Episode Transcript
Speaker 0 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 1 00:00:48 Hello and welcome everyone to the annuity straight talk podcast, episode 12. My name is Brian Anderson. I'm excited to have you here. I'm the founder and creator of all things, annuity straight talk and out in Washington. My co-host who is only adding to the intelligence level of annuity. Straight talk a joke, say hello? Hello. This is a show Graham G the founder and creator of top planning, excited as always to be on another terrific episode of annuity straight talk the podcast. Yes, and I am the blunt one often. Not very politically correct. The show presents better than I do, just because he's so level-headed mild-mannered but don't let it fool you. He's got his own opinions as well off camera. We really let people have it. So on camera, very polite and charming. Yes. And I apologize. I did freshly shaved my head this morning. I should have waxed it.
Speaker 1 00:01:42 So I got a nice glow on my bald head, but that's okay. I'm I'm never perfect. Right. But I stepped it up from the t-shirt and I went a little more professional today. The information we're about to share will more than make up for it. What have we got today, Brian? I sure hope so. I kind of liked the track we've developed over the last five or six weeks or episodes anyway, you know, minus the recording glitch that kind of put a couple of them back, but just a recap was we talked about guaranteed lifetime withdrawal benefits, and then we talked about income versus accumulation products. And then we talked about nationwide, had a very aggressive payout and to be noted even after just a few weeks, that market's changed a little bit. So that's why you need a good people to kind of keep their thumb on the pulse, if you will.
Speaker 1 00:02:25 And we, we looked at a couple of those contracts in the show category case study, but now again, we're going to do, because we've done the income contracts and an income scenario. We're going to look at it an accumulation product today. And it's one that we both like, and I guess that's kind of how we met each other. We were both connected to this company and being in the same region. That's, uh, our internal wholesaler introduced us and that's, uh, that's where this thing was born. It's where it took off. So I liked the fact that you two would look at products based on what they were doing, using your own homework and saying, Hey, this is pretty cool. This where I can see it fitting in. And I hope people see from our reviews, we're actually using some of these products and saying, this is where we feel like this fits in.
Speaker 1 00:03:08 In this context. This other product may fit in, in another type of context. So everything we're going to be talking about today is how do you use an annuity for accumulation purposes? We're not talking about using it for income. We're trying to say, let's see if we can swing for the fences with complete downside market protection. That is correct. And so we look at, and obviously a lot of the strategies I've been using for the last several years are focused around having good accumulation in a product or what people want to protect money and looking for safety, but can't find the yield. This is an awesome way. And I like to say index annuities allow you to leverage low interest rates to get an acceptable rate of return on safe money and, uh, lots of different ways to look at it. And again, this is, I wrote the newsletter actually recorded a video for the newsletter a couple of weeks ago in this product to show.
Speaker 1 00:04:01 And I called it the best growth annuity. Now that's a matter of opinion, is it not? It is because some people might prefer another growth annuity. And so we continually, now I will present somebody who's looking for accumulation. I like to present this product as the top choice within this company, there are shorter term products that work as that work well also, and we can explain why this is better. And then we go into, I think I probably, even if somebody does decide to buy this contract from me, we will typically have looked at three or four different annuities and some of the more popular selling contracts. And then I make my case and present it saying, this is why I believe this is the best one. I mean, we've got an eight plus company. We've got excellent growth potential. I've got a good rate history with past contracts.
Speaker 1 00:04:47 People are really happy with it. And that's you look at it and say, well, what else do you want? Right, correct. If you take a step back, what we're trying to accomplish today, I've heard it been said that there are three types of institutions that can hold your money. Either have a bank, you have an insurance company, or you have a brokerage firm. And so here I was just looking before we went on the air, the CDs right now at a bank, let's just take a five-year CD highest rate I'm seeing is about 1%. And we know that right now, the latest inflation readings are coming in hotter than that. And so we have to just say, okay, if we were to look out, say the next five years, 10 years or so, don't we need our money to work for us better than 1% to at least match, or maybe hopefully offset our reduced purchasing power.
Speaker 1 00:05:35 But at the same time, if you go to the other end of the extreme, if we don't want these funds to take on a lot of market risks, we want them to be there. So what we're talking about today is how do you safely accumulate where we can have that preservation of capital while at the same time, growing our monies with complete upside potential, this product we're going to talk about here has a lot of features and it's designed. So that there's really what Brian, no caps. There's ways to grow this even more. If one wants to pay a fee and the upside potential unlimited. Yes. And that's a, that's what I really like about it. And so when we start, uh, we show this illustration, I'm going to tell, uh, tell everyone if we're doing income planning or RMD planning, or even just portfolio management.
