Annuity Surrender Fees Are Not a Big Deal

Episode 14 September 17, 2021 00:37:39
Annuity Surrender Fees Are Not a Big Deal
Annuity Straight Talk
Annuity Surrender Fees Are Not a Big Deal

Sep 17 2021 | 00:37:39

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Show Notes

Bryan Anderson, founder of Annuity Straight Talk, speaks with Ashok Ramji, a financial consultant with TOP Planning LLC, an independent asset protection and retirement income planning firm serving retirees and pre-retirees alike. In this episode, they dive into the topic of surrender fees.

Bryan and Ashok weigh in on why fixed deferred annuity contracts have surrender fees and why the surrender schedule is important. They review one of Bryan’s newsletters, diving into the two main reasons why surrender fees are not a big deal.

Ashok then shares what a 10-year surrender fee schedule looks like. He and Bryan look into a couple of case studies, illustrating the pros and cons of surrender fees and offering some solutions. They end the show with the advantages of working with Annuity Straight Talk.

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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 00:00:48 Hello and welcome everyone to the annuity straight talk podcast, episode number 14. My name is Brian Anderson, founder and creator of annuity straight talk. And my co-host a show from GE out in Seattle, Washington. Speaker 3 00:01:01 Welcome everyone. This is a show where I'm G with top planning. Welcome to another episode of annuity straight talk. Speaker 2 00:01:07 Okay. So we've talked about this. You came up with a pretty good idea. It might seem a bit mundane, but it's not. It's actually very important for people to understand so that it's not one of the issues that holds you back from doing the right thing in retirement. So what ideas did you have for us today? Show Speaker 3 00:01:24 I thought we would talk a little bit about surrender fees. You had an article that was put out in 2020, that basically said why surrender fees? Aren't a big deal. When we look at annuities, I thought we would look at that article, but first we're going to take a step back. Explain why fixed deferred annuities, for example, have surrender fees. I know other types of annuities have them as well, but this is the wheelhouse you and I work in. We would consider the pros and cons of those. And hopefully, you know, as people are looking at where to place their money for their retirement savings, they may say, you know what? If I've got to put money into a fixed deferred annuity and there's a surrender fee schedule, maybe I don't do that. And so hopefully this podcast will give people something to consider some perspective and maybe some solutions. That's where I think we'd like to go in this app. Speaker 2 00:02:18 Okay, good. Well, and I agree with you and I will say the biggest reason why you have a surrender fee on a contract is because it's free no matter what anyone else says so long as you don't add anything additional to the contract, any writer's guarantees, lifetime income, death benefit. Otherwise your contract is free and you pay no fees to own it. And so what's interesting is I think a lot of people, you know, I say it's surrender fees or the stick use to beat annuities. And a lot of people don't understand. You look at it in the context of other investments. It's actually a pretty dang good deal. So long as it's done correctly in the portfolio. Now with a contract, if you put a hundred dollars into the, uh, Schoeke you and I get paid to sell it, right? The insurance has got administrative fees, investment banking, fees, all sorts of stuff. Speaker 2 00:03:07 They've got a big operation, they got marketing costs. And so they're actually paying money for you to own the annuity. What you have to do in the surrender fee is it's like a contingent deferred sales charge on, was it be shared mutual funds or something like that? Cost declines over time. And essentially what that is doing is the insurance company has to ensure that some way that you keep your money there long enough so that they can not only get their money back, but they can make a little bit of a profit. And I don't know who wouldn't want the insurance company to make a profit, because if they're making money, they're strong, they're stable. Safety's the key. You've got your money guaranteed. And so don't be a cynic that says, I don't want the insurance company to make money. Is that a fair, a fair shot at what they essentially what they mean? I would. Speaker 3 00:03:53 I agree with you because at the end of the day, when people are looking to place their retirement savings into some sort of vehicle, they may look at putting it into a certificate of deposit at a bank. The problem is at the time we're recording this in the early 2020s interest rates stay have stayed