Recover Market Losses with This Annuity

Episode 83 April 27, 2023 00:20:00
Recover Market Losses with This Annuity
Annuity Straight Talk
Recover Market Losses with This Annuity

Apr 27 2023 | 00:20:00


Show Notes

If you have suffered market losses, the best way to recover those losses is to invest in a diversified portfolio of stocks, bonds, and other assets that match your risk tolerance and investment goals. This approach is known as asset allocation and diversification. Alternatively, you can use annuities for risk mitigation, as they are all about safety and protection. 

Annuities can be a useful tool for generating income during retirement and reducing risks, but it is important to understand how they work and how to use them effectively to make money and reduce risks.

What You’ll Learn from This Episode:

[2:57] Recovering Market Losses with This Annuity

[4:21] The Stock Market Has Been Flat for Two Years: Is It Time to Consider Annuities?

[5:11] Annuity Rates Unaffected by Fed's Decision to Raise Interest Rates

[6:33] Present-Day Risks: Why Annuities are a Safe Investment Option

[7:15] Understanding the Reverse Dollar Averaging Strategy for Annuities

[10:08] Fixed Annuities Outperform Other Investments in the Past 2 Years

[13:45] How to Make Money and Reduce Risks with Annuities

[14:57] Index Annuities: A Wise Investment Choice with Multiple Benefits

[15:41] Annuities: The Perfect Risk Mitigation Tool for Investors

[19:16] Why Annuities are the Best Option for Distributing Retirement Funds

Key Quotes:

[8:19] "The five years before retirement and the first five years of retirement are the riskiest periods for consumer investors." 

[10:23] "Fixed annuities are by far the best financial assets that you can own." 

[19:19] "If you enter retirement and begin to distribute money, every advantage swings to the annuity side."