Speaker 1 00:06:19 It's nice to look at the upside and the big flashy numbers, but it's very important to start with a conservative assumption. And what I like to tell people is I think if you get a four to 5% average on this thing, it's going to do everything you need it to do. And we're not going to be the guys that go out, you know, there's other contracts similar to this. And then the guys are just going to show them a 10% illustration. And if it doesn't work out to get 10%, then you're going to be disappointed if that's your expectation from the beginning. So, and especially if we need 10% to make an income plan work, we're doing something wrong. So we start, we'll look at something conservative. And that's where I think we should just start with that. What do you say show, I agree with you. The rate of return on products like these typically are like three to 5%. These are at the end of the day, fixed income replacements. Or if we're looking at them as an alternative to fixed income. So we usually have lower rates of return than what you're saying earlier. Right? Look at this. I like this. It's like the hall of annuity straight talk right here.
Speaker 1 00:07:20 I'm a child. All right. So are you with me? You got it. Now I see. Or illustration software up on the screen. This is annuity straight talk. The podcast. You can be watching this, everything Brian's going to be sharing. We stream this right onto YouTube on the annuity straight talk, channel the number to call by the way, if you're interested in learning more 804 3 8 5 1 2 1 that's 804 3 8 5 1 2 1, go to annuity straight talk.com. Hit the green schedule a call button. Go ahead, Brian. Here we go. I appreciate the plug there a show. Yes. Get ahold of us. Anytime. We've had a few people that just found the podcast and gave us a call. I don't bite. I'm a nice guy and I'll answer your questions. So I'm going to run this illustration in the state of Montana, because that's where I'm at right now. Now, as far as the upside potential of the contract and the meat and potatoes of it is going to be the same, just, uh, no matter what state you're in, but there's a few contractual differences with surrender charges and things of that nature in different states.
Speaker 1 00:08:16 And, uh, so for all intents and purposes, it doesn't make a difference. I recorded a YouTube video with this kind of similar track and we're going to do a better job. So I did that a couple of weeks ago. So this will replace that. One of the things I did wrong in the video is I had the age set at 45, which is a minimum age to buy it. And the minimum age is 40. But anyway, so we're going to go like kind of standard, which is typical people. We talked to 60 to 70, something like that. So this is a little closer. Let's just do 65. How about that? Any arguments or show? No. Oh, young people can use an annuity like this. If they don't have a lot of risks tolerance and they feel like I've worked for this, I want to go up the mountain very safely.
Speaker 1 00:08:59 For the most part, we see people that are a little older in age, but a product like this because we're really not using it for income. I think the age is not as of great import. We're really thinking more of the surrender schedule period of time, like 10 years that you're going to need to hold this money in the contract. Right. Okay. No, that's that makes sense. And then obviously with the liquidity and the withdrawals, you're not just stuck there. You can use it, right? Correct. Okay. So real quick, I think we should just cover the additional riders. This is an additional benefit rider, which I don't, I'm not a big fan of it. What do you think? Agreed. It's a nice feature that basically gives you a little extra bonus. There is an additional annuitization bump at the end of the ten-year period, but if you're not really going to be using it for a payout, I just would personally don't use the additional benefit rider in our designs any further.
Speaker 1 00:09:48 Right. It allows you, I think this is a 10 year contract. So one of the things it does, you get the bonus, you get enhanced free withdrawals when they're not used in the previous year. So if you don't take 10%, one year, you can get 20% the next year. And then it also has the one thing that, where I've, I've showed it to people. I've never actually put it on a contract, is that it allows you to get out with all your premium after the third contract year. If you decide, I think they changed it now it's for the fifth year in year five, you can get all your money classes after the fourth. Yeah. Okay. Right. So it's after the fourth year. Yeah, you can, if you, you know, you put up a hundred grand into this and you'd go through, you know, four years and say, I hate this.
Speaker 1 00:10:25 I don't want it. You can get out of it, but I'm going to I'll show you why that's inconsequential in my opinion. Okay. Funding. So we're not elected. Their funding is a hundred thousand dollars. So this is where, well, this is what I like about the contract to show. You've got so many different options. And one thing I say about other contracts that may be can illustrate 10%, they have just one, maybe two ways to do it. And when I like this one, because it's got, actually, there are actually four index options in this contract that will illustrate two of average, more than 10% in the past, or right around 10% in the past 10 years. So to have the optionality of doing that makes a big difference to me. I think. So what I'm doing, if you want to explain some of these, as I'm putting together a show, you can go ahead and do that.
Speaker 1 00:11:13 Sure. We have. And what I really like about, they will skip the strategy fee for now. Yeah. You have a diver, uh, like standard and Poor's, you have fidelity of fidelity investments and you have BlackRock three very well known entities that have put together proprietary indices. And the S and P mark five, I believe, has been around since 2017. So there's actual history going back the past four years actually, that's actually been around since 2010. It just hasn't been publicly available, but they've been tracking that index has been around for it just crossed the 10 year point. So it's actually, those are real numbers going back 10 years, which I just learned that a few weeks ago. Oh, okay. I stand corrected. I thought the index was created in 2017, but you learn something new every day, even on the podcast. But the idea is that you have diverse strategies and you can say, well, if I want to have something that's focused on say gold stocks and bonds.
