3 Year Indexed Annuity

Speaker 1 00:00:05 This is annuity straight talk since 2008. Your host Brian Edison has helped clients nationwide navigate the complex market for a meeting with Brian's assistance. Hundreds of clients have achieved a profitable and secure retirement. I would know because Brian has answered many of my questions concerning annuities and retirement planning So that you can benefit as well. Let's get started. Here's Brian Speaker 2 00:00:49 Hello and welcome everyone to the annuity straight talk podcast, episode number 37. My name is Brian Anderson coming to you from Northwest Montana annuity straight talk world headquarters, excited to be with you this week. And before I get started, I just want to thank everyone for watching this or listening to it. I really enjoy doing it. And I hear from everybody asks me about service with clients and whatnot. And some people I talk to all the time, some clients I'm more friends with than an advisor. We share common interests and we chat a lot. And then there's some people that we talk a minimum of once a year to review contracts and all that stuff. And you know, most people, I talked to them at least a few times during the year, depending on, you know, withdrawals, all that stuff, but it's been fun because I don't have time to, uh, be best friends with everyone, but everybody's always welcome into my home. Speaker 2 00:01:37 People that work with me are welcome to come see me wherever I can. I do have a plan to take a trip to meet one client that I've worked with for about 12 years. I'm going to do that in the next month. But anyway, I appreciate it because I think, and this has been good that, you know, people that don't get to talk to a whole lot, they get a chance to see me and hear me talk about different things and kind of reinforce the decisions they made financially. But anyway, I just want to say thank you because I think it's been great. And this topic to me, something that came across my desk based on a couple of cases and it's a three-year index annuity, which I think is an incredible deal. It's not that that's the only one that should be used right now, but I just think it's a great opportunity for a lot of reasons. Speaker 2 00:02:10 So let me tell you a story you start with, I've got two clients. One of them bought a five-year Mica multi-year guaranteed annuity. He bought it five years ago and the other couple bought an index annuity seven years ago and they both renew at the same time. And so right now they're looking at replacing the funds, the rates, the Reno rates offered by the companies aren't that enticing. They've got plenty of times. So they're figuring they're going to re up and find another contract. This is a piece of the portfolio. It's not everything. It's just, it's a piece of it. And that's, you know, kind of where these guys have it pegged for. Each of them has a paid for, Hey, this is just safe money. We want a good rate on it. And so there are a couple of different examples. The first guy with the five-year fixed annuity, he came and he said, Hey, I want to, when it comes up, I want to pull a big chunk of money out for some extra cash. Speaker 2 00:02:56 And then I'm going to take the remainder and I want to put it into new five-year contract, the company that has it. He had the option to continue the contract, but the rate they were giving him, we could beat that in the open market. So what's interesting is rates are going up right now. And that's where everybody's really thinking about this. As interest rates are going fed, supposed to keep raising rates that doesn't necessarily translate to consumer rates. Higher rates are a bad for borrowers. They're good for savers. So everybody's looking at some deals that we haven't necessarily seen for a couple of years. And so that's why this kind of prompted to talk about this, this contract because of these two people I've been really studying the rates closely to make sure that they get the best deal. So the first guy with the fixed annuity he had from the date of the contract date, he's got 30 days to move the money somewhere else. Speaker 2 00:03:44 Okay. So we set it up and we picked an annuity is going to get 3% for five years from a good aid rated company. And so I had to prepare the paperwork, send it to him, you know, he lives on the other side of the country, but before I even got the paperwork into ups, that same company that he was going to buy from announced a quarter of a percent interest rate increase. So they said, Hey, our new rates for five years or three and a quarter. So he's going to get an even better deal just cause Ray kept popping up. And I think honestly, that's probably about where they'll settle for the time being. So I think it's a good deal, but it really nice that he's going to get a quarter point extra than he was planning on getting. So that's kind of one story where it's like, all right, in a rising rate environment, when do you make the move? Speaker 2 00:04:20 When you pull the trigger, he pulled it at 3%. By the time he gets the paperwork in and who knows, it's going to take another 10 days to process, there might be another one, but that remains to be seen the other client. They're also on the other side of the country to different states. However, and they bought the index annuity when rates were really low in 2015, that was the previous low point in interest rates. And it was done to replace bond funds. And because we use the flex strategy, we put a whole lot less in the annuity than would have been suggested otherwise with a guaranteed income product. And they swapped out for the index annuity because they had more liquidity than they went with their bonds. At the time, their bonds were yielding about 2%, the bond funds they were in. So they had more liquidity. Speaker 2 00:05:02 They're going to use the flux strategy. There were a couple years off from retirement, but they've never tapped the annuity because their equities portfolio kept jumping up so much in value. They did really, really well. It's actually kind of a cool case study, but they're in great shape. And now this annuity money really is, Hey, we've done so well everywhere else. Our portfolio is in great shape. This is just going to stay protected. But with the index annuity, he's got more