at historical lows and we're seeing reports of, uh, purchasing power being eroded. So there's a real concern that net of will purchasing power, be lost. If you're getting a very low return on your money, say maybe like 1% for a period of time, right? So on the flip side, someone can put their money into market oriented investments. Hey, I like those a lot, but there's always the risk of those going up. That's not risk, but that would be a nice return, but they can also go down. So what the insurance company is providing for society is to say, here's a way for you to place your money on deposit. And if the markets continue to perform, especially in a fixed deferred annuity, if it's tethered to an index, if the indices go up year over year, you're going to get a nice credit. They have to earn a little bit of a profit margin in order to keep doing that year in and year out. So this is why the surrender schedule is important is because they need to know that they can have that money on deposit for a while, rather than it being fast, money, money in and money out. Speaker 2 00:05:15 Right? And that's the thing I, you know, I want insurance companies to make money again for the cynical people think about how much money a bank makes off of, uh, your CD or your money market savings account. They're paying you a half a percent. And, uh, maybe right now it's pretty rough, but you know, you put a hundred thousand dollars in there and there, they get to loan a million bucks on it and they're making three or 4% of a million dollars. So they're going to make 30 to $40,000 a year and pay you nothing for the pleasure. So nobody can tell me that insurance companies are out to screw people. It's the banking industry. That's, that's, uh, the biggest perpetrator. I don't know if that's my opinion to show up. What do you think? Well, I'll just Speaker 3 00:05:53 Say that we like working with the insurance carrier of a diplomatic, right? But I'll say that, uh, we like to just guide clients to saying, when we work with them, this is the purpose of money. This is what we're trying to accomplish you. And I will go through the application and make sure when we're designing some of our cases, maybe we might use a ladder. Maybe we might have some short surrender schedules. Maybe we'll have some longer ones. Maybe we'll mix them up. But I think fundamentally at this point in time, if people are looking to grow their retirement savings and do it safely, the fixed deferred annuity is a very compelling choice. And it would be a shame for someone to look at that surrender fee schedule and make a determination. Well, this is not for me because I'm gonna lose my money during the first period of time that the surrender fee schedule is in play. So that's why I thought we would have Speaker 2 00:06:47 This episode. Okay. No. And I agree with you and I think one good example, if you don't mind, I'm not afraid of taking shots across the bow, but Ken Fisher says plenty about guys like us. I'll say something about him. If you have a million dollar portfolio with Ken Fisher, he's going to charge you about one and a half percent to do it. So that's $15,000 a year in nominal dollars, over a 20 year retirement. That's $300,000. If you factor in what that money would have grown to the lost opportunity costs on the money being in Ken's pocket, instead of yours, it's going to be an astronomical difference. Wouldn't you say? Yeah. And so if you take that and say, all right, well, half the money, just for simple terms, I'm not saying you put your half, half your money into an annuity, but in a simple scenario, if you put half your money into an annuity, that's free, you just got to surrender charge. Speaker 2 00:07:37 So you got to within free withdrawals, you can take money out, you can use it for income. You can use it for rebalancing, your portfolio, all sorts of different stuff. So your money's not just locked up, but you're going to cut your fees in half. So instead of paying 15,000 a year, you're going to pay 7,500 a year. And a lot of scenarios in the past a show, we're going to have to do a little more detailed case study on this, but there's a lot of times where when you have the right protection component, you actually get more growth over time, over several periods throughout history, where you'll actually have a higher portfolio value for limiting the volatility. And if you think about, instead of paying 15,000 a year, you pay 7,500 per year. That's going to make demonstrable difference in retirement. You know, you're looking at recapturing half that money and not just keeping it, but also growing that basis. Speaker 2 00:08:28 And so I think, uh, it's just one thing. People need to really understand what's going on. And again, annuities have to go in the right context. Uh, you gotta have guys who know what they're doing and put