Speaker 1 00:12:05 That's why it's called multi-asset risk control mark. We can focus there. But if you want to focus, say mostly on us stocks, you could use the fidelity. If environmental and social governance ESG is of greater import, we can use the BlackRock. So we have diverse strategies inside of this fixed indexed annuity. I would point out with all of these fixed index annuities they're using what are called volatility controlled indices. So if the equity markets are roaring as they are now, you might notice that these indices don't move up as much per potentially because of the bond component that's inside of the index because it's fall activity controlled, but that's the way these indices are able to provide some of the upside and none of the downs, right? That is a no. And it's, you know, some people don't like, it's like, well, the contract itself has volatility control.
Speaker 1 00:12:58 Why would I want that? But it offers the insurance company a better projection of cost of those index options. So the typical you'll see those maintain a steady level more, more so than something like to just the S and P 500, which, uh, you'll see your caps and your participation rates kind of swing swing a bit more. And so, again, I'm doing this one, a couple of indexes. I really like. So to your point to point with margin, the S and P 500 low volatility, 8%, uh, that's a really, really good one with the market being high right now. I'm not a big fan of like going into it, but that's why I'm going to take a little more conservative approach. We don't know what's going to happen. So one thing here that's interesting is the inverse performance trigger, uh, meaning that you can put the money into that.
Speaker 1 00:13:41 And if the S and P 500 goes down by any amount, then you're going to get a positive intrepreneur credit. Okay. And when I look at this, if you look at the, this is going to illustrate over the past 10 years, and we know that in the past 10 years, the S and P 500 on an annual basis was only down two or three times, right? So I already know that the illustration is going to return less than stellar numbers, but again, I'm just trying to create something that gives us a conservative projection. And then the fixed account. You always have an option for a fixed rate right now. It's about two, it's 2% on this contract. If you want, you can put a piece or all of your money in the fixed rate. And I also know, so we've got 20% of the money over the past 10 years.
Speaker 1 00:14:21 It's never going to do more than 2%. That's going to really water down the projection of the illustration. And I think it's one thing that people don't fully comprehend, or some people don't is that we get to change these up on every anniversary. So we can go into something really aggressive one year, for instance, this year. And last year, I have a lot of people come through, they'd get a decent yield. And they say, I don't know what's going to happen. I'm just going to take the 2%. Right. And they just take the fixed interest rate. I had a client do that with this contract just couple of months ago. She said, I'm just, you know what? I don't know what's going to happen on a second, guessed myself. I just want to guarantee I'm gonna make some money. So she takes it for the year, then we'll reevaluate next year sound about right.
Speaker 1 00:15:01 Yes, it does. And the only thing I would just caveat is when you said aggressive with indexing strategies, what we're trying to do here is we're trying to swing for the fences better than that. 2%, the worst we can do is get a zero. If the markets are flat or down by any amount, but on the upside, if these have uncapped upside potential, that's where we can hopefully get a much higher credit, but just the concept of aggressive what's inside a fixed index annuity. I mean, earlier we were talking about the S and P 500 low volatility eight, you may decide, well, I don't think this is such a good entry point. If an index is at highs only because over the next one or two years in this case would be a two year term. Someone is likely to get a credit of zero that may or may not happen.
Speaker 1 00:15:52 But when you're looking at some of these underlying indices, just keep in mind that the downside is zero and the upside is hopefully unlimited. If you have uncapped. And again, I'll wrap up here, Brian, but we've had discussions before with members of the listening audience and when they have a cap, that means that no matter how much that index does, as it moves up, the upside might be limited. If it's uncapped, we removed the ceiling. And these indices we're looking at here are uncapped. And that's why it's one of our favorite names for accumulation purposes. Yes, it is. So blow this up a little bit. Okay. So what I typically run in w a run to with people is I talk about people say, well, what questions should I be asking? Right. And the biggest thing is like, I think there's a, you want to look at the protection factor.
Speaker 1 00:16:47 We know the money's guaranteed. Then you look at the growth potential, which is what we're going to do. And then you look at any restrictions in the contract. So, you know, what rules you got to play by? And one of those restrictions is the surrender charge schedule. So you're not going to pay a load on this contract. You put a hundred in, you get a hundred goes to work day one. But if you pull all that money out, then obviously you're going to pay a fee. That's one thing people don't like, but understand if this works, if you can work, do it the right amount. And for the right reasons in your plan, you're never going to see that charge. And so, yeah, just it's declining over years in the state of Montana, it goes 10, 10, 9, 9, 8, 8, 7, 6 4 2. So, you know, in your, in your nine-year-old, there's only a 2% fee, but I guarantee you're going to like the contract.
