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 74. For those who don't know, my name is Brian Anderson, founder and creator of this podcast and the website annuity straight talk.com where you can get all the answers to your retirement questions. An unbiased, no pressure approach to solving the problems that you foresee in those casual years of retirement here in episode number 74, kind of getting into February I think is when this is gonna come out. So we're moving through the first month of the year. Things are kind of same as last year. Rates have settled just a little bit for everybody that was waiting for more, waiting for more. If they jump now, they're gonna settle for a little bit less. Uh, and a lot of people get into contracts into December. We're finishing those up now and in the last couple of weeks and those guys kind of nailed it just about right.
Speaker 2 00:01:38 So I think like November, December was kind of the uh, high point rate. Not everybody's pulled back, but a lot of the bigger companies have and you know, I guess you just do it when you think it's worthwhile, right? But the title of this one, index Annuity Perspective, we talk a lot about both fixed and index annuities, income annuities. I talked about pensions in the last couple of weeks, you know, but we're going to index annuities this time because of a conversation I had with in the past couple of weeks. I keep saying I'm gonna get to a three-part series and it's gonna come at some point, but these ideas just keep popping up. I've already got a different one from last week based on just a comment. All it takes is a sentence to give me an idea. So if you have got something to say, please say it respond to my emails and this goes out to the new email list you can comment on, I think you can comment or like on YouTube or your podcast platform if you need that.
Speaker 2 00:02:27 Or you can call me at (800) 438-5121. Schedule a call top right corner of any page on annuity straight talk.com. Okay? So index annuity perspective. Now I've got a newsletter for this. It's my visual aid. I kind of changed the camera angle to get it a bit closer to me, to you be more easily noticed that I look down at my screen cuz I'm reading it. You guys, I don't know if you can see the computer from this angle. Sometimes I share it and sometimes I don't. Today I'm not going to, if you wanna see the newsletter sign up to the email list, you'll get it on Saturdays. Both will go out so you can read it or you can listen to it. The podcast is always gonna have a a little bit more detail because then I don't have to form perfect sentences and the punctuation and paragraphs and all that stuff.
Speaker 2 00:03:04 So anyway, if you have never owned an indexed and annuity, you have no idea whether it's gonna work out to be a good investment. And it's like funny to hear a salesman say that, but I am not a salesman first. That's how I make my money. But I wanna make sure you understand all details of the contract so that you can make the final decision, go forward with confidence. But you buy it and you don't know, hey, is it really gonna work out like everybody said it would or like this guy promised. Now safety, your money's safe and a reasonable amount of liquidity are guaranteed, but top line growth is only a projection. Now if, if the type of a liquidity that the contract offers doesn't work for you, then you don't buy it in the first place. You can't get down the road and say, ah, you know what, this doesn't work.
Speaker 2 00:03:48 So if you have a really, if you have a good contract, low performance is not usually the fault of an annuity. Rather it's the fault of poor economic conditions or a bad stock market. Right now the s and p 500 is about flat over the past two years it's up a little bit. Three to 5% changes every day. If you bought an index annuity two years ago that hasn't grown much, then you've essentially kept pace with the market without the ups and downs. Now a lot of people get into a year or two where, you know, some people do well hit 10, 12% their first year and then it's easy, right? Some people, you know, make zero to three. Last calendar year was the first time I'd ever seen a zero in 12 years of selling these things. But if you're, you gotta be patient.
Speaker 2 00:04:30 So a lot of people want, you know, oh I didn't do that well in the first year. Oh this is terrible, right? But it's usually related to something else and that's what I call it index new perspective. Cuz you gotta be looking at it the right way. Within the last couple of years, I think I did a newsletter on this, I don't know that I did a podcast, might have been right before I did the newsletter, but old index annuities can still grow. But I saw one that hit 15% return in its fourth year. It had kind of bumped along. Now this was, I think that fourth year was probably back in oh 20 18, 20 19, I think 20 19, 18 to 19 was a pretty good year and that brought the average back up to above expectations. Okay? So remember the circumstances with which you bought it. And I've talked to a lot of people, they get through, you know, some of 'em may be two and a half to three and a half percent.