them in the right way. We know RIA is registered investment advisors all over the country that are jumping on the annuity bus. And they're saying, yeah, these things are great. They work really well. So just a quick little example of how, you know, the rest of the world works. Everybody's making money in this business just depends on if you want it to come out of your pocket or not. I Speaker 3 00:08:57 Love when consumers have choices. So wherever people find value, as they're doing their homework, if they want to place it with one investment manager, they feel like there's going to be value add, but there may be some costs along the way. What we're saying here is with these fixed deferred annuities, as long as they're implemented correctly. And remember they are contingent deferred sales charges. It's contingent upon taking out more money than is freely available. Then if you honor those provisions, the money, there wouldn't be any charges during that surrender fee schedule period of time. Yeah. Speaker 2 00:09:31 We've got a lot of examples, a couple of examples later, why that's not, it's not likely to happen so long as you make the right choice for the right reasons in the beginning. Speaker 3 00:09:39 Now, Brian, your article that we're going to review is why surrender fees are not a big deal. If you will. We do want to clarify that they are a big deal. When you go into doing some planning, especially for say older clientele, we'll look at the surrender fee schedule on a fixed deferred annuity. We'll look at their age and typically we'll make sure that that contract comes out of surrender before their estimated lifespan ends. For example. So when we do some case design, we make factor something like that. We may make sure that our contracts have a waiver. If somebody passes away, there shouldn't be a surrender charge applied for the beneficiaries. There may be a waiver for nursing homes. Sometimes there may be a waiver for terminal illnesses. Sometimes we're going to be designing our cases where we do some laddering. We're going to do a three-year annuity. We might do a five-year annuity, a seven and a 10 years always designed to give the client the liquidity that they need. So I just wanted to caveat that we do consider the surrender charges in our planning, but as we're going to explain, if we use it correctly, we can help that doesn't need to be the chief impediment and our plan design. Is that fair? Speaker 2 00:11:01 No, that is absolutely kind of really good points to remember is that when someone comes in and says, I mean, I actually, this morning I was cutting up steak to make beef stroganoff and I'm going to get to it after we're done recording. But one of my clients called and he's 80 years old, he had a terrible bout with COVID and the, you know, the blood clot issues where he actually had a leg amputated. He bought, bought a contract from me seven or eight years ago. So he's been surrender free for a year. It was a seven year contract. And you know, he called just was always concerned. Well, what if I pass away? You know, we talked about maybe getting him a new contract with better terms and we've decided to kind of keep it where it's at, but he said, I don't want to go into a new contract because then if I die, then my kids are going to have to pay that surrender fee. Speaker 2 00:11:46 And so I guess I didn't do my job early. And obviously he's, he's 80. He might've forgot a couple of things. I don't remember the exact conversations eight years ago, but he looks at it. And I, I said, listen, if you've moved to a new contract, there's a waiver of the surrender fees on death. And he didn't know that. And again, we still decided to keep his contracts where they were, but it's one of those things where you have to explain to us what your biggest concerns are. If it's someone saying, well, I'm 77 and I'm worried I don't need the money at all, but what if I go into a nursing home? Well then what do we do is show you, make sure if the annuity is the right fit, you find one, that's got a nursing home waiver and you look at the terms of that waiver and all that stuff. That way you've got an out on the surrender fee. If the person gets into kind of that one position that they're really concerned about, correct? Speaker 3 00:12:38 This is an important time to remember that if you have an annuity where you're kind of saying, wait a minute, I already have this annuity. What would it look like? If I were to do some planning, it may be in surrender. It may be out of surrender. You may not have an annuity and you may be thinking, okay, but what happens if I put my money into something with the surrender fee, schedule a good place to start, give us a call. 804 3 8 5 1 2 1 that's 804 3 8 5 1 2 1 go to a nudity, straight talk.com hit the green schedule, a call button. I think Brian would, our