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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 85, getting up there. My name is Brian Anderson, founder and creator of Annuity straight I am on location in Grand Junction, Colorado. On my way back from Tucson, Arizona. Trip didn't work out quite as planned but it worked out and I had a great time, met a lot of really good people, gotta see some old friends. I decided to go a touch outta my way. It's not a whole lot to visit my little sister who lives here with her husband. Now any of you guys who have been around from since the beginning, throwback to episode three had the same backdrop. Charlie Russell Print belong to my grandpa, my sister got it. I love to visit it and see it. She's the artistic one in the family and appreciates it the way it should be appreciated. Speaker 2 00:01:42 Anyhow, Charlie Russell, iconic western artist, episode three. I was here after I got my puppy who's no longer with us rest his soul, but episode three was annuity sales and distribution. It's a really good lesson, a continuing lesson for a lot of people. That podcast applies to 75% of conversations I have with people. Hey, why do so-and-so sell this? And why do they only sell that? Why do these guys only recommend this product? And maybe I should do that as a small part of each podcast going forward. Give a throwback and a shout out to some of the previous podcasts. I think it'd be a good reminder for people cuz a lot of people, and I've said this all the time, you're coming in new, you don't have all the topics behind us. And this is kind of a developing process where I hit kind of current stuff along the way but you don't have the context to all of it cuz you haven't necessarily listened to all 85 podcasts. Speaker 2 00:02:31 So the, the topic of this one is recover market losses with this annuity. When I think about this a lot, probably not gonna share my screen. The newsletter is in document format, mostly finished but it's not ready yet. And today is a Saturday. Tomorrow Sunday, by the time you guys see this or hear this, I will be back home in Montana and continuing to do what I do. So everybody's thinking about recovering market losses or where it's going from here. The stock market reaching an all time high intraday on January 2nd, 2022. By the end of the day a reverse course and it hasn't been back since. It's been all over the place since then and there's anything but smooth sailing in the days, months or weeks, months ahead. Who knows what's gonna happen. When it started to drop last year, a lot of people froze kind of thought, oh, oh wait, wait, oh wait, nobody ever gets out of the top. Speaker 2 00:03:24 They either get in too early before the bottom or they get out too late after it has already peaked and is on the way down. But a lot of, a lot of people just kind of froze so they watch the gains evaporate and we're almost a year and a half into it. The s and p 500 is still down more than 13%. We're back to the levels of April, 2021. So for the past two years, the broad stock market is basically flat and we've had a really, really bumpy ride whip side back and forth. It dropped way down, charge back a little bit, went down even further, came back dropped, came back recently. So today's April 22nd. You guys are gonna see this probably, I guess it's gonna be released, email's gonna go out the 29th but it'll be released on the 27th. Uh, time sensitive. I'd like to put the timestamp in there so you guys know a little bit of the context of when I'm talking about it. Speaker 2 00:04:14 Things could change next week but for all intents and purposes the markets flat for two years. I bring this up because a lot of people, dozens upon dozens of people told me, uh, you know what? Rates are good but they, I think they're gonna go higher. He's like, oh well the fed's gonna still raise rates. And again, I'm gonna tell you the Fed raising rates has nothing to do with annuity rates. You wanna talk about it, I'll talk about it. You wanna ask me, send me an email and I'll tell you the podcast where I talk about that specifically. But annuity rates are a market function. Fed rates are an objective use of the financial system, setting overnight rates for banks, everything else falls in line based on market movement or sediment by traders and all that stuff. But a lot of people say, well rates are gonna go up and we're gonna stay away from that cause I've covered it ad nauseum, it seems like two out every three new conversations I have. Speaker 2 00:05:01 Well should I wait cuz our rate's gonna go up. Well, annuity rates have dropped in the past five months and they're still, I mean they're still pretty good. They've dropped a little bit and the fed has kept raising rates. They're not not related but people want their market assets to recover before. Okay, well I'll wait till I get back. It's an extremely general investment strategy and if you're going to use that, I really hope you've got a little bit more analysis to justify it. I don't think it's gonna happen this year, but it could be wrong. That's why I'm talking about this Now, even if it does, what's the point? It's a lot of risk. It has to be worth the potential payoff and there are too many risks present today. Economic, global, political. There's a lot of stuff out there that could shake the markets, rattle the markets. Speaker 2 00:05:44 Either way, no matter what you do, it's your choice. I do however hope you have a backup plan in case it takes a little longer than you expect. My job is to help people and the people who want help will do business with me. If you don't want what I have no big deal, it doesn't matter to me. It's not gonna change my life. Either way, anyone who's 10 years or more from retirement, it matters less because continued contributions will offset volatility and allow for purchase of devalued securities at certain times. That's the reverse dollar averaging lesson. If you don't know what that is, most people do. So if you're, if you're a ways out from retirement, you can afford to take a little bit more risk. But most people I'm working with are within a few years or are already retired, in which case you have less time to make contributions and or recover losses. Speaker 2 00:06:34 On top of that, creating an income plan while you want, uh, for retirement gives you even more risk. And kind of like what it really does is it kind of like constricts what your options are if you want to do it optimally. But if you're doing that with all these other present risks right now along with the good interest rate, great deals makes it really ideal time to start protecting money. As a reminder, it's been studying improvement academically the