Leinbach-Reyhle at Forbes.com

While more couples are planning to celebrate Valentine’s Day this year, the average American plans to spend $212 versus last year’s nearly $300, according to research by American Express. Still, with 81% of Americans likely to participate in what some refer to as a “Hallmark holiday,” according to the survey, Valentine’s Day delivers big business for retailers large and small. American Express found that among the top ways consumers are planning to “invest” in a significant other include:

  • Surprising with unexpected gifts (42%)
  • Regular date nights (39%)
  • Romantic getaways (26%)
  • Unplugging from technology (23%)

Keeping this in mind, while couples are still investing in each other, many believe what they are truly investing in is the hype of Valentine’s Day. This perception is becoming increasingly popular, withAmerican Express’s study also revealing that 35% of couples view Valentine’s Day “as more of a fun tradition rather than a monumental, or major occasion (vs. 33% in 2015), and only 28% of couples feel that it’s an important time to celebrate relationships – down 30% from last year (vs. 40% in 2015).” […Read More at Forbes]
 


 
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Market Volatility is Back! Are MarketFree™ Annuities an Answer?

By

Timing is everything. Unfortunately, 99 percent people who say they are only in the stock market when it is going up and then get out just before it goes down got lucky once, are delusional or lie!

The level of recent volatility makes even the most staunch buy-and -hold investors take notice; and for those counting on their investments to fund an impending retirement, it can…[continued below video]

Video: Annuity Guys Dick and Eric talk about the roller coaster ride the market has experienced lately and how MarketFree® Annuities might help smooth out the ride.

**Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

…create extreme anxiety and sleepless nights. For near retirees who have enjoyed the recent bull market run and feel positive about their ability to fund a comfortable retirement. Now may be a great time to secure that retirement by protecting some of those gains.

In 2008 and 2009, we spoke with numerous pre-retirees who were distraught because their retirement plans were decimated when their IRAs and 401ks lost 20-50% over the course of just a few months. Discussions went from talking about traveling and spending time with family to serious deliberations about working longer and downsizing homes. Now, does volatility of this level imply that a correction or bear market is imminent? We are not so bold as to predict it; but would it be nice to not  have to worry about it at all?

Some of the best conversations we have ever had were with clients who had allocated a portion of their portfolios to annuities in 2007. These clients were able to protect their gains by using MarketFree® Annuities thereby eliminating the market risk. By allocating a portion of their assets into annuities, they were able to smile knowing that they did not lose any of those annuity dollars during the severe market down turn of The Great Recession. In contrast to those who were  directly in the stock market of 2008-2009 who lost their money our MarketFree® annuity clients were actually making money!

One of my favorite phone calls of all time was in 2010 from a client concerned because his annuity payment had increased and he wanted to make sure he could keep the money. What he had forgotten was that his annuity contract provided for an increase to his income when his annuity grew. He was ecstatic – not only did he survive the recession with all his assets intact, he actually benefited from the market downturn which allowed his indexed annuity to reset to the lower level in 2009 and produce gains without having to overcome the 30% losses of the stock market first.

Using a MarketFree® Annuity to protect principal and provide modest interest gains coupled with for life can be a solid strategy for both retirees and pre-retirees. This strategy removes the uncertainties of requiring market performance and replaces it with safety of principal, income predictability and some interest gains from upward market movements .

 


 

Can Annuities Help You Avoid the 2016 Crash!

By

Can Annuities Help You Avoid the 2016 Crash?… Absolutely!

If you think like many Americans and some economic experts that a crash is coming in 2016 to the equities market and you would like to move some of your assets to a safer place, fixed and fixed index annuities (FIA) could be a viable option for those investment dollars. Fixed annuities and FIAs have the ability to offer **guaranteed rates of growth that typically exceed…[continued below video]

Video: The Annuity Guys, Dick and Eric, discuss how annuities can protect you in a market downturn.

**Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

[continued]… what you can find from any banking institution presently by two to six times their interest rate growth. Fixed index annuities allow for a participation in the upside of many equity indices without having investment risk from those indices should the equity market correct or even crash.

Many FIAs allow you to choose from a variety of growth options that allow you the flexibility of choosing a fixed interest growth rate in one year and the option of choosing index based growth for greater growth potential in another year. So, the majority of fixed index annuities provide for re-allocation annually based upon your individual preference or with some guidance from your advisor.