Speaker 1 00:17:31 If you get that far, and there's no way you're gonna want to pay the fee. Right? And so the next one is the penalty free withdrawals. So once per year, after the first contract anniversary penalty, free withdrawal also known as penalty free, partial surrender without surrender charges or MVA of up to 10% of your accumulation value. So you go through a year and then you can start taking 10% out every single year, and you don't pay a penalty for it. Good enough. A shock. This looks fine. You have some liquidity options. If you need it, I could make a case, by the way, let's just put somebody in the picture here, where might they be using this penalty, free withdrawal? Well, maybe you have a pool of safe money, but you need to take certain distributions as an example. I'll just say one, one situation could be, maybe we need to fund a life insurance policy.
Speaker 1 00:18:18 We need to withdraw a certain amount of money. Well, if that funding for the life insurance policy happens, let's just say, once a year, maybe that penalty free withdrawal could be used. You take that once a year and you put that to its designed purpose. So the penalty free withdrawal is something we can design into a plan and say, after the first year, we'll take a portion of this to, you know, and repurpose the money for something else. In the meantime, the balance that's left in the contract continues to grow, right? And that's obviously that's a more technical, specific planning option. Typically, most of the time penalty free withdrawals, we're using them to generate income or just provide a backstop for RMDs and things like that. And you'd go in and obviously, I mean, we could do a separate show on that idea alone, a show, right?
Speaker 1 00:19:05 Agreed. We're just sitting here with a lot of info. I currently don't have any clients who are taken withdrawals to buy life insurance, none, but maybe they want to we'll see. Anyway, beside the point. So I'm going to go down to this one again, just, they're going to explain like all the different crediting options is just an explanation of how you can make money in the contract. Here's our allocation. So we've got five sections, 15% in each of the S and P mark five and the fidelity on one end two year options. So we've got the S and P 500 inverse performance trigger. It's a 5% rate. So if it goes zero or less on the S and P 500, you're going to get 5% of that money. Pretty simple. The mark five, you have these two options here. You get 75% of the index on the one year option and 110% on the two year option.
Speaker 1 00:19:56 The fixed account, like I said, is 2% declared rate. So that's just a guaranteed two on 20% of the money. And then in the fidelity on the one year option, you get, there's a 1% margin. So a shock that obviously is if the index goes up 6%, they take 1% off. You get five, there's no cap, but they're going to take 1% off the total gain. That's the margin you pay. And on the two year option, you're going to get 120% of the index over two year period. Fair enough. Fair enough. And I'll point out, again, those of you listening, you may want to see this on the YouTube channel, but what Brian's done here is we have several indices from which to choose. And those indices, importantly, in this contract either give you a one-year option or a two year option, or sometimes it might just be like, for example, with the S and P low volatility, eight there's only a year option.
Speaker 1 00:20:48 But what we're able to do here is I want to drive this point. Home is the pie, the circle, as long as we get each of it to add up to 100%. And let's just say, if it's a one-year term every year, we can change out that slice of pie and put in something else. If it's a two year term, we've got to wait two years before we can change it out and put something else in. But when you look at the different terms and the different strategies, you basically say, we've got a lot of options from which to choose. And importantly, the downside is going to be, if you're wrong, the downside is going to be zero, unless you picked an enhanced strategy option. But the upside is aside from the fixed, as long as it's an indexing strategy, all of these are configured for uncapped upside, right?
Speaker 1 00:21:38 And in this situation, we've only got 30% of the money on a two year option, which is becoming more and more what I'm encouraging people to do, because what happens is you've got two years on 30% of the money. After the first year, you get to reposition 70% of the money you can then put, but what a 30 or 40% into another two year option. So then you're leapfrogging the two year options. That's where you're going to get your best performance, but you got to set it up. So you kind of have a head yourself and you're crediting. Cause if, if you have it all in a two year option, you're waiting two years for your first credit, right? And then, I mean, by year six, you're only gonna have three opportunities to reposition money and capture interest. So I think that's kind of risky, even though you're going to see the biggest numbers doing it that way.
Speaker 1 00:22:22 So these are all free options. There's no base fee on the contract. That's where I like to go to the guaranteed values page and premium $100,000. So we look at accumulation value, death benefit. So this is assuming that every index in that contract went down for 10 straight years. A lot of people look at it and say, that doesn't look very good. And I come back with, well, if this is what actually happens, you're going to be damn glad you got the annuity because everything else is going to look like trash, right? You'll be darn glad. Oh, see, there you go. He's the level-headed one. Pear am cursing up a storm. I apologize everyone. So what I used to say is like, this is what the insurance company guarantees, right? They guarantee you will never lose money. And if you do not elect, like was not done in this illustration, there will never ever be a fee at the 10th year.
