I recently heard a true
story about a retiree who had the lion's share of
his investments in the stock market prior to the year 2000.
If YOU were in the market at that time, you realize that he was
in for a scary downhill slide that would begin in
2000... and show no signs of reversing until 2003.
According to his wife... once the "market correction"
began, her husband would spend entire days watching the
stock ticker on CNN.
Now... I know lots of Seniors... but not
many who want to spend their GOLDEN YEARS
glued to a stock
ticker...
OK... the majority of this
retiree's investments were in mutual funds, so
they were "safe"....right????WRONG!! Depending on which sector of the
market his mutual funds were in, he may have actually lost even
more than the S&P 500 INDEX, the
generally accepted measuring stick for US Domestic Markets and
the benchmark that most mutual fund managers try to
beat.
There were
many factors that contributed to this 3-year correction: overselling
of tech stocks, corporate fraud, geopolitical unrest... and the
tragedy of 9/11. From March 2000 through
September 2002, the S&P 500 INDEX fell a staggering 45%
!! AND... who is to say that history will not
repeat??? Even the market dip that began in May 2006
was beginning to give
many investors flashbacks!!
Continuing our story... the
majority of our retiree's investments were IRA (qualified)
money, and he was over age 70-1/2. To add
insult to injury, the
lawrequires him to
take annual Required Minimum
Distributions (RMD's)... essentially
forcing him tosell at a loss!
For a man his age, RMD's would be at
least 5% per year. So... factor in the 45%
market loss and 3 RMD's of 5% each and picture
this... if our
retiree'saccount was worth $100,000 at
the end of 1999, it may have been worth LESS than $45,000 at the end of
2002... OUCH!!
In 20/20
hindsight, our retiree might have wished he had put
all his money in CD's down at his local bank.
But, at that time, he would have been lucky to get a 2.75% annual
return... not to mention all the "red tape" attached
to CD's. After the double-digit market returns of the
1990's, who would want to settle for a product that was almost the
equivalent of putting their money under a
rock???
EQUITY
INDEX ANNUITIES (EIA's)
The US
Insurance Industry is generally considered one of
the SAFEST sectors in our economy. By
law, Insurers are subject to more checks, balances,
regulatory agencies, and audits than