Speaker 2 00:05:19 And then when you compare to what bonds did over that time period, the worst ones draw. Similar to bonds, no harm, no foul, right? A lot of 'em exceed that. But when you go back right now we're renewing contracts that were issued in 20 14, 15, 16, some of the lowest rates we've ever had. So that's gotta be kept into perspective every now and then a personal bail after a couple of years. And then it take the hit on the surrender fee thinking, oh there's surely there's gotta be something better. This is all gonna come into one nice story at the end. So matter of perspective, you have to remember the reasons for buying it in the first place. Okay? So a few weeks ago now there are a lot of these people, maybe two weeks ago I spoke with a guy I've had had several in-depth conversations with him.
Speaker 2 00:05:59 There's a lot of people like that that I've had re really detailed conversations with. And for one reason or another they don't do business. You know, a lot of it maybe not wanting to take the leap or maybe they've got an established relationship elsewhere. Everybody's a little bit different. But I've talked to this guy a bunch. Good dude, I like him. We've never done business right before he met me in I, I'm pretty sure it was 2018. So, but before he met me, he bought from someone else a hundred thousand dollars Index Annuity Prudential. Now 2018, and I've said this before, was the previous to now was the best rate environment that I've seen in 10 years, 12 years we had a little bit of rise in the treasury and then it stayed strong kind of into 2019 through the end when 2020 hit Covid market dumped, so did the treasury and then we had a lot lower rates to work with.
Speaker 2 00:06:48 So I didn't sell this to him, but he had good rates and over the years it's done well. So during this conversation a couple weeks ago, can't really say I, I mean I I'll say complained, he didn't really complain, but he said, you know, that stupid index annuity, he only made 700 bucks last year. And so of course I said, well, not a lot of things made money last year. The only things that I can think of that made money like across the board were CDs and annuities. Stock markets down, bonds are down. I said, you make money last year with any asset. You know, positive movement is a good thing, doesn't matter how much. And he wasn't really sad as I could. I was kinda repeating, well yeah, but 700 bucks, that's nothing. Okay? I said, well, well how'd the rest of your portfolio do?
Speaker 2 00:07:23 And what do you mean how'd your stocks do? Well they're down. How'd your bonds do? Well they're down, but he's got a good asset manager. He said, well this guy had some, uh, mitigation strategies in place. Total portfolio was down less than 10%. I can't remember, I thought he said five or 6%, but he's got a bunch of money. So that was, it was a good chunk of money that he lost. But he, so he lost one and cash in the bank in this index annuity about the only thing that did anything positive, even with good management, still lost a substantial amount of money. So going back to the annuity, I said, well how much is that contract worth today? What was it worth at the anniversary? We put a hundred thousand in in sometime in 2018 and at his fourth anniversary whenever it was last year, it was worth $127,000.
Speaker 2 00:08:04 So in four years he made 27% total with no risk, no fees and no volatility. Can anybody tell me what's wrong with that? I've seen some that have done just as well. I've seen some that haven't done that well, but it's usually related to external forces, not the annuity itself. What we essentially had in the last four years, we had two really good years, two really bad years. That's the perfect environment for an index annuity. For comparison purposes, let's consider what the s and p 500 did over the same time period. So at approximate starting date, s and p 500, beginning to end, right point to 0.4 years, if he would've put a hundred thousand dollars in an index fund matching the s and p 500, you probably wouldn't have done that. He'd have had, had his manager put it in a blend of different things, you know, all right.
Speaker 2 00:08:50 He would've had a total of $129,000 today, 2000 bucks more, but low point would've been about $80,000 in March, 2020. And the Heif point would've been about 140,000 right after New Year's, this time last year. So there's your volatility with the ups and the downs, the index annuity of basically done just as well as an investment with a hundred percent risk in the stock market. The annuity probably edges higher because he bought it with after tax money. Non-qualified annuities get tax deferral, an open investment in the stock market, you're gonna pay ordinary income on dividends, you're gonna pay capital gains cuz funds buy and sell even if it's down in value, you get dividends and you get buying and selling. That's kind of one of those, that's really a sting to a lot of people where, you know, mutual funds are down in value for the year.