listeners have found out is we will look at their situation. We'll ask them, what's the most important, what are they trying to accomplish? And sometimes you might hear don't work with us and we may not use an annuity in your situation, or if you have an existing annuity and maybe it's still in surrender, maybe it just stay where you are. So give us a call. We're straight shooters because that's what we believe here at annuity straight talk. Speaker 2 00:13:39 Yeah. And that's a great point. And that kind of goes back to the last episode where we talked about annuity maintenance and I've had a lot of people I serve as contracts that I never sold in the first place. So it's kind of a Goodwill gesture on my part. People. I like people that need help. I'm really, I'm here to answer questions for anyone, no matter who it is. And I could have probably along the way, I've got one that's, uh, that's coming surrender free this year. And I think I'm going to advise the people that keep it. But I've been, I've been servicing that contract for seven or eight years now. And if I was interested in just stuffing my pockets, I could have probably convinced them to do something different. I could have just, I probably, I mean, they're good friends, they've done some other business with me. I like them a lot, but I'm not going to take advantage or breach that trust by just stuff in my own pockets with money. And so the fact that if you got something you want to look at, if you can't contact the guy who sold it to you, I don't care if it's a variable annuity, a fixed annuity. I've met people that have had an, a single annuity for 35 years. I love the stories. It's interesting. So give us a call it's again, our goal is to help people. Is it not? Speaker 3 00:14:52 It really is. That's always first and foremost. And if an hour work together, it ultimately ends up in doing business together so much the better. But if at the end of the day we part as friends that's okay, too. Speaker 2 00:15:08 That is true. So yeah. So what do we got for like the examples of case studies? You had a nice little, Speaker 3 00:15:14 Let's take your article for example, this is from August 15th, 2020. Uh, we've got the article here. Surrender fees are not a big deal. And the first point that you address is, and we've talked about it now that when you're looking at an annuity, when we know that there's going to be a surrender fee schedule and there's going to be a period of time, annuities are not meant to be. Short-term like just put it in and put it out. So we're going with some methodical thinking of why this annuity is in the portfolio. And a key point that you say is that just like any type of thoughtful placement, you might decide, you know what, every year let's reposition a portion of that. And with annuities, there's usually a amount that's traditionally about 10% of the money that can be pulled out each year with no penalties. So that's one example of why surrender fees. Aren't a big deal, right? Brian, because you have that ability to reposition a portion of that money every year. Speaker 2 00:16:14 Right? Well, and I say, you know, that's kind of one of my stories, a show where someone say, oh, I don't want the surrender fees. And I'll ask them, say they're 65 years old. It's an IRA. How long have you been saving money in your IRA? And they'll say, oh, for 40 years or whatever. And then I'll ask them, how often did you touch the money? Well, I never touched it. Never moved. It just sat in the IRA. Yeah. Okay. So what makes you think that being able to withdraw 10% is not going to be better than anything you've had before now, again, it kind of speaks to, you know, an individual plan and obviously retirement's different when you're drawing on assets, but if you've kind of kept your money in one place for several decades, then adding liquidity, you're actually having, it's almost like a guide or it gives you a framework with which to withdraw money and all that stuff. So my bad is that you're not going to be moving more than 10. If you've got a good plan, you're not going to be moving more than 10% of your portfolio one way or the other on an annual basis. So again, I don't think it's a big deal because most people are going to set things in place. And a good plan has got a long-term perspective and you're not going to make those major changes on an annual basis. Speaker 3 00:17:29 Agreed. And one other point we've talked about before, let's just say that if somebody puts in an annuity with a 10 year surrender fee schedule, that's relatively a short period of time. When you consider that someone who's say 17 years old, when they start working, they start paying social security taxes right now, someone who would be 17 year old, their full retirement age is 67. So, and then the earliest you can tap social security is 62. So