Speaker 1 00:23:12 Your surrender value and your accumulation value are equal. Okay. Guaranteed surrender value it declines, which means the surrender value increases. Okay. That's just, basically, this is what's guaranteed in the contract. You will never lose money and you will not ever pay a fee unless you choose to for enhanced performance later. Let's just also just kind of paint a picture here, imagine a basketball, going down a cliff. We know that when a basketball goes down a cliff, the way that ball is configured, there's going to be some, and may eventually go all the way down into the ocean. If you're at the top of a cliff and you throw it into the ocean, as long as it's going along the cliff, but usually there's going to be some spike up. And then another leg lower. What the zero here is showing is assume every year the index is lower year over year.
Speaker 1 00:24:02 So that's why it's getting a zero. It's either flat or lower year in and year out. I don't think we've ever seen that before, but that's why, what they're showing you is if you didn't take out any withdrawals and you got a zero, this is where you'd end up. Nope, that's true. And, uh, they're all gonna make some money. I've never seen one that didn't make any money. Do you know that I've actually never gone through a year and got zero of every single contract has made some money every year. I have had zeros before. I know everybody else says that, but maybe I'm just too conservative. I always put something in the fixed or something like that. Okay. So this is what you're going to look at for the past 10 years, all those index options. Over the past 10 market years, you got an annual effective rate of 4.2, 3%.
Speaker 1 00:24:45 I show this to people and a shock. I don't know if you're the same, but you show them this and you say, well, I'm really watering it down and being conservative with this. And they say 4.2. And, and they say, well, that's not going to beat inflation. What's the, what good is that contractor? So we're listening. We're being conservative to begin with. And then we're going to show you the upside later. Yeah. I think what we're doing here is, again, if these are very similar to fixed income instruments, three to 5%, a 4% rate, and what this annual effective rate basically says is it's as if you got 4% each year and in year Europe. Exactly. Yes. So, and you can see over here in the credited interest rates, there's a 4.04, 8.02 than a 0.91. So some nice yields like that. So the second and the 10th year, you know, the even number years, that's when the two year comes in, that's where you're going to see the biggest gains.
Speaker 1 00:25:33 But I want to explain something about the automatic benefits rider that allows for early, uh, exit of the contract. This is why I don't sell it. Number one, with the bonus, you're going to get a 5% bump at the beginning, but then they're going to charge you a fee. So the bonus really just kind of offsets the fee to some extent. But if you look at this right here, so year to year surrender value is already worth more than you put into the contract. This is where people relax. They look and say, oh yeah, that's a pretty good deal. You could walk away after two years with more money than you put into the contract if you surrender it. So that's why I say, why pay a fee for a benefit that we'll do after four years? Because, and I look at what you have here, you know, one 10, obviously we don't encourage anyone to surrender it, but this is when you're going to realize, Hey, this is not such a bad deal.
Speaker 1 00:26:21 I could always get out of it with all my money plus some. Okay. And so I think that's important. And again, like the 10 year accumulation value surrender value, it's important to note the death benefit. If you pass away, your heirs will receive the full accumulation value. There are a couple of annuities that don't do that. There used to be more, it used to be more common thing where I used to call it like a negative inheritance where that Paul charges surrender fee on death, but most of them allow full accumulation value. You agree with that? A joke I would. It's nice that this contract is designed that way. Also keep in mind the rates we're seeing here are non-guaranteed they're hypothetical. They just say, what if the index had performed the way it did over the past 10 years, we don't know how the market indices are going to do.
Speaker 1 00:27:07 And unless you're putting allocations into a fixed interest contract, like the 2% we were talking about, that's when you know, like, okay, for the coming year, we're going to get 2%. But with the index, we just don't know how it's going to perform. But if we took the last 10 years of history, that's where we're seeing the 4%. We know what our worst cases with the zero. And then the actual returns could be higher or lower or somewhere in between some of the higher returns as well. So there's a nice summary. Here they go. Over the past 20 years, they picked the highest, lowest, and most recent 10 year periods. So, uh, the highest one was 5.09 and the lowest was 3.5. So again, we're going to go conservative when we're doing income planning, because we don't want to set unreasonable expectations. Typically, I don't think you can beat almost if you get a three and a half percent yield, you're going to beat any guaranteed income contract out there, period.
Speaker 1 00:27:58 Just the way it is. So we got a really good shot at it. And then we're going to talk about, obviously, if you want to pick apart the indexes, it shows you each index over those three different periods. And you look at where your best yield was. Some people really like to dig into numbers, other people don't, and then we've got a little mountain chart and then just some contract disclaimers market value adjustments. You want to talk about that to show value adjustment just says, during the surrender period, if you surrender the contract for more than the penalty free amount, what is the carrier using here at the end of the day, they're using bonds and bonds can move up and down. So in price. So if the carrier takes a hit on the bonds, they may have to pass along a portion of the losses.
