Episode Transcript
Speaker 1 00:00:05 This is annuity Straight Talk. Since 2008, your host Brian Anderson, has helped clients nationwide navigate the complex market for annuities 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 76. My name is Brian Anderson, founder and creator of annuity straight talk.com. Here to answer all your questions about retirement and how annuities pertain to the stock market and income planning required, minimum distributions, tax planning, Roth conversions, social security, anything else you can dream of. The list of articles is long and we're gonna try to create the podcast to match that. So we're on a roll in 2023. The topic today is something everybody has been interested in, has been curious about. There's a lot of people out there on the internet searching for it. Uh, I'm gonna try to address the question as best I can. Will annuity rates rise in 2023? I've got a newsletter for this. Any of you guys like to read it, you can go to the website, annuity straight talk.com, click on the newsletter page.
Speaker 2 00:01:41 The most recent is always at the top. If you catch this in a few weeks or so, if scroll down a little bit, you'll see it Will. Annuity rates rise in 2023. So Jose last year ended off, uh, it was a good year for people that were retiring new to the annuity landscape. We had a lot of really good deals. A lot of people capitalize on those insurance companies got overwhelmed with the sheer number of people who were trying to jump in and processing times slow down as a result. But for everybody that bought one, there's at least one or two people who held back thinking, ah, it'll go a little bit farther. Go maybe a little more. Maybe I'll get some more. That's why I did the podcast back in November. Annuities and greed don't mix. Anybody who's been looking at annuities, CDs, stuff like that for 10 or 12 years realizes that these are a good deal.
Speaker 2 00:02:25 There are a lot of people that are just now retiring and this is kind of the first time they've really looked at it and they don't know why they're so good because this is the first time they've seen it. We saw the top of interest rates back in November. It's pulled down consistently since then by a little bit, not a ton. Annuities have leveled off and dropped slightly to begin the year and still people are waiting for rates to rise. It's the number one thing I hear. Sounds good, but I'm gonna wait till the Fed comes out. And the Fed has very little to do with what you guys are getting in your pocket. So I would say for anybody who thinks rates are going to rise or wonders if they will do yourself a favor, take a deeper look and forget about whatever your neighbor or your coworker or your plumber or the guy at the gym or whatever said who's, you gotta form your own opinions and you gotta listen to e expert's advice.
Speaker 2 00:03:13 Will annuity rates rise in 2023? I say probably not Anyone who doesn't like a long drawn out answers or you don't like listening to the whole thing. I've had a few people comment, boy, that was a waste of time. Well, okay, thanks. Appreciate it. A lot of people say they like it, so, but you don't want that drawn out answer. You can leave. Now I'm gonna try to explain why I think that's the case. Okay. The Fed wants to add a couple more rate increases that doesn't directly relate to changes in annuity rates. No matter how, how many times I say it, I don't care what the Fed does. Next meeting, last meeting, they raised it. That's not gonna translate automatically to annuity rates. The Fed only controls the federal funds rate, which is the rate charge between banks for overnight loans. So when they change rates, it increases rates for borrowing costs for banks.
Speaker 2 00:03:58 So you'll see car loans go up in rate. You'll see mortgages go up in rate CDs a little bit, and that's not gonna change the annuity market or the overall bond market, which is where insurance companies play the game. So you need to look at long-term rates. That's where your focus should be. So the short-term rates are more dramatically affected by the Fed action. And if you're in short-term rates, if you need liquidity in one or two years and you want safety go by a dang cd, that's kind of what they're for. Annuities are for long-term propositions, therefore intricate planning situations. There needs to be a purpose behind it. And we're not talking about short-term commitments here, but we've seen like aggressive moves on stuff like three month treasury, six month CDs, somebody ragged, Hey, I can get 5% for nine months on a cd.
Speaker 2 00:04:46 Okay, what are you gonna do after nine months? Uh, I don't know. So the person that understands why 10 year rates are lower, they're gonna say, oh yeah, maybe I'll take that five or seven year annuity and guarantee that 5% for five to seven years rather than just have to replace and rebalance the the cd. If you have long-term goals and long-term needs, then that's where the annuity fits. And you know, one thing I've heard consistently, it's like it's really easy to co like project the markets, the interest rates and stock market over a three month period than it is say a 10 year period. We kind of know where the fed moved and we kind of know where that's gonna sit with us for a little while, but it's harder to gauge what the long-term effect is, like a year or two or three or 10, certainly tough, but annuities being mostly based on long-term rates focused there.
Speaker 2 00:05:33 I've always watched the 10 year treasury and a lot of people have heard me say this. That's kind of a basic indicator of where annuity rates are headed. That's okay to use. It's a little simplistic as well. I don't go into technical details with everyone, but it's, it's an indicator, but it's not the be all end all. All right. Credit spreads play a part as well. Credit spreads difference between the treasury rate and a bond with similar maturity. So a 10-year treasury right now I'm, I'm recording this, it's about 3.6% and a1 year investment grade corporate bond, maybe paying five and a half or something like that. That's a 1.7% credit spread that indicates the profitability of the insurance company. You want 'em, if you buy an annuity from an insurance company, you want 'em to make money, correct. An increasing spread can offset falling rates to some extent.