you've got to figure that there's a 45 to 50 year period of time that this 17 year old is not really going to have access to the money that has come out of their paycheck. So sometimes when we think about annuities with a 10 year surrender schedule, it's a long period of time from one perspective. But from another perspective, it may not be that long. So just something to consider as we do our planning, Speaker 2 00:18:27 That is very true. So let's see. That was one of, so we have two big reasons why I pointed to. So that's kind of just the theoretical thought of like really are you going to pull 10% of your portfolio in or out on an annual basis? And the likelihood is zero. And if you'd have to that, you have planned correctly. But in the article there were kind of two major, like more concrete reasons why surrender fees are not a big deal. So what do you think we should start with? Which one was, Speaker 3 00:18:52 Let's start with you right here. The first is the fact that most index annuities have growth in the first few years that exceeds the surrender fee. Now, if it's okay, Brian, what I'm going to do is I actually did a back of the envelope calculation to explain this. So we are going to, if you're watching this on, Speaker 2 00:19:12 It's a good idea. Yeah. If you're on YouTube, you can check it out. A show is going to do a little illustration. Speaker 3 00:19:17 And what I have here on the screen is a 10 year surrender fee schedule. If you will, this is just made up, but this isn't really deviate too much from what we see elsewhere. So let's just say that we have a ten-year schedule. We have our surrender charges that might start off something like 9% in year one, 9% in year two. And as you can see, typically what we see as these things tail off. So as we get to your 10, now, the surrender fee may be 1%. So it starts high. And then over a period of time, it just sort of tails off. Let's just say, here, we'll take year three. And let's just hypothetically assume that we still have an 8% surrender charge. That means that if you put a dollar into that contract in year three, you would have access to 92 cents of that dollar. The question is what type of growth rate would be needed. So that way, if you had some growth in the contract, you need to at least get back to your original principal, which was the dollar. So if I take $1 and I divide that by 0.92 mathematically, that works out to 8.7%, which seems, wow, you need a pretty decent rate of growth. But remember this is over a three-year period of time. So if we then do something which is called the geometric average, the time-weighted rate of return Speaker 2 00:20:52 To basically say what average yield do you have to get every year to make 8.7% over three years. Speaker 3 00:20:59 Exactly. And you see the calculator website? Yup. Okay. So I'm just using, uh, just to make it completely accessible. This is a website. It's not an endorsement, but it's just out there calculator.net. There's a route calculator on there. And if I go down to the general route calculator, there's either even a cube root calculator, but let's just say if I did over a three-year period of time, and let's just say I needed to get 8.7%, I hit calculate. And that shows 2.06. So that means that the fixed indexed annuity, if it was returning 2.06% year, one, 2.06% in year two, 2.06 year in year three, of course, we know that those rates are really going to be maybe zero in one year. We might have a great year in the other. We might have a so-so year in the third, but when you take the geometric average, as long as we're doing about 2% a year, which Brian isn't that within the realm of possibility of what a fixed deferred annuity can offer? Oh, Speaker 2 00:22:00 Absolutely. I would say that's probably on the very low end of expectations. Very, very low end, because are you looking at, you're looking at a zero of five and a 2.3 a, that would be pretty weak performance just to get past that hurdle in the first few years. And I would say when we would look at it, I say the worst contracts I've ever sold probably had growth that exceeded the surrender fee by the third year, then some really good ones by, you know, after the first year. There's a lot of those actually. Speaker 3 00:22:29 Yeah. I was going to say, though, this is the back of the envelope where you can just pencil out what is my surrender fee schedule. If I put a dollar in this sort of map, you can see, this is why this is within the realm of possibility. So let me go ahead and stop my screen, share handed back to you. And let's look at an actual case study, Speaker 2 00:22:49 Right? Cause I have, I just have an annual statement. Right? Okay. So you see what I'm looking at a shelf you got. I see. Okay. So here's the interesting thing. Obviously this is a larger contract. It doesn't mean everybody's got to