Speaker 1 00:28:47 Conversely, when interest rates drop and prices go up, we've seen in the last cycle, there were contracts that were being issued in 2018. Those contracts had what was called a positive market value adjustment because interest rates to drop during the Corona virus epidemic. So we saw that the adjustment was positive and they were able to avoid any surrender charges because of a positive market value adjustment. I would say one of the thing too, Brian, is that you mentioned earlier, this contract can be used for income planning. This is one of the best contracts out there. Again, we're talking about here where we're doing our review of Midland, National's retire, vantage 10 contract. And we're saying that it's one of our favorite contracts, especially for the flex strategy. And you've mentioned before this could be used for income planning. It definitely can because it doesn't have that guaranteed lifetime benefit.
Speaker 1 00:29:42 The GL WB rider that we talked about in the last episode, but you can also use a contract like this for, I was kind of alluding to earlier life insurance. It's only because within the context of estate planning, you could use it for maybe. Yeah. Okay. Can you guys tell that, uh, Schoeke loves life insurance, so he keeps plugging it and plugging it. We're talking about an accumulation product and he's talking about a life insurance strategy. Come on. What I'm saying is this, this product is so versatile. It has so many different applications as a funding mechanism for something else. Or let's just say you want a side fund and you say, I just want this pool of money to grow safely. I don't need to put an income rider on there. The same underlying product can be used for multiple purposes. And that's kind of where I was using earlier that application that I gotcha.
Speaker 1 00:30:27 Funding. Okay. Well, we will use explain the ideas. I'm just going to get going on the next one. Okay. I like to show this because again, we're going the fee-based options, but we're going to go a little bit more aggressive for just only two year options, S and P mark five, and the fidelity multi-factor yield. So just purely 2% interest rate. So this is we're going to enhance the yield, but we're still using the non-fee strategies. So guaranteed minimums are the same. All other contract details are the same look at the past 10 years. And again, annual effective rate 6.27%. So we bumped up the yield by 2% and you're going to see obviously a lot more performance that makes, gives you a better surrender value, gives you a better growth. So instead of 1 51 where at 180 3 at year 10. Okay. So that's very good performance.
Speaker 1 00:31:18 And I think, you know, if you can achieve something like that in your contract, if this is the worst thing that happens your portfolio over the next 10 years, if you're going to be in really good shape, right? Yes. Now, is this where we can talk a little bit about the account value? True-up that we liked so much about this country? Yeah. We're going to go to that next. And we're going to talk about maximum performance. So again, go to the highest, lowest, and most recent, the lowest was 5.04% in the past 10 years. That's a very good number for any planning you need to do, whether you're buying life insurance or income planning, or just MDs and the highest being 7.88. So again, that's kind of where, you know, maximum, no fee, there's actually the one index that will go close to 10%. It's the low vol eight.
Speaker 1 00:32:01 If we just illustrate it that I think it's in the nine and a half percent range, 9.3, maybe for a yield. So there's just, there's a lot of ways to get a really good yield out of this contract. But what a shock was talking about recently, or just a minute ago is the, okay, so this is where explain the, uh, enhanced participation rates. Would you please? I will. And I'm chomping at the bits because what you're showing here is we can take the same contract. Now we just talked about its application in multiple settings. Now we're talking about design. You can do a one year contracts, a one year allocation terms, or we could do the two years. Brian was saying, and now we can even take it to the next and say, let's pay a little extra money to buy up the participation rate.
Speaker 1 00:32:45 Let me level set. What is the participation rate again? Let's just say we have a 60% participation. If the index goes up 10%, I'm using just back of the envelope numbers from the air. But I'm just saying, if index goes up 10 and you've got a 60% participation rate, that means your credit would be 6% or 60% times the 10% upside movement. And what we're saying here is that the carrier says, well, you can pay a little extra fee in this case. It's 1% per year. But now that participation rate is going to go much, much higher. We might see a participation rate in excess of a hundred percent. So the same 10% move in the index will yield a higher credit. What we're doing is we're basically saying let's pay for some rocket fuel. That is the purpose of this money. And guess what, what I love about this contract so much, and you can tell Brian, I feel like just opening up the shirt and just flying off somewhere.