options. He's just out of surrender the contract doesn't end. And he's not forced into another surrender period if he doesn't move the money. So he can do it in a couple different pieces. And he said, Hey, I want to take about half the money and put it into a three year mega multi-year guaranteed annuity. And one thing I really love about this guy is he speaks at a high level. Speaker 2 00:05:47 We can talk about technicalities of interest rates, equities portfolios, and all that stuff. And so he does it, he does his homework. He does a lot of due diligence. So when the renewal paperwork came up 30 days ago, I said, okay, well we got a month to decide and things are changing so fast. Let's just wait until the end. Plus he doesn't have a 30 day window like the other guy. So he's got plenty of flexibility. So he decided, okay, well, he can take a piece of the money out. He's going to do a Roth conversion with some of it because it's in an IRA and then he can take a piece out. And he said, look, look at the three-year rates. Okay. So a month ago when we started looking, the highest three-year rate was 2.5%. And as we get closer to that date, the top company, again, this is a rated or better. Speaker 2 00:06:31 I don't do B rated garbage, anybody that sold Colorado banker's life a few years ago, got in trouble with that. And I'm just going to stay away from it. So I could do a podcast on that specifically, but we've done a lot on the safety thing. So I'll have to think about that anyway, but in the last 10 days, the top rate on a three-year fixed annuity was going up, up, up. So every time we looked at, I look at it and I'd say, here you go. Here's the top rate? It's 2.6 now. And then he comes back. Well, I saw one at 2.6, five, and then I look at, and I say, oh yeah, but the, okay. Yeah, there is one at 2.65. And so he was almost ahead of me because there's databases online and he's really good at finding stuff. So he found it. Speaker 2 00:07:10 I'm not sure exactly where I think it's great because he's going to make good decisions so he can hold my feet to the fire. And so we found 2.6, 2.7 and then just last night, he came back and said, well, now we're leaning toward 2.85. And all of a sudden New York life came out of nowhere and started offering the highest rate in New York life. Hey, that's pretty good. Can't beat that really. But it's a short term bail it's three years. And it's just a piece of even what you had to set aside for annuities. But as the rates were coming up, I kept getting announcements from different people and they weren't coming up like shooting up. Like, I mean, mortgage rates are 2% higher than they were a year, year and a half ago. Nudity rates are half percent, 1%. There's some really good deals out there. Speaker 2 00:07:49 And you have to think about it because if that keeps raising rates, that's going to slow the economy down. And who knows what the response to that is going to be. You know, deflation always follows inflation. So be careful, don't think just inflation. Think about protecting yourself. Annuities are a great way to do that. So, but I got an announcement from great American, which coincidentally is where this index annuity was coming from. So it was coming out of great American and they have great American has a three-year index annuity, and I've had it for a few years, but the rates were never really that great. I showed it to a couple of people's. Nah, it's not. It's kind of cool. It's only three years. It's got 10% free withdrawal. It's got all the waivers for death, terminal illness, nursing, home, all that stuff. It's good. Speaker 2 00:08:32 It's good annuity. But it just that there wasn't a lot of potential in there. So I always thought, Hey, why, why would anybody put it in an index annuity with poor terms? So they said, rates are going up on their products, big surprise. They've come up a couple of times and just incrementally each time. So I'm going to show you, show you why I thought this would be a contender for a portion of the money and why it might be a really good opportunity for a lot of people. Cause I don't do product reviews a lot, but this one deserves mentioning. Okay. And so when you're looking at two and a half, two and three quarters on a fixed rate annuity, that's fine. It's guaranteed every year. And at the end of three years, you get a chance to move out of it. Right? Let's look at this here. Speaker 2 00:09:16 Now it does apply to, if you can see the screen. So purchase payments 150,000 and over. So if you're less than 150,000, then you're in this column over here. So that's the American landmark three rates effective 4, 7 20 22. So this is, I'm not there yet, but by the time you guys see this, that will be the effective rate. I think it's the day the podcast comes out. Pretty cool. Huh? So declared rate, that's the fixed interest rate in the contract. Now you can go and put all your money into the fixed rate account. You can put a piece of it in there. You can put a little more in there or you can put, you can put half of it in there, a quarter of it, 10%, whatever you want. Okay. What I like, and I'm not going to go into too much detail and I should have done my homework. Speaker 2 00:10:05 I don't know what the I-Shares MSEI E F E T F one-year point-to-point with cap is we'll look into it. But what's interesting is the cap rate for 150,000 or more is 5.5%. It's only 5.25 for less than one 50. So these rates, I mean, under one 50 is not bad. It's called low band rates, high band. So those are pretty, pretty solid rates. What I look at is I say, okay, you're going to lock in at 2.7, 5%. Well do you realize if you even hit, you got three years. If you hit that cap twice, two out of three years, pretty good odds of doing it two out of three. If you do it two out of three, then you're going to be at a little over 3% on average. Okay. It's an opportunity then that's all index annuities. Do they, you're supposed to beat fixed rate annuities. Speaker 2 00:10:52 If you pass up the guaranteed rate for the opportunity to do more with index, you just want to at least beat that fixed rate. So one thing I said, well, if you want a guaranteed return as well, you put half of it in the declared rate, half of the money is going to create 1% for the entire amount. And if you hit the