do it this way. This is just a really good example. We got through the first year and he said, Hey, would you mind if I I'll redact the information? So obviously his name and the account number and all that stuff. So you see my name and it's an IRA. And he put in $500,000. So we had a fantastic first year, he made $60,000. So a little over 12%, which is, Hey, you can't tell me it was one year. And this guy's a total believer, right? And his surrender value now is 522,000. So the surrender fee went down by 1% and his account value went up by 12%. Speaker 2 00:23:39 He eclipsed it. He could walk away from this contract after the first year 5 22. And he can walk away with a little over four and a half percent interest. Right? So tell me why that's not a good deal, safe money. This was, again, this happened in 2020. This was after COVID nobody. I can tell you, nobody first saw the market coming up all the way where it's at now, everybody was nervous. Uh, he'd lost a bunch of money in the security side of his portfolio if he goes 12% up, but it's surrender value over that time period. Then if you think about the context of the era we were living in, in the summer of 2020, holy cow, I mean, that's amazing. So he's above water and he's got a plus side after one year. Now this contract got seven years left to go. And I think he, I think his second year he did about three and a half, maybe 4%. So he crept up a little more, but man alive, that's a pretty dang good deal. So as simple as it gets, that's a real statement. And I, I asked him, he said, I'm proud of it. You can share it with whoever you want. So I thought it was pretty cool. You know what I like, Speaker 3 00:24:50 Like about that? Here's some observations I have. Number one, we want our clients to actually, when we're doing our planning, keep it during the whole surrender fee schedule. So even though Brian is saying, look at how the value is after year one, still our guiding thing is this money was meant to be originally on deposit for a period of time. But look at mathematically, look at what happens. If importantly, number two, the contract is configured for upside. This is why we liked that particular design is had you put him into something with maybe a 2% or 3% cap. Then the numbers would be radically different. Your contract design was for what have we talked about before Brian, we've talked about knowing when a contract is for accumulation or income. In that particular case, I'm guessing your client was focused on accumulation. You put them into a contract where there was no cap. It was potentially unlimited upside. And hopefully the participation levels were stable upon renewal. But that's an example of where, when we look at that design mathematically, we know if the client worst case something changed in his life, we haven't hopefully done any damage there. That's my takeaways. Speaker 2 00:26:01 And this one, the title of that article, I put it out in a newsletter. The title of it is what it's like to own a good annuity. And again, I talk about he could surrender it, but he'd be crazy to do it. He got 12% his first year, he's above water in his surrender fees. He's not touching that because again, we put it in the right context that works for his portfolio. So the year before I had written a newsletter about him, that's it was kind of how to beat a guaranteed income contract. Now this guy chose to do the deferred accumulation with a maximum upside and he won in a big way. And instead of him trusting me and believing me now, he knows it, right, because it's real deal. It's there for him. So I put it out there again. And I linked the past article, how to beat a guaranteed income contract, which we we've talked about in the past several weeks with income contracts, income versus accumulation, all those things. So we don't need to go back to that, but we'll probably do more case studies or that's a beautiful case study and it fits right in with why surrender fees are not a big deal. You've got to be kidding me. There's nothing wrong with them. So there's the first example. Speaker 3 00:27:06 I love it. Now the second one in your article is that you've said people can maximize the withdrawal from a potential contract and get a substantial amount of money out before the surrender period ends. Can you walk us through that? Speaker 2 00:27:23 Yeah. So I guess this is, there's a lot of stories and it goes back to certainly one person. I told you already about the couple where I service contracts that they bought from somebody else. And I've been doing it for seven or eight years now, just because I like him. And I would consider, you know, they're in my, if I had to count them all on one hand, like these guys in Colorado or my favorites, right? They're like family, I love them to death. And so I try to do the right thing for them. So what