Speaker 2 00:09:36 They lose money and they still get a 10 99 cuz of the dividends and the buy-in and the selling. Just one of those things that's not so great about it. And then if you add, you know, management fees, say the guy's charging him 1% or three quarters, if you got a really good one and a lot of money and he's cutting you a break, it's gonna drop it even further. It's all about the right perspective with index annuities. So that part of the conversation started cuz he is thinking about buying another annuity and he's, he listens to the podcast and he wants to know well fixed or indexed and I, you know, the same spiel. It's like, well if you like the fixed rate and that you're satisfied with that, it's a guaranteed growth rate and, and you just get what's guaranteed and it's easy. But if you want to go for more, then you buy the index annuity and he could do either one.
Speaker 2 00:10:17 He could afford to go for more in some situations. I say, why not? That's me and you have your own opinion. It may be different. But he said, well there's no good reason to buy an index annuity cuz the market's gonna be terrible in the next few years. My broker and I both agree that it's gonna be awful <laugh>. So I say, wait, the guy that's got your money in the market says the market's gonna be terrible. Okay, well what are you doing with money in the stock market then if we have volatility in times past the most volatile markets produce the nice yield for annuities and it's a result of how the contract functions, right? You rise up, you step flat, you rise up, you step flat, okay, pretty simple. The best time to own an index annuity was probably from the decade from 2001 to 2010.
Speaker 2 00:10:54 If we have a similar experience for the next 10 years, which we cannot project or guarantee, but if you have a ton of volatility, you're likely to do pretty well in an index annuity. The rates you can get today are gonna deliver incredibly great results with an index annuity. I'm not saying you gotta go buy one, but don't not buy one because you think the market's gonna be rough. That's why. And if you think the market's gonna be rough, so you're not gonna buy an index annuity, then why invest in the stock market? Some of you are, are out entirely. A lot of you do have money in there and it's a good idea to protect it with where rates are right now. And I think I said it last week, first quarter this year, I expect 'em to probably stay where they're at. I'm calling something of a drop.
Speaker 2 00:11:32 I don't know how much, I hope it's not much and I really hope it's nothing. I hope they stay this way for a long time, but not a bad time to do it. It kind of goes back to uh, something I, I've said in previous podcasts maybe a couple of times, I've been doing this for 20 years and it's throughout my whole career. When annuities are at their best, nobody wants 'em. Very few people want them, everybody wants the gains back, they want the, you know, the extra what, 18% that the s and p is down. They want to get back to where they were a year ago, it could go the other way. When it does and you decide to get an annuity, then the rates are gonna be lower and you're not gonna like the opportunity. So this is a time when they're best.
Speaker 2 00:12:09 Nobody really wants 'em now. Insurance companies are still very busy so a lot of people are doing it. But really good rates right now allow you to settle into an uncertain future. We don't know, I don't know if it's good or bad rates are lower or higher, but you settle into it with a very valuable contract. Sleep at night, safety, plenty of upside potential, not a bad opportunity to do it. And I would appreciate a conversation with any of you who want to go into more detail about this. Again, episode 74, index annuity perspective. My name is Brian Anderson. You can give me a call at (800) 438-5121 or schedule a call at the top right corner of any button. <laugh> the button on the top right corner of any page on annuity straight talk.com. Thank you again for joining me. I look forward to any questions, comments, or suggestions I get from you guys out there like and share on YouTube or your favorite podcast platform. If you wanna send it to somebody else, gives me motivation to keep going, send your questions cuz it gives me an idea. So like I said, next week's podcast, one sentence and it wasn't even a full sentence. Four words the guy said, and I'm like, that's a great title. So I'll see you guys next week with episode 75. Okay, have a great day. Thank you. Goodbye.
Speaker 1 00:13:32 You have been listening to annuity straight talk. The proceeding information is for information and educational purposes only. Does not represent legal or investment express and do not necessarily reflect the no information presented today should be acted upon without meeting with the qualified licensed professional. Its important that you all insurance contract disclosures before guarantees based on the financial strength and claims insurance company.
