, ,

Can a Policy Review Save You Money? We Say Yes…

Policy Review: Lower Premium;  Increased Life Insurance, Tax-Free Income

Whenever we make a major purchase, we always look for the best return on our investment: whether it’s a car, a home, or an insurance policy.
When it comes to our tangible assets, it’s easy to see when they need updating or maintenance. Unfortunately, less tangible assets like insurance policies often get filed away and forgotten, but it’s just as important to review and revisit these on a regular basis. Here’s why you should always consider a policy review.

 

, ,

I DON’T LOSE WHEN THE MARKET IS BAD? Tell me more….

Untitled-10I wonder how many people truly understand an Indexing Strategy in  an insurance based environment?

We’ve all been educated about Indexing Strategies in mutual funds, ETF’s and so on. But as a rule,   people have very little knowledge when it comes   to insurance indexing strategies—yet they do exist.  What’s more, the money in these assets grows tax free—like a 401 (k) – and can be accessed through policy loans, thus avoiding income taxes and allowing constant liquidity throughout the life of the assets.

So what exactly is an Indexing Strategy in an insurance based environment?  This kind of strategy has two key components:  a CAP or limit as to how much you can earn when the market is good and a protective floor of ZERO when the market is not good.  How is this different to the S&P Index?  The S&P Index spreads the investments evenly between 500 different stock companies. There’s no cap, so it lets you keep all the gains when the market is good, but  when the market is bad, you suffer the loss.

Now look at the chart below. This illustrates how a total of $100,000 would have performed  during the period 1998-2015 based on these two strategies. The top line of the graph represents the Insurance Indexing Strategy: you can see that in the years where the market loses money, you’re protected from losses due to the floor which protects principle.  The same doesn’t apply if you’re invested in the market—where you’re subject to the lows as well as the highs of the S&P 500 Index.  You can see that over time your assets in the Indexed Strategy are protected from loss  and have the potential for substantial growth. Over the 17 year period 1998-2015, the total yield of the Indexing Strategy was 114.9% with an effective yield of 6.75% compared to the total yield of the S&P 500 Index which ended at 83% (effective yield 4.88%).

As a point of note a Nominal yield is what one makes on an annual basis (Bank paying 1 % annually on a CD is a nominal yield).  An  Effective yield:  what one earns over a period of time greater than one year (for example, earnings of 5% in Year 1, 7%  in Year 2 and 12% in Year 3 gives an effective yield of 24% over 3 years).Updated Annuity Graph - May 2016

Over the 17 year period 1998-2015, the effective yield of the Indexing Strategy was 6.75%  while the effective yield of the S&P 500 Index was 4.88%

For more information on how an Indexing Strategy works and how you can incorporate into your portfolio, call Barry Goldwater at 617-527-9736 or email at barry@goldwaterfinancial.com

DISCLAIMER:  This graph is based on actual credited rates shown on the Index-5 product which is no longer available for sale.  Past performance is no guarantee of future performance and  should not be relied upon as such.
, , , , ,

As Markets Go Down, Look Into Index Annuities

 

As the stock markets are looking dismal, maybe its time to re-investigate index annuities to protect your wealth.

We hear more and more about indexed annuities in an insurance based environment and their increasing popularity when it comes to retirement planning, Yet naysayers are quick to decry them with arguments such as “what does minimum guarantee really mean?”, “too complex”, “limited  earnings because of the CAP”. But when the stock markets look dismal, those that have taken advantage of these annuities are protected.

Check out our JUNE article and the above video to understand why.

 

, , , , , ,

Why Annuities are Gaining in Popularity

JigsawWe’re hearing more and more about indexed annuities in an insurance based environment and their increasing popularity when it comes to retirement planning, Yet naysayers are quick to decry them with arguments such as “what does minimum guarantee really mean?”, “too complex”, “limited earnings because of the CAP” and—my particular favorite—”beware of agent bonuses”.