Should you take all of your money out of the equities market? For most people the answer is no. Historically the stock market has produced higher positive returns over the long haul… So as long as you have the time to recover from losses in a protracted downturn that will not impact your lifestyle or health, you may elect to keep money in the market and hopefully ride out the downturns. We are not fans of trying to time the market since repeated studies and most active management results have shown that it is virtually impossible to do so. However, we know that with fixed and fixed index annuities you no longer have to even try.  Since, you can get interest growth from a portion of a market index that is rising with NO market index downside risk.

Article from Seeking Alpha, January 7, 2016

Could This Be 2008 Again?

Summary

  • Investors are very nervous again, especially as they see another huge crash happening in China.
  • The current economic problems can be best observed in the energy and commodities markets, which have crashed.
  • However, the situation is very different from 2008, and this time central bankers will have no choice but to intervene before things get out of control.

People are starting to get nervous, especially when they are looking at another 7% crash in China. George Soros said it sounds like 2008 again. Of course, one day it will be the end of the world, at least financially, and many times there will be deep crises which will panic people so badly that they will feel like it is the end of the world. It is inevitable to have such episodes once in a while.

But can this time things get so bad that would be another end-of-world scenario like 2008? 2008 didn’t start well. 2016 hasn’t started well at all. If at least the start, or the first quarter, is to resemble 2008 then 2016 can have further to go, downwards (as can be seen in the chart of the S&P 500).

There are several worrying real issues out there to which we do not know what may be the outcome a few months from now. One is the economic and financial unraveling that seems to be going on in China. Another is the energy and commodities crash that seems to continue, at least for now. And what is actually most important is that asset valuations in some parts of the rich world are quite high, compared to historical levels, and can therefore easily fall to lower levels. […Read More at Seeking Alpha]


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A Lump Sum Buyout or Keep Your Pension – Which is Best?

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It is a statistical fact that “Retirees love their pensions”. Studies consistently show that pensions are favored over qualified retirement savings plans like 401ks and IRAs. The comfort of knowing that one has an income that they cannot out live has been a stabilizing factor for many generations of retirees — until recently.

Please don’t think that we are anti-pension. We love pensions and the **guarantees they offer; however, lately we have been talking with people who were counting on pension benefits to be there when they [continued below video…]

Video: The Annuity Guys, Dick and Eric, discuss accepting pension buyouts. (sorry for an echo in this weeks video “technical difficulty”)

 Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

[continued]…retired – yet are now fearful that due to “unfunded pension liabilities”, they may not receive the benefits they worked so long to achieve and now feel forced to take an unfair lump sum buyout.

Pensions are **guaranteed nationally by the Pension Benefit Guaranty Corporation (PGBC) and they help advise employees impacted by lost or failing plans. It should be noted that most pensioners receive their full benefits even when they are administered by the PGBC. So, why the concern? The PGBC is currently running over a 60 billion dollar deficit due to the number of recent bankruptcies. Congress is expected to try and close the gap by increasing the premiums due to the PGBC, which are charged on a per participant basis; however, many suspect that increases in those premiums will just continue to increase the number of companies dropping pension plans and programs altogether.

So, what happens when a solvent company wants to drop their pension program? The company typically has two options; they can offload the liabilities of the pensions to an insurance carrier to fulfill the obligation or they can offer a lump sum payment that covers pensioner’s benefit.

Just because you are offered a buyout does not mean you should jump at the option solely because of the risk of the entire system. Most pension benefits are “richer” than what is typically available from an insurance company issuing a new annuity in the commercial market. Thus, when you are offered a buyout, you have to examine the whole package and ask yourself a number of questions, such as;

  • What are the benefits offered versus what is available commercially?
  • What is the financial status of my company’s pension fund and why are they offering a buyout?
  • Do I need additional benefits for my family or spouse not covered under my existing plan?
  • What happens if the PBGC takes over my benefit?
  • When do I need the money?
  • Would I rather have more flexibility and manage my own money with securities, or annuities, or both?
  • Do I want a benefit/lump sum that could be passed onto my heirs? (Especially if you have a short life expectancy due to health)

If you determine that accepting a buyout is the best move, you still have the option of purchasing a level or increasing  now or in the future from an insurance company. We believe that highly rated insurance companies offer a higher degree of safety and stability than most financial instruments offer due to the high level of assets and reserves they are required to maintain. Also, with annuities, you have a number of options available that allow for income **guarantees combined with the flexibility of still maintaining full control over the majority of your dollars at all times.