Speaker 1 00:33:41 It's that if you buy rocket fuel and for whatever reason, the indices, which are beyond our control, they don't perform Midland actually says at the end of the ten-year period, we will true up your account value so that yes, you paid for rocket fuel, but unfortunately you only got 85 octane or something, right? Imagine going to a gasoline station and saying, I want to pay 92. And for whatever reason, you never got to go on the Autobahn you got to do. We, even as in the parking lot, then been a bit of, a bit of a stretch there, a bit of a stretch, but you get the idea. The gas company actually comes to you at the end of the money back guarantee, right? Yeah. They just say that the fee doesn't hurt you because we swung for the fences on a solar panel. If it provides everything in your, all the power in your house, plus a little extra than the power company sends you money.
Speaker 1 00:34:34 This is where we want our clients swinging for it. So this is where just to, in very simple terms, this is exactly what he's talking about. Okay? So you see the account, the accumulation value is going down, right? And then you get to year 10 and they say, well, that didn't help you. So bam, true it up. We're going to give you your money back. So in the long run, your guarantee is still the same. So, um, in one thing about this is there are a lot of other contracts that are doing this. The fees might be one and a half percent a show. Can I just look at one where the company starts at 0.95, but within the contract each year or each crediting term, they can increase that feed up to 3%. And so from an income planning perspective, the feed does not help, but this one is, is guaranteed not to go above 1% for the life of the, for the surrender term and at the end of 10 years.
Speaker 1 00:35:25 So you don't have to worry about, and again, you can, you have this option. What I like to tell people is, well, what if you buy this contract now? And I'm not recommending people use the enhanced fee options. I want them to get into the contract first. And so, but what if the market corrects and it's down 30 or 40% a year from today? Well, I would say, heck yeah, a hundred percent, two year facility multi-factor with a fee, right? Cause we looked at up here and all of a sudden you're getting 180% of that rate. And I saw that the last year I've been following that for the last year and a half. There were times last year, that thing was up 12, 13% just in a year in the last two years that thing's up 20 something percent, right? So 180% of that is 36% in two years, of course you'd pay 2% to do that piece of cake.
Speaker 1 00:36:15 And if you don't get 36% and if you get zero or anything less, they're going to give your money back anyway. So the really good option for people who are going to just set the money aside and really want to see it grow, but want to make sure they don't lose anything. Right. I completely agree. This is what gets me so excited is I don't know how the indices are going to do Brian doesn't anyone listening. We don't know what we're saying here is that we have the platform that says we can limit the downside. We can have unlimited upside. We don't know how the indices are going to do it's anyone's guess how you do the allocation, but the design of this as such, we can swing for the fences. And at the end of 10 years, you got to wait the full surrender period.
Speaker 1 00:36:55 That's when the true-up hits. And they say, okay, if the fee that you paid extra for was hurtful, then the carrier will actually make up the difference. That's what's called the account value. True-up it's one of my favorite features. So what, uh, we're going to see here, obviously the past two years in the fidelity 32.6 net or no, that's gross. So it's 32.6, but your account value. So they took the two grand off of it. It's kind of like a little margin, but it's still in cap. That's amazing. I mean, you pay, you could pay surrender fees and still have about a 9% average over two years. So what we do is that you wouldn't set it up from the beginning. You'd put half the money in the one year and half of it in the two year. And then after the first year you put that into two years.
Speaker 1 00:37:39 So then instead of going 0 32, 0 28, you're going to have an opportunity for positive credit each year. So it's going to smooth out the yields and give you a better expectation of high performance. So piece of cake, your 10 to 46 to 46. Okay. So again, we could start with this and say, wow, this contract's great. But we also have look at how we had to divide it up at the beginning, just to show a 4% yield. We had to really draw that thing back. That's why, like this thing has potential to really grow. And if you're looking at protecting money, I don't, I mean, you got an, a plus company, a lot of the other high competitors, they might be a minus, might be B plus, we're talking about safety, safe assets go for the strongest company. If you've got one of the strongest companies out there with this kind of potential in these many options, nothing else compares.
Speaker 1 00:38:25 So that's my opinion. What do you think? I completely agree. And one of, one of the things I like and anyone who's doing your due diligence, when you look at the carriers, we're going to talk a plus. It's just another added point. What I like about Midland and north American, both are that their, I believe it's their tier one. And tier two, a lot of carriers will look at those numbers and say, how much do we have in terms of investment quality bonds. Midland has one of the highest concentrations of tier one bond. So it's very well capitalized. And based on that analysis alone, isn't 96%. Yep. And it might be 75 or something. And then with the tier two, I think it was around 20 or something, but they have a high concentration of tier one bonds in their portfolio. And so we liked the way the company is run.
Speaker 1 00:39:12 We, there are other contracts out there by the way, that will let you buy up the rate. Some of them don't have the account value true up. There's one I've seen where they offer that true-up feature, but it happens in year five of the contract and it's a 10 year surrender. So that way, okay, well you've trued me up halfway, but then what happens in the next half of the term when it's in surrender? So I like the fact bottom line here is you got the account value, true up. We've got uncapped indices. We've got the ability to buy it up. This is our favorite idea in the flux. Yeah. And there's also, there's at least one contract where if you choose the enhanced rates, you're going to pay the allocation fee and you're required to keep it for the whole term. So that again, what I, uh, another thing I really liked because I like options.