five years before retirement and the first five years of retirement are the riskiest period for consumer investors. Years ago, the Prudential Insurance company called it the retirement red zone. You know, I'm cynical and it's like, I don't think that's it cuz the red zone is like the 20 yards to the finish line. They're talking about the finish line and then through the end zone doesn't make sense anyway, but that's being, uh, that's being picky. Speaker 2 00:07:23 But that's one of the white papers that you know, Prudential and other insurance, insurance companies. It's the five years before in the first five years of retirement are the riskiest part. Uh, points for any retiree bonds are the all-time favorite asset protection strategy for investment managers. And that's been done for so long that unlike millions of upon millions of people just blindly accept that it's gonna provide protection. But it didn't work out so well last year. 2018 was another time where it didn't, anytime in the past 20 as rates. And again, I go back to some of the previous episodes we talked about the 10-year treasury in 2000 or 2001, late nineties, early two thousands was six and a half percent. That falling interest rates increase bonds, the value of bonds over and above their coupon rate. And even with right now we have about a three and a half percent treasury, it hasn't quite climbed. Speaker 2 00:08:16 If it climbs higher like everybody thinks it's going to, whether it does or not is a different story. But if you think it's gonna climb higher, then don't be in bonds. It's a terrible strategy for retirees cuz you need liquidity. So in the past two years, fixed annuities are ahead of just about everything else. And I'll say like a lot of the annuities I sold didn't do that well in the last two years, but they did better than bonds in the stock market cuz they made a little bit of money and they didn't lose anything fixed. Annuities are probably the best thing you could have owned in the last two years as far as financial assets goes. Unless you picked a couple of, uh, you know, flyer stocks, you got lucky on. Most people are not in that uh, class of investor. But in 2022 annuities, fixed annuities are about the only thing that made money last year. Speaker 2 00:08:58 So this week I'm gonna give you another idea or at least a def perspective on annuities and I'm gonna tell you do not have to be in the stock market to get your money back rather than the risk of losing more. You can protect some of it and you will eventually get there, but never lose it again. We've had higher rates, it creates better opportunities for safe money for investors and lots of different things. It's a good time to switch things up for uh, even defer diversification if nothing else. You can think of this as a sales pitch if you want, but I feel like I feel more like I'm trying to, uh, get you to think about it from a different angle For anybody who can't get over the hump. Hey, you know what, here's the deal. You guys know I like to set benchmarks. Let's set a benchmark s and p 500 all time high. Close of 47, 25, December 31st, 2021. It is now down to 41, 33 as of April 21st, that's yesterday for me and last week when you see this. Speaker 2 00:09:52 So as a percentage of current value, you need 14.5% yield to get back to the value of an all-time high. That's your concern. Okay? That's on the equity side. S and p 500 US high yield corporate bond index. A general index of high yield corporate bonds. Solid, stable, okay? All time high. Close of 7 67, that's an index. It's not an individual bond. If you wanna look at indivi individual bonds, we can do the calculations on those and figure out what they are. So I'm happy to do that for you. It's pretty simple. All time high. Close of 7 67, December 31st, 2021. And that's, uh, there's another lesson there. So the stock market and the bond market both topped out at the end of 2021 and they both cratered. And when the bond market cratered, it's because rates started going up but the stock market trailed off. So rates arose and end of 2022 bond values lost, lost a lot and it's fine if you're sitting on investments, but if you're drawn income from that, you didn't have, you have a stock and bond portfolio, you had nowhere to draw income where you weren't losing money, it's down to 7 0 8 as of April 21st as a percentage of current value. Speaker 2 00:11:04 You need 8.3% yield to get back to the value of an all-time high. Let me talk about bonds. I'm not necessarily suggesting you replace bonds. It depends on a lot of things. I've had a lot of people in the last year who had depressed bond values, but they had really nice coupon rates, maybe something they bought years ago. You're going to get that value back at maturity. So it's a paper loss. You'll realize the loss if you sell it. So I'm not necessarily recommending to do that. Again, this is more for perspective on how you can make money with annuities and reduce risk. So quick and easy way to get it back with as little risk as possible. Like I said earlier, and I'm doing it for the last year, higher rates created more opportunities. There's a lot of different ways you can do it when you talk about income or just appreciation, accumulation, stabilizing a portfolio. Speaker 2 00:11:54 Don't wanna worry about the risk of losing money. I've talked a lot about fixed annuities in the past year. We could do something separate on that. I'm talking about indexed annuities today. And here's the reason. Fixed annuities have a little, I call it torque, right? I'm a diesel engine guy. Like they've got a lot, there's more torque in the product. So I've said it a lot. You like the guarantee take the fixed annuity, like the potential of getting more with the protection on the downside. You take the index annuity, there's some really, really nice potential in those contracts right now. So you can take it from either the bond side or the market side. Buy an index annuity. Now careful again, I'm not recommending you sell either one before you. Do you get a consultant investment professional? I've got 'em on my team. I certainly know how to do it as well. Speaker 2 00:12:35 But we do some serious calculations that are not difficult, but we wanna make sure that it's in your best interest to do so. It's not a recommendation to sell those. But hypothetically speaking, right now there are several products with a 10% cap rate on the s and p 500 in index annuity. That means if the s and p 500 goes up by 10% or more, then you'll earn 10%. The best thing about it is that the market doesn't go up. You won't lose money. So if you think it's gonna race back and you're get gonna get your money back, great. If it does, you're fine. You