In summary, if you are offered a buyout, take the time to carefully consider your options so that you can make the best decision possible. It would be wise to consult an advisor with experience and expertise who can help you carefully balance all the possible pluses and minuses prior to taking a lump sum buyout.

Here is an exerpt from Kiplinger’s that is a great read for anyone interested in more info on this topic.

Put Your Pension to Work

By Sandra Block, From Kiplinger’s Personal Finance, January 2016

How you decide to take this endangered asset may be crucial to a secure retirement.

Fretting about how to manage your pension is like complaining about the cost of winterizing your beach house. Lots of people would love to have your problem.

Only about 18% of private-industry workers have a defined-benefit pension. Less than one-fourth of Fortune 500 companies offered a defined-benefit plan to new employees at the end of 2013, down from 60% in 1998, according to Towers Watson, the human resources consulting firm. The number is much larger for public-sector workers; about 80% of them have a traditional pension.

If you’re eligible for a traditional pension, you’ll be faced with important decisions that could affect your financial security, and they’re usually irrevocable. That means when you retire, you’ll need to do more than turn in your security badge and wait for the monthly checks to roll in.

Backing away from defined benefits

The move away from traditional pensions reflects several trends. Employees are living longer, which increases the cost of providing a lifetime monthly payment. Low interest rates have reduced pension funds’ investment returns, requiring com­panies to put more money into their plans to avoid a shortfall. Government regulations designed to protect pension participants have increased the cost of offering and maintaining defined-benefit plans. Finally, companies used to view pensions as a way to attract and retain good employees. But these days, a benefit that rewards longevity is a lot less valuable because workers change jobs every 4.6 years, on average, according to the Bureau of Labor Statistics.

Even if you’re among the minority of private-sector workers covered by a pension, you’re not immune from efforts to reduce pension costs. AT&T, Boeing and IBM have joined other companies with big pension obligations in switching to a cash-balance plan. These hybrid plans combine features of a 401(k) and a traditional pension. Benefits from a traditional pension are typically based on a participant’s salary during the final years of employment, but with a cash-balance plan, benefits are accrued evenly over time. When a company converts, participants are usually entitled to the benefits they’ve earned to date under the traditional formula, with future benefits based on the cash-balance calculation. For longtime employees, the shift can result in a big cut in benefits.

Other companies have frozen pension benefits. The number of plans with frozen benefits rose from 10% in 2003 to 32% in 2011, according to Russell Research, a financial research firm based in East Rutherford, N.J. Many companies have cushioned a pension freeze by providing higher contributions to workers’ 401(k) plans. That could pay off for young workers who haven’t accrued much in the way of pension benefits, but a freeze can be costly for mid-career workers. Their future raises and years of service won’t be factored into their pension, and they’ll have less time to make up the difference by contributing to a 401(k), even if it comes with a generous employer match.

In the past, pension participants could count on the payouts they were promised once they started receiving benefits, but that’s changing, too. A new law allows multi-employer pension plans to cut benefits for current and retired workers. These plans typically provide coverage for union members who work for different companies, usually in the construction, manufacturing and trucking industries. Because of a decline in employment in those sectors, the plans have come under severe financial stress. In October, the Central States Pension Fund, a multi-employer plan that covers more than 400,000 participants, proposed cutting its benefits by an average of 22%. Some retirees will see their benefits cut by up to 60%.

A nice problem to have

Carin Hoch, 58, vice president of real estate for NuStar Energy in San Antonio, vividly recalls a meeting she and her husband, Ron, had about five years ago with their financial adviser to discuss financing a retirement home. After reviewing their salaries, retirement savings and other assets, the adviser turned to Ron and said, “She’s a keeper.” The reason: Hoch will retire with a traditional pension.

Hoch hasn’t decided whether she’ll take her pension as lifetime payouts or a lump sum when she retires. The Hochs have other sources of retirement income, including 401(k) plans, but having a pension in the mix has given them options they wouldn’t otherwise have. It has made it possible for Ron to retire at age 59 so that he can help care for Carin’s father, who is 93. It will allow Carin to retire in four to six years. It even helped them get a lower interest rate on the mortgage for their retirement home because it showed “financial stability.”

The couple plan to use the income from Carin’s pension and Social Security to pay for their living expenses. They’ll spend money from their 401(k) plans on travel and other discretionary items. Considering what can happen in the stock market, Carin says, having a pension “really gives us a comfort zone.”