they did is they bought the contracts and they didn't need the money or they didn't need the income. They just wanted to protect it. But the guy put them into a guaranteed lifetime withdrawal benefit and they were paying one and a quarter percent in fees. And I looked at it and say, well, why are you paying it? Speaker 2 00:28:08 And it was, it was a fair bit of money. You know, it was like four contracts, a total of about $700,000. So one of the quarter fee, uh, what is that? Uh, it's $8,750 per year. But then again, the GWB value rolls up, right? So the fee grows over time. And about the third year, I said, cancel the income rider. But, and so he did, and he probably saved himself well over a hundred thousand bucks in the last eight years on doing that. But because the contract was built for maximum income, there, wasn't a really a healthy growth aspect to it. And so the most they would get in a year was maybe two and a half percent. And while all their other assets were going up, they felt like they did like the safety. And they had probably for their goals, they had a pretty modest expectation, four to 5% interest rates. Speaker 2 00:29:01 So they're never that risky, but they said, I just don't like being stuck into the annuities. And that's where, you know, I've written other letters about that. You're never just stuck. And the thing is they have left them alone, but they could have, and I'll show you the example, a show. You don't have to just stick it there because if you pull out the full 10% free withdrawal, right? Okay. So what I have this program too, is just a full 10% maximum withdrawal. So you put in a hundred thousand dollars, this is a guaranteed minimum. This means if the account never grows, this is what the insurance company guarantees. You're guaranteed to never lose money. You're guaranteed to never pay a fee. Okay. So if you look at this, this gives you, so you, you know, you pull 10,000 out the first year you got 90 left and then you get 9,000 and the math gets a little bit trickier, but it all lines up. Speaker 2 00:29:54 And so we look at pulling it out through the 10th year, right? You've pulled out 61% of the money and you still have 39% of it left. Right? So that's at a guaranteed minimum. You can. So if there's a scenario in your retirement, now I'm going to say, if you plan on liquidating 60% of your portfolio in the first 10 years of retirement, you either have an advisor that doesn't know what he's doing, or you didn't do a good enough job preparing for retirement. And I'm not trying to, like, we gotta be honest, like this is a serious deal. Right? Any questions on that? A show? No. No. Okay. So if I go down to the, you know, the past 10 years and I give a 5.6, 4% rate, which is, what do we talk about? It's somewhere in the middle of the zero versus the top end. Speaker 2 00:30:44 We've looked at this contract before and you know, a few episodes back and we can illustrate at 10% if we want to, but we're going to go in the middle of that. So 5.6, and what happens is obviously if the account's growing now, here's one thing about the surrender values that we'll look at. If you look at these two values here, right? You pulled 10,000, $440 out. Your surrender value is 97,000 9 72. So you're above water, right? But if you look at the bottom of it, that's 77,000. So you pulled a 77% of the account out over time and you still have $67,000 left, huh? Well, I don't think that's such a big deal, right? Pull a tremendous amount of money out and still have a substantial remainder left. And again, once you get to 10 years, these two lines match up, surrender value, accumulation value equal throughout all the way down. Right? What your Speaker 3 00:31:41 You're saying is, is that when you're taking out 10% out of a growing contract at the end of 10 years, you should hopefully have based on how the contract has performed, the money that you have out should hopefully still have left enough money still inside the contract. Speaker 2 00:31:58 I mean, it's performed. Yeah. If you get a four or 5% yield, you'll pull a majority of the money out and still have a big remainder left. Speaker 3 00:32:06 Brian, does it show, by the way, if the contract had perform the poorest, what would that Speaker 2 00:32:11 Look like? Yeah, we can done so lowest effective rate would be the red. So that's still 60,000 remaining. Um, I don't know the exact math, the highest was 6.88, which means 75,000 remaining. Uh, you're talking about, and then that obviously the most recent is the one we looked at, but you talked about safe money, like a plus superior company. Yeah. Surrender fees are not a big deal. You're protected, guaranteed. You got access to it. You can drain the account if you want to. And again, it's not to say you got to take it out to spend it. You can rebalance, you can move back and