don't need me. But staying in the stock market, you risk things falling off because of the war in Ukraine and everything going with Russia and China and all the other stuff that's out there, right? So annuities are risk mitigation. Speaker 2 00:13:22 I feel pretty good about bringing up this now because there's just too many economic risks and it seems like going the marker route will come with plenty of stress last two years. It's flat. Okay, great, it's flat. You didn't lose money, but it was all over the place. And I don't know a single person who hasn't been really nervous about it. Now I use the s and p 500 because it's something that everybody understands. We're talk talking about a crazy index. We're not talking about some blended index that nobody gets. There's no transparency. You've got really good core components of long-term index, whether it be SB five under the Dow, the nasdaq, things that you can see on a daily basis and figure out kind of what the trends in our are in those. So we're not talking about anything fancy. 10% is about the ballpark. Speaker 2 00:14:08 You wanna know which annuity I've talked about a lot of times. Number one, I go with Midland National. Number two, mass Mutual ascend. Number three, athen. Now I'm gonna say something about the indexes as well. That is not the highest thing in the market. There are a lot of other companies that have 11 or 12% cap rates. What I do, and I think it's really important to look at kind of where the general market is. When I say those are the three best annuity carriers in my opinion for accumulation contracts, I believe that is. So I've got a lot of reasons to back it up. I don't necessarily need to spend more time in this podcast. If the general market is at about 10%, maybe nine and a half, 10 and a half, and there's a few that have 11 and a half or 12, I kind of scratch my end and say, Hmm, I don't know. Speaker 2 00:14:54 I wonder why. Why are they different? They're not smarter than the invest investment professionals at the companies I mentioned. They're not better at it. They're doing the same stuff. So it's either a teaser rate or they're taking maybe a little bit more risk with bond portfolios. Annuities are all about safety. Go safety, go consistency, see what the market does across the board and go for something with a really strong company that's kind of in the middle of everything. Don't take a flyer on something that may not last for a long time. 10% yield on an index annuity, we'll get you within spitting distance of the all-time high value and it's, you'll still climb as you go by. But the thing about that again is you lock it in. You need 14% to get back to the s and p 500 record. If it goes that you're gonna get 10% of, you'll never go backward. Speaker 2 00:15:43 That's the key. That's why everybody who bought it in next four or five years ago is way ahead of the market because whatever value was gained in that time period was wiped away in the past year. And then people say, oh, they only made 4%. Yeah, well at least they have the money. Again, you see paper value in the stock market, any other asset, gold, silver, real estate, any other commodity, it's a paper value. It's not your money until you sell it. Just like bonds, you don't realize the loss until you sell those bonds. So that's why I say don't necessarily do it, but again, I look at it and for retirement. And then if you, again, we go into the income plan. If you're getting ready to retire, you got an income plan, whether you're doing income annuity or an accumulation contract, you gotta stabilize the portfolio. Speaker 2 00:16:29 And there's some really, really, really good deals. I'm gonna do a, a podcast, maybe not next week, maybe the following week, we're gonna talk about the interest rates within those contracts and how they change over the years. I've done it in the past, I wanna do it again. But if you, if you get into retirement and you're distributing money, then we have every advantage swings to the annuity side. I'm just trying to help everybody out here. It's pretty simple. It's not scary. It's an asset you lock your money in, it's insured, it's safe. We got podcasts to cover everything. I talked to one lady yesterday asking questions. She said, I think you hit 12 or 15 different podcasts. It's all explained. Happy to have a conversation to clear up a few small points. She doesn't need to go spend three hours watching 15 podcasts, right? Speaker 2 00:17:16 So anyway, this has been episode 85, recover market losses with this annuity. I gave you a few examples. I'm not gonna talk about specific annuities. I've done that in the past. If anybody wants to, don't email and say me. Oh, send me an illustration for this. Like I, that never works and I'm never doing it again. Make an [email protected]. Top right corner, schedule a call. My name is Brian Anderson. Pick your time zone, write your name, your email, your phone number, and some notes about what you want to talk about. And I will give you a call at that time. You can give me a call if you want. It's not a guarantee. The number is 804 3 8 5 1 2 1. Then you're gonna risk whatever else I have to do today. You schedule an appointment, you lock in that time in my calendar, I will be there, gimme a call. Speaker 2 00:17:59 And the worst thing that happens is you gotta wait. Sometimes you gotta wait a few hours for me to call you back. I've had piles of voicemails in my uh, inbox, you know, this week, uh, this last week I was traveling in and outta service. I didn't get back to someone till the very next day. So make an appointment if you want. Again, uh, thank you for joining me. I like the podcast or comment on any of 'em. Send me an email. If you're curious about something, you have something to say. You can post comments on the website, follow me. Subscribe to any of your favorite podcast platforms or on where you can see the video of me. Check out the newsletter for the written version of this. Not as much info, but kind of the basics are covered. Anyway, episode 85. Thank you so much for joining me. I look forward to next week with a new topic. Not sure what it's gonna be, but I'm excited about it and I hope you are too. Have a great week and I will talk to you soon. Speaker 1 00:19:04 You have been listening to annuity Straight Talk. The proceeding 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 annuity, straight talk or its partners. No information presented today should be acted upon without meeting with the qualified and licensed professional. It is important that you read all insurance contract disclosures carefully before based on the financial claims of the insurance.

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