Not only that, but retirees like the Hochs can invest money in their retirement accounts and other savings more aggressively, which offers the potential for higher returns. A monthly annuity payment “is like a bond portfolio,” says Charles Sachs, a certified financial planner in Miami. “You can buy riskier assets because you have this cushion of dollars coming in.”

Lump sum versus lifetime payout. If, like Hoch, you’re covered by a pension, this decision may be the most important one you’ll face when you retire. As employers look for ways to rid themselves of costly pension liabilities, they’re increasingly offering to pay departing employees a lump sum in lieu of a lifetime annuity payout. Figuring out which option is right for you will depend on a number of factors, ranging from the size of the lump sum to how long you expect to live.

See more information and details at Kiplingers.com


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New Social Security Cuts are Effective NOW

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Last week, we had no idea that congress and the president would act so quickly on such an important issue!

Social Security changes: How will they impact your retirement plan?

This new budget bill will significantly impact the retirement plans of many individuals nearing or in retirement. Beginning in 2016, the bill would stop the benefits of…[continued below video]

Video: The Annuity Guys, Eric and Dick examine why this change to Social Security could be debilitating to so many retirees.

Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During these segments, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

Video: In case you missed last weeks video where Dick and Eric discussed the proposed changes to Social Security.

[continued]…spouses, divorced spouses or children on the work record of a spouse, ex-spouse or parent who has suspended his or her Social Security benefit with the plan of restarting their benefit later. This strategy is often referred to as the “file and suspend” strategy. However, these recent changes eliminate the said strategy effective May 2016 for all future retirees.

If you have not planned to use “file and suspend” or implemented this Social Security  strategy, you might just be saying “so what?” But as financial planners who pride themselves in helping clients optimize their retirement income, congress has just undone tens of thousands of optimized retirement plans across this nation, especially for those who do not reach full retirement age by May of 2016. They will not be grandfathered in and are directly affected in an adverse way by these changes. What these Social Security changes effectively do is to possibly cause couples to file for their own benefits earlier than they would have under the old rules in order to meet their retirement spending needs. For many, this loss can be a significant portion of their total retirement income.

So, in order to protect retirement lifestyles,  many couples will have to file for each of their Social Security income benefits simultaneously and earlier than planned. By filing earlier, they are losing out on the compounding growth available to individuals who delay taking Social Security until as late as 70. One major impact this will have is on the additional compounding effect provided by the cost of living adjustments (COLA); that under the old rules, Social Security payments could have been deferred longer by one of the spouses to lessen the impact of inflation by creating a larger benefit base for (COLA) income benefiting both spouses.

For many Americans, Social Security is a cornerstone of their retirement income plan. It is unfortunate that with the raise of hands, congress has undone the retirement benefits promised to so many American families.

Updated related article by Michael Kitces from Wednesday, November 4th.

Navigating The Effective Date Deadlines For The New File-And-Suspend And Restricted Application Rules

With last week’s “surprise” legislation that revealed Congress is killing the File-and-Suspend and Restricted Application claiming strategies for maximizing Social Security benefits, even those who weren’t previously aware of the strategies are now wondering whether it’s something to take advantage of before the new rules go into effect.

Fortunately, though, the new rules do not kick in immediately. Those who are already receiving benefits are not impacted at all. And those who are full retirement age – or will reach it in the next 6 months – will still have the opportunity to file-and-suspend before the crackdown takes effect after April 29, 2016. Furthermore, anyone who was born in 1953 or earlier (or January 1st of 1954) will still be able to do a Restricted Application for spousal (or divorced ex-spouse) benefits, even if the filing doesn’t occur until years from now.

Nonetheless, the next 6 months do mark an important transition period that merits a close look at Social Security claiming strategies, for the brief time window that all of the tools remain on the table, whether it’s an individual filing and suspending for a potential lump sum reinstatement in the future, a couple claiming spousal benefits, or a family claiming dependent or disabled child benefits while delaying individual retirement benefits until age 70. And for those “lucky” enough to be born in 1953 or earlier, only a few years remain to consider a Restricted Application, before that deadline ends, too!