forth. Obviously there's some tax implications of non-qualified contracts that are bought with after tax money. And, but a lot of people are using IRA. So there's a tremendous opportunity to do some rebalancing depending on the tax situations of the classification of the account. Pretty simple, Speaker 3 00:33:06 Yup. Surrender fees. They're important to consider. We obviously try to make sure the fundamental design of the contracts we use are the best performing ones out there. And we are cognizant of what surrender fee are, you know, when we do our planning, but at the end of the day, like you've said, there are some mechanisms that we can take advantage of to hopefully something changes in that planning. There's some mitigating circumstances that can hopefully address those concerns. Speaker 2 00:33:38 Absolutely. No, I agree. And I think we covered it pretty well. Again, if you guys want to chat with either one of us, I'm doing a big website redesign on annuity, straight talk. So we're going to have some more interactivity in the next few weeks, but any page on the website from now and forever is got a schedule, a call button, a show is going to have his calendar up soon. But if anybody wants to get ahold of them, you can touch base with me. I'd be happy to connect you guys. I don't know. You want to plug your phone number or show that you've been here long enough. Sure. You Speaker 3 00:34:06 There's. The easy, easy way is to give us a call 804 3 8 5 1 2 1. The number of top planning is a little bit different. It's 8 7 7 2 3 4. Plan 8 7 7 2 3 4 plan. But again, if you want to give us a call at the regular annuity straight talk number, you can talk to Brian and he can also connect with me right there. But I don't know. Speaker 2 00:34:27 I might have a press two to talk to a show pretty soon. We'll see. We'll see. And uh, if you like the podcast, go ahead and subscribe. If you want to see the illustrations and the videos we put up, or you want to look us in the eye, we're getting better at recording this. So I'm trying to look at the camera instead of looking at my computer in my new office, but go ahead and subscribe to the podcast on any of the platforms where you enjoy podcasts. And you may also see the videos on youtube.com go to youtube.com, search annuity, straight talk, all the episodes are there, subscribe to it. You get notified as soon as a new episode comes out. And, uh, again also we want to, we want people to understand that they can, uh, comment, let us know what you think. It's good for us to know how we can fine tune the message to maybe offer greater clarity or detail in areas where it's needed. And it's also helpful for other people to have they call it social proof where someone may become, you're going to help other consumers or well say, you know, Hey, no, I get it. That's the question I had and they'll feel better about themselves. So we're really about empowering and building confidence in the retirement community, uh, what we're here to do, right? A show Speaker 3 00:35:32 Completely agree. This is a, another annuity straight talk podcast where the whole purpose is to hopefully give people a different perspective on annuities and see where it may or may not fit into their financial Speaker 4 00:35:44 Planning. Speaker 2 00:35:45 Yep. That sounds great. Well, I want to thank you for the idea. It was a good topic and hopefully everybody got something out of it. Come see us next week when we release a new episode and uh, I'm gonna go watch college football, make my B stroganoff. I dunno, show. I'm ready to go. How about you ready? Take care. Everybody have a great weekend, everybody. Bye. Speaker 1 00:36:05 You've been listening to annuity straight talk. The preceding information is for informational and educational purposes only and 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 of nerdy straight or no information presented today should be acted upon without meeting with the license. It is important that you read all insurance contract disclosures carefully before making the purchase decision guarantees are based on the financial strength and claims paying ability, Speaker 4 00:36:53 Uh, showcase. Ron G is an investment advisor representative of insight, folios an sec, registered investment advisor. The firm only transacts business in states where it is no despised or is excluded or exempted from notice filing requirements. Any fee-based financial planning and investment advisory services are offered through his association with insight folios top wedding LLC is not a registered investment advisor and is not another name under which insight folios provide services. Insurance products and services only are offered through top planning, LLC insight, folios Inc, and top planning LLC are not affiliated companies.

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