But when it comes down to it, it’s difficult to argue with hard numbers and proven results.

So what exactly is an Indexing Strategy in an insurance based environment? This kind of strategy has two key components: a CAP or limit as to how much you can earn when the market is good and a protective floor of ZERO when the market is not good. How is this different to the S&P Index?  The S&P Index spreads the investments evenly between 500 different stock companies. There’s no cap, so it lets you keep all the gains when the market is good, but when the market is bad, you suffer the loss.

Now look at the chart below: this graph is based on ACTUAL CREDITED RATES for the period shown on a particular product* over the period 1998-2014.  It shows how $100,000 would have performed during this period had it been invested in the S&P (with dividends) and the actual credited rates of the Indexed Strategy.

With the Insurance Indexing Strategy, you can see that in the years when the market loses money, you’re protected from losses due to fixed zero floor.  The same doesn’t apply if you’re invested in the market.

 When it comes down to it, it’s difficult to argue with the numbers:

IS Graph 300 dpi

*This graph is based on actual credited rates for the period shown on the Index-5 product from American Equity which has since been replaced
 **Past performance is no guarantee of future performance and should not be relied upon as such
, ,

More Insurance Myths Debunked….

ProtectionI recently read an excerpt from an article expounding the concerns associated with index annuities. Whoever had these concerns is unclear, so I had to smile to myself, but as a passionate believer in index annuities as part of a comprehensive and diversified portfolio, and out of the belief I hold that, like myself, many of my colleagues truly wish to help businesses and individuals understand the many retirement options open to them, I felt compelled to address some of these concerns:

 #1        “They are going to sell you!

As a nation built on competition, free enterprise and freedom of choice, I’m not quite sure why this should be a concern. Anyone offering a product or service is “selling” something, including anyone offering a 401(k) plan. Admittedly, there are bad – even awful – sales people, but the true value of a sales person is one that offers all the options, the pros and cons, educates and allows the consumer to choose what’s best for that consumer. To imply that anyone offering index annuities will force the consumer to make a choice that would ultimately not be in their best interests does little more than engender mistrust.

 #2        “Informative lunches that are really veiled sales pitches”

Who has ever accepted an invitation for a free “weekend for two” to some resort and not understood that part of the deal is a sales pitch for a timeshare? Potential attendees to these lunches are not fools. A great presentation is about informing, educating, and earning trust, and most individuals want to do business with people they know, like and trust.

 #3        “Surrender fees — as high as 20% — imposed on buyers who want to cash out before 10 or more years have passed.”

 Perhaps there is an insurance company out there that does indeed have such draconian surrender charges. However, the vast majority of customers who purchase index annuity products do so for the GUARANTEED INCOME they will derive – at which point surrender fees become a non-issue.  If the customer is looking to make a short term investment, then they should NOT be looking at index annuities as an option.  Surrender charges are meant to dissuade customers from using index annuities as short term investments and the right insurance consultant would advise their clients against doing so.

 #4        “Offers of “bonuses” that aren’t worth as much as they seem and that some people never actually collect.”

A company that offers an annuity buyer an 8% bonus gives that buyer an 8% bump not only on their deposit but also on any riders that may have been included. When income is requested, the principal amount plus the 8% bonus is calculated. Why would this not be attractive to a potential client?

 #5        “Products so complex that buyers — retirees who are at their most financially vulnerable — can’t tell whether they’re getting a good deal or are just getting taken. “

 A recent survey of 401(k) participants showed that 71% were unaware that fees were charged by their plan providers to maintain their account.  When told of these fees, 63% could not determine the amount of these fees.  This is a clear indicator that the financial industry as a whole needs to do a better job educating the public on the complexities of all finance related products.

2114

To have people entrust to you the safety of their hard-earned income is a privilege, so on a final note, I’d like to quote Albert Einstein:

“Whoever is careless with the truth in small matters cannot be trusted with important matters”