Speaker 1 00:40:01 I like control. I like flexibility. This is a thing for you available in the contract. You can use it or not. Right? You have the choice on an annual basis. Now we're going to encourage you to pursue the highest potential, but we're not going to be. Uh, but we take it seriously. If we think conditions, don't suggest it's worth paying a fee, then we're going to go. No, we're not always right, but we're going to try to get your best interest in mind. And obviously we want to see it grow as well. Cause it's exciting for us and fun for us to see big numbers come out every year. It is. So there you go. I mean, last 20 years, the highest was 11.62 mamma Mia. Right? So that was a 12 31 0 9 to 12 31 20 19. I would say that if anyone's looking at accumulation again, this is the annuity straight talk podcast.
Speaker 1 00:40:48 Give us a call. 804 3 8 5 1 2 1-800-438-FIVE 1 2 1 hit the green schedule, a call button. One of the benefits by the way of talking with us or working with us is that if you're looking for something like the flex strategy and you're looking okay, how do I implement it? We could actually show you where we feel something like this could work into your particular case design. And the benefit is both of us have access to this contract. A lot of agents don't participate with Midlands direct to agent model. So this may not be an offering that you see. So a lot of guys that don't even know it exists. Exactly. So we offer contracts with where it's not direct we offer, but it's just being from where we sit. We want to, what are all the great contracts out there? And this is one we both have access to.
Speaker 1 00:41:37 So give us a call. Yep, absolutely. So we're here. The numbers live. I think we've got this one covered. Wouldn't you say? And the only thing I'd say one last thing, and this is just something to keep in mind about fixed index annuities in general. And this is for people as they're doing their homework on them is that sometimes the participation rate in a fixed index annuity can change year to year. So just know that this year the participation rate may be 60%. The next year it might be 60% or 55%. So just keep in mind as you're doing your homework. Sometimes those participation rates can jump around one of our favorite other designs, where we pair this with another contract where we can actually lock in that participation rate. And that makes for hopefully the best of both worlds, where you have potentially some flexibility.
Speaker 1 00:42:28 That's what the, you know, some flexibility and the participation rates. Yes. That happens here, but we've got the account value. True-up, that's what I like about the retire vantage. Then there's another contract out there, which we will talk about in a future episode where we can lock in the participation rates, but there's no account value true-up so when you put stuff like those together in a plan, yeah. And you did it, you did a split, it's a five and a 10 years. So that's an, another thing. This is a 10 year option. Midland has an eight year option and a five-year option for shorter term stuff. Uh, they don't have the five-year option has an enhanced rate opportunity. The eight year does not. I was still very good contracts. If you're sensitive to timing a lot of people, if it's your first experience with an index annuity, I've had a lot of people come in, do you know the five or seven year contract?
Speaker 1 00:43:12 And then a couple of years into it, it's like, Hey, this is pretty good. It's like, all right, well now look at the 10 and realize that, you know, you can get a tremendous amount of liquidity between the two contracts. So a lot of people just, they relaxed a little bit. Once you understand the deal and you realize it's, it's a pretty good thing. I mean, oh baby, here it is. Okay. The last thing we should mention too, as well as that, this is our favorite idea among the flex strategy. And it's also correct me if I'm wrong. It's flexible premium. Yeah. Yes. A lot of people are surprised to know that they can add funds to the contract. And we have done that with a couple, with a couple of people this year. I mean, you can do, what is it like 50 bucks.
Speaker 1 00:43:49 You can even just start putting a direct deposit in it. I think it's pretty small, but you can do a direct deposit. What happens if you put new money in, then it's going to sit in the fixed account until your next anniversary. And then it's all going to go to work and whatever indexes you choose. Well, I think we've covered this one pretty well. This is our favorite idea and the flex strategy. There are other great carriers out there with a lot of great products, but this is one you and I are sort of like those test drivers. We've test driven. This one, we like it. We wanted to share it with the world. Yep, absolutely. So we're here. If you need us schedule a call annuity straight talk.com green button, any page 804 3 8 5 1 2 1 a show. Thank you for your time and expertise today. Grateful for everyone, us a subscribed to the podcast or to the YouTube channel. Get notifications. As
Speaker 2 00:44:35 Soon as we release a new video and we'll, uh, see you next time for episode 13. Thank you everyone. And have a great day.
Speaker 0 00:44:44 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 talk. 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 2 00:45:32 Uh, showcase. Ron G is an investment advisor, representative of insight, folios and sec registered investment advisor. The firm only transacts business in states where it is notice filed 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.