cap, you'll get 2.75. So if you hit the cap and you have half that your bottom line is 1%, your top line is 3.75. We're talking three years right now. So take an opportunity $150,000. Let's just say a hundred because I can kind of do that in my head at 2.75, you know, you're going to make about 8,000 bucks in interest, give it a shot three-year index annuity. Awesome. And that contract does not end at three years. You're just out of surrender. Speaker 2 00:11:41 Do you have full liquidity to move it? Okay. I shared us real estate, a 6% cap. I don't know if real estate is going to go up that much, but that, that index has performed extremely well in the past few years. So a 6% cap on the real, that's an opportunity. If real estate drops, this index is going to go down. You still have the opportunity to move into that subsequent years. So really good opportunity where it fits is for people that have a lot of them. There's more uncertainty now than I think at any other time. I mean, because we do actually have rates. Inflation has always been a concern. We do have rates kind of slowly creeping up and there's obviously a bunch of garbage going on in the world. I think it's all a distraction. Like I talked about a few weeks ago in the podcast. Speaker 2 00:12:25 I think it's BS. I think you should focus on the, keep your eye on the ball. And this is the ball right now. How do you plan prudently? So that major events do not affect you negatively and here's the opportunity, but there's also a lot of people that are like, eh, I don't know if I want to get into an index. I don't know. Some people don't like the variabilities of the index return, for instance, I mean, in variability, I mean zero or five or 6%, but this one for a short deal, landmark three. Now they also have landmark five and you can see five-year contract. This one's done really well. So this is what you get. When you go longer, you get a couple more index options. So this one has a banding of a hundred thousand. You don't have to put quite as much in to get the highest rates, but 6% cap on the S and P 500 for a five-year deal, 2.3% fixed rate. Speaker 2 00:13:15 This one is cool because they actually have a cap lock, which means it's guaranteed to not change. Now have I've had really good experience with this company, not crushing rates in an existing contract. I even did a newsletter a few years or about a year and a half ago. And I showed you several examples of this company, actually raising rates with a contract from year to year. So it's not something she'd be worried about. I could do I've I've written newsletters about it. I could do a podcast. So again, you get the real estate. The difference with this one is you get the S and P 500 risk control, which is a risk control mechanism in the S and P 500. This index was up over 21, maybe 22%. Last year, you get 55% of it. So there's double digit yield potential in this contract. Speaker 2 00:14:01 And the S and P U S retiree spending, which is a section of the S and P 500, that, that is focused on investing in or tracking companies where they, it is believed that retirees are going to spend money. So companies that will benefit from baby boomers, retiring, I don't know specifically what that is. I don't think that index is a big mover. That's why you're getting 80% on it. It's a consistent contract. I earn a consistent index. I have not seen it blow anything out of the water, but I have seen it yield something every year, not too exciting, but it's an additional option. Now go one step further. If you go to the seven year contract, then you've got a two and a half percent declared rate, 6.1 cap on the S and P 500. The difference being is you get a monthly point to point here, which 2.5% is a fantastic monthly cap. Speaker 2 00:14:51 And you also get the gold index gold index with an 8.1% cap, whoa, all this uncertainty you think gold might spike maybe an 8% yield, but non gold would be a good, it would be a good option. Some people don't like it, some people do, but it's a great way to, uh, there are just other options. So that's what happens. The three-year annuity is a really good three-year contract. It does not have the options and opportunities and potential that the other contracts have, but I wanted to highlight it because a lot of people are concerned about committing to an annuity. This is a great way to test it out. A lot of people are concerned about long-term commitments with rates going up. I do believe there's a significant value in the longer term contracts. I've talked about Midland and great American problem. My two favorite companies, I've got great experiences with the customer service, with the way they deal with the contracts, the performance of the indexes. Speaker 2 00:15:41 And there's several others that I represent as well. I analyze all of them. Those are the two that I've settled on. I think that's where the clients have been the happiest, but three, five, and seven from that company, all short-term options, all good potential. And again, that three years just kind of a cute little contract. So that's about what I wanted to show you. I think again, it's great opportunity for anyone who has been hesitant or wants to just take a slow, a low commitment. So you have an opportunity with full liquidity in a few years. Anyhow, go ahead and subscribe to the podcast. If you want to talk about this contract or any other contract that you've been presented, I'd be happy to have a conversation with you. Schedule a call button, any page on the website and you can call 804 3 8 5 1 2 1. Subscribe to the podcast on any of your favorite podcast platforms posted on casts, those available on Google, Spotify, apple, all the different places. You can get it and YouTube for the video, if you want to check it out. So thank you for joining me. I really appreciate the opportunity. Again, I'm grateful for the audience and if I can do anything to help I am here and you know how to get ahold of me, cause I've told you lots of times. So, all right, you guys have a great weekend and I will see you next week with episode 38. Thank you. Bye Speaker 1 00:17:08 You've been listening to the proceeding. <inaudible> The views expressed by guests do not necessarily reflect the <inaudible>. Uh, please pay the bills, the insurance company