The Near-Term Expiration Of The File and Suspend Strategy For Married Couples
How File-And-Suspend Used To Work
The original version of File-And-Suspend allowed someone, upon reaching full retirement age, to file for Social Security retirement benefits, and then immediately suspend them. The fact that benefits had been filed for meant a spouse became eligible for spousal benefits (as spousal benefits cannot be claimed until the primary worker also files for benefits). However, the fact that benefits of the primary worker were subsequently suspended – and therefore were not actually received – meant that the original filer could still earn delayed retirement credit increases of 8%/year for waiting.

Example 1. John and Mary are both age 66, and have been married for 40 years, in a household where John was the primary breadwinner and Mary never worked outside the household. John is eligible for a retirement benefit of $2,000/month at his full retirement age, and Mary at her full retirement age will have no retirement benefit of her own, but will be eligible for a spousal benefit of $1,000/month, equal to 50% of John’s full benefit.

John wants to delay his benefits until age 70, increasing his benefit by 4 years x 8%/year of delayed retirement credits to $2,640/year (plus subsequent cost-of-living adjustments). Doing so not only boosts his own benefit, but increases the size of John’s survivor benefit that would be payable to Mary if John dies first.

However, waiting until John turns 70 means that Mary won’t receive any of her $1,000/month spousal benefits until then either, since Mary cannot get spousal benefits until John actually files for his own. And since there are no delayed retirement credits for spousal benefits, the extra 4 years of waiting just means Mary permanently loses those 4 years of $1,000/month benefits with no benefit in return!

To resolve this issue, John would File-and-Suspend upon becoming eligible at his full retirement age of 66. By doing so, Mary becomes eligible to claim her own $1,000/month spousal benefit (which she can receive in full, since she too is age 66), accumulating 4 years’ worth of spousal benefits she otherwise wouldn’t have received. (If Mary had been younger, she could have also claimed, but her spousal benefits would be reduced for starting early.) And John still gets the 8%/year delayed retirement credit increases for delaying his own benefits until age 70.

The fundamental point – with File-and-Suspend, John could allow Mary to get her spousal benefits, while still delaying his own benefits to earn the 8%/year delayed retirement credits.

How File-And-Suspend Will Work Now
Under the new rules in Section 831 of the Bipartisan Budget Act of 2015, when John suspends his benefits, he will suspend not only his own benefits, but any/all benefits payable to other individuals based on his earnings record. And since Mary’s spousal benefits are 50% of John’s benefits – and therefore are based on his earnings – then the entire File-and-Suspend strategy is effectively dead.

Now, if John were to file-and-suspend, he will suspend his benefits and Mary’s benefits, so no one gets any benefits. Which means if John wants to delay his benefits to earn delayed retirement credits, Mary will have to wait on claiming her spousal benefits, too. [continue reading about the changes at kitces.com]


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Is Strong Growth from Annuities Likely in The Looming Bear Market?

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Strong growth is a matter of perspective, and when your basis of comparison is a decrease of 20 to 30 percent, even zero growth is strong by a matter of comparison.

Many economist and market watchers have been proclaiming an end to the bull market for months and the recent drops have sent many investors scrambling for safety. Now that we have seen many indexes drop into “correction level” (a polite way of saying they have lost 10%) the big question is … [continued below video]

Video: Watch as Annuity Guys, Dick and Eric, discuss the growth potential of annuities in a declining stock market…

 Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

[continued below]…are we poised for a new bull run or are we in for a more serious drop of another 10 to 20 percent or even far more?

Can you get strong growth from an annuity during a bear market? Certainly! You can even utilize a fixed annuity and typically **guarantee a fixed return of 2 to 3 percent at present rates. However, a fixed index annuity (hybrid style) can benefit from resetting during a bear market, which typically creates more growth potential because fixed index annuities can reset to a new lower indexing point during a bear market – they do not have to grow back to their high point to begin accumulating gains. According to various studies of past performance, index annuities have the realistic potential to earn from 4 to 6% interest annually while protecting principal!

Trying to time the market can be extremely difficult for professionals, especially for individual investors. Riding out a bear market for some is “un-bearable” – they cannot handle the emotional roller coaster. Annuities can be an answer for those people hoping to move a portion of their portfolio into a safer financial growth alternative – safer option that offers a far greater upside potential than just sitting in cash or riding a market down.


 

Read more on this subject in this article:

 Shiller: Average CAPE Ratio Puts S&P at 1,300, Dow at 11,000

Nobel laureate economist Robert Shiller of Yale University says his indicator shows that the current stock market values are overinflated and will only crash even lower.

Shiller invented the cyclically adjusted price to earnings ratio (CAPE), a key indicator for stock market crashes.

“It is entirely plausible that the shaking of investor complacency in recent days will, despite intermittent rebounds, take the market down significantly,” Shiller wrote in the New York Times.

According to Shiller’s CAPE ratio, the stock market is significantly overvalued. The metric modifies historical price-earnings ratios to account for business cycles. Between 1881 and 2015, CAPE averaged a ratio of 17, well below today’s reading of 27.

“Levels higher than that have occurred very few times, including the years surrounding the stock market peaks of 1929, 2000 and 2007. In all three of these instances, the stock market eventually collapsed,” he said.

Shiller said his indicator would put the S&P closer to 1,300 from around 1,988 on Friday, and the Dow at 11,000 from around 16,643.

“We are in a rare and anxious “just don’t know” situation, where the stock market is inherently risky because of unstable investor psychology,” he said.

“There are reasons to question whether this was a quick, effective slap on the wrist, or if the market is still too overactive, and thus asking for a more extended punishment,” he said.

“Ten percent drops in the S&P 500 in just five trading days — such as what we just experienced — have not been common. Out of the 29 corrections since 1950, only nine happened in five days or less,” he said.

“Most of those happened since 2000, possibly because of the Internet and faster communications. Such rare sharp drops are psychologically significant; an extreme one-day collapse seems to create anxiety that imprints on people’s memories and could contribute to a downward momentum.”

The CAPE is a valuation measure usually applied to the US S&P 500 equity market. It is defined as price divided by the average of ten years of earnings (Moving average), adjusted for inflation. As such, it is principally used to assess likely future returns from equities over timescales of 10 to 20 years, with higher than average CAPE values implying lower than average long-term annual average returns.

All of the recent market volatility could help drive investors away from stocks for years, says ace hedge fund manager Doug Kass, president of Seabreeze Partners Management. [Read More at NewsMax]

 

The China Affect on Annuities…

By

There has been no shortage of China headlines as their economy faces major headwinds. It would be naive to think that the second largest economy in the world, that is close to becoming number one, would somehow not affect the US economy adversely if they go into a free-fall. Even a small country like Greece going in and out of default cast economic turbulence on larger successful countries. So, imagine how much worse it could be for the world if… [continued below video]

Video: Watch as Annuity Guys, Dick and Eric, discuss the not so good “China Affect” on annuities!

 Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

[continued below]…China does not get its house in order soon!

So why should retirees who own annuities or those with plans to purchase them care about what is happening in China? Simple. When markets become unstable and volatile, investors flee to safety; this often leads them to purchase short-term US government bonds. As demand for US treasuries rise, bond prices increase which in turn lowers the yields on bonds as their price is bid up by demand. Hence, the annuity companies that rely on higher bond yields to remain profitable and solvent must react to these lower bond yields by cutting costs which translates into **guarantees and benefits being reduced as a cost cutting measure. Due to increased demand for bonds, most annuity companies feel this financial pressure and are now positioning for changes. So, if you are close to moving annuities into your asset mix, now may be an excellent time to lock in better **guarantees and benefits before they are reduced by the China Affect!.

How severe will it get in the market before another stable uptrend is underway? This is a question with no certain answer. Many believe that there will be a 20 to 40 percent drop before things get back on track; others believe we have already seen the worst. Regardless of which scenario is correct, you must ask yourself how much are you willing to lose and “that is the amount you should consider for stock market risk” especially if you are in or near retirement. Annuities and other insured or **guaranteed financial products are where the balance of your money needs to be if safety is one of your important objectives.

 


 

Read more on this subject in this article:

10-year Treasury yield hits 2-month low after China’s yuan devaluation

By Ellie Ismailidou

Demand for Treasury bonds jumped Tuesday, driving yields down to their lowest level since May 29, after a surprise devaluation of the Chinese yuan by the People’s Bank of China sparked flight-to-safety flows into haven assets, like Treasurys.

“A devaluation implies even slower growth in China, and that’s driving an aggressive risk-off trade, with the rates markets taking back all of Monday’s losses,” Guy LeBas, chief fixed income strategist at Janney Montgomery Scott, said in a note.

The yield on the 10-year Treasury TMUBMUSD10Y, -0.12% tumbled 9.9 basis points to 2.139%, the largest one-day decline since July 6, according to Tradeweb. Bond yields fall as prices rise and vice versa. Read More…