Speaker 2 00:06:19 So if the, if the treasury fall, it increases that spread, the insurance company has more leverage to keep their products pretty sustained at certain levels. That's why we've seen annuity rates settled just a little bit coming into this year. But the 10 year treasury is down almost 1% at the lowest. It was capped out at four three something now and the lowest was three four. So not quite 1% but close. But you want the insurance company to make money, otherwise you gotta bum annuity. You don't buy an an annuity from an insurance company that's not making money. Okay, so will they rise in 23? We gotta go back first to see why the fed's doing this in the first place and it's inflation. You guys know that a year goes out of control. Easy money, stimulus funds flooded the economy with cash. It's been happening for a long, long time and obviously 2020 didn't make things any better.
Speaker 2 00:07:08 Home sales, surge building costs, labor market is tight, wages are rising, supply chain issues haven't eased. So everything costs more today. And what the fed's doing is they increase borrowing rates and it slows down that expansion. They keep pushing 'em higher until that inflation number comes down. Now it has come down a little bit, but it's got further to go. So we saw end inflation ease kind of toward the end of last year, maybe in October. I think it started to come down and they said, okay, we're gonna slow increases cuz it still has a ways to go. Now there's not a direct effect on what the Fed does and inflation it takes while to sort it out. That's why a lot of what they're doing is kind of guesswork. January report of 2023 was the lowest we've had in a year, but it's still at six and a half percent.
Speaker 2 00:07:53 The market remains strong because investors are, generally speaking, investors are pretty optimistic. The Fed will continue to slow things down or even stop. We got a really strong jobs report last week. So the Fed comes back and says, well, we're gonna have to be aggressive again and rates are gonna have to go higher. So it's more than a theory at this point that the fed's ultimate goal is to induce a recession. They've essentially been saying as much publicly for the past year. Looks like they're pretty dang serious about it. I've been saying for at least the past year that this thing is gonna swing in the other direction. At some point you're gonna see a top and then it's gonna go back. We're seeing the first signs of it now. And if you don't believe me then how did the Fed raise rates at every meeting in the last three months?
Speaker 2 00:08:33 In the last year while the annuity rates dropped? Many analysts consider the most likely scenario will be that the Fed will do too much. They're gonna overshoot. If that happens, it pushes us into a recession, which will have much more of an impact on annuity rates, the recession, faulty market, weak economy. People are gonna rush to safety, it's gonna drive those treasuries down and eventually the corporate bond market's gonna follow that. So I say don't sit around hoping for rates to rise because I don't think it's gonna happen. The best case scenario is that we'll see things level off for a while and I really think that we're gonna have kind of, things are gonna normalize for a little bit. It's not my only chance to convince everybody that's some really good deals out there. Those who have been waiting for a long time, not a bad time to do something, it's a great time to do something.
Speaker 2 00:09:20 And those who have just started looking at this, go back a little ways four or five years and look at what things were like before now and you realize why I'm telling you these are good deals. So I listened to a webinar last week from, uh, this chief investment officer of a major insurance company. And whereas I have been selling annuities for the past 20 years, he's been managing insurance company assets. That's a big job thing. He knows what he's doing and he's pretty good at forecasting, otherwise they wouldn't pay him. What they pay him put 'em up in a cushy office, right? So his forecast for the 10, uh, 2023 is a 10 year treasury will continue to settle up below 3% could end the year closer to 2%. He said specifically, he sees us going back to 20 15, 20 16 levels. I did not like what I had to work with back then.
Speaker 2 00:10:07 Take it for what it's worth. But if that does happen, then we're looking at, yeah, we're gonna alternate strategies. But it's good that you know that I've been through all of that before, so I have different ways to pivot and think it, like right now, it's a great, a great time to lock in guaranteed income. I haven't always believed that. I talked about that a few weeks ago. So that's beneficial to you. Now's a really, really good time to get it. And then it, but if we go back, then I'm gonna talk about, if we go back to a lot lower levels, I'm gonna start talking again about staying flexible, short-term commitments, those kind of things. So anybody just started to look at annuities may not understand completely and waiting may mean they learn the hard way. I do hope I'm wrong and I'm not trying to scare anyone or push anyone to make a decision if you're not ready to do it.
Speaker 2 00:10:49 Timing is the most critical factor in any of these planning decisions, but you guys know, I I always err on the side of caution and just want you to have a different perspective. And I don't know if this is what everybody else is saying or if it's just what I'm saying, but this is what I'm saying. I wanna thank you guys all for joining me. This has been episode 76. Will annuity rates rise in 2023? I don't think so. This will be public. This will be out there and I will certainly do an update on that down the road. And I will publicly admit whether I was right or wrong. We, we shall see. If you like the podcast or you like the episode, go your favorite podcast platform or YouTube comment, like share whatever you wanna do. We're unavailable on any podcast platform You could find Spotify, apple, Google, the big ones, I guess, and a bunch of other littler ones videos on YouTube.
Speaker 2 00:11:40 If you wanna see me sitting here in my little cabin in Montana, can you read the newsletter or schedule a call by going to annuity straight talk.com, top right corner of any page, schedule a call button to get ahold of me and get on my calendar guarantee that I, i, uh, will set aside some time to give you a call. Or if you want to just ring me, it goes right here to my cell phone. (800) 438-5121. Again, episode 76. My name is Brian Anderson. Thank you so much for stopping by. I will catch up with you guys next week, uh, with the brand new topic. It's gonna be good. Okay, thank you so much. Have a great day. Bye.
Speaker 1 00:12:24 You have been listening to annuity, the purpose purposes. It does not represent tax, legal, or investment advice. The views expressed by guests on this program are their own and do not necessarily reflect the views partner. No information presented be acted upon without meeting with the qualified licensed professional. It's important that you all insurance contract disclosures before making a purchase. Decision GS are based on the financial claims, the insurance company.
