You may have seen TV ads sponsored by Ken Fisher screaming, “I Hate Annuities."  But, in an article which appeared in Forbes Magazine, Fisher stated, “Folks ask why we run them.  Simple: Because I do.  Granted, some ‘fixed’ types are okay.  But that's about it.”  So, when Ken Fisher says he hates annuities, he’s talking about “Variable Annuities” and not the new generation of the fixed indexed annuity recommended by us!  Fisher sells investments, and his fee is based on the increase in his clients’ investments.  When they make some money, he takes part of it!

There are five different types of annuities, and each are guaranteed by a life insurance company.  When you see the word, “Fixed” in the name of the annuity, it means you cannot lose any money!  We recommend the fixed indexed annuity because the interest rate can be linked to the gains of the S&P 500 Index.  In some years, it has earned double-digit rates.  It looks like a bank CD because it is an account which earns an annual interest rate.  It has special features like income tax-deferral and protections against creditors and lawsuits.  When you retire, you systematically withdraw money to supplement your social security benefit.

As a general rule, if your account earns only 3% during your retirement, you can still withdraw 5% of the account value, and the money will not run out for 30 years.  For example, you could withdraw $25,000 annually from a $500,000 account to supplement your social security income.  You cannot use this rule for securities or variable annuities due to the risks of losing money.

The new generation of the fixed indexed annuity was introduced in 2015.  It is different and better!  There are several companies offering it.  Instead of using the S&P 500 Index in the annual rate calculation, a new index uses the gains of multiple asset classes; like domestic stocks, international stocks, emerging markets stocks, gold, real estate, and bonds for diversification.  A higher bi-annual interest rate is achieved because a computer analyzes the performance of each class, and removes asset classes that have a 12-month negative trend.  The data shows this configuration operates well in both good and bad economic times.  There is a fee to use this Index; however, the 7% to 10% illustrated interest rate is the net rate after the fee has been subtracted.  So, the returns can be significant during the next "stock market Boom and Bust Cycles (2017-2023).

After our first interview, we will prepare a written retirement plan.  It will have a table showing the suggested annual withdrawals; along with the projected year-end account values over the next 20 years.  The implementation of the plan is completed during the second meeting.

Enhanced Death Benefit

This is an optional feature for a fee.  But, when the rider is added, the owner receives a 10% cash bonus to offset the fee.  Usually, the death benefit is equal to the account value at the time of death.  The Enhance Death Benefit is different.  At the same time, the couple is withdrawing money, the enhanced death benefit is offsetting part of the withdrawal.  Let’s say they purchased the fixed indexed annuity with an enhanced death benefit with $500,000.  Plus, they withdrew $25,000 a year to supplement their social security.  By the end of the 10th year, they will have withdrawn $125,000 and the enhanced death benefit was $645,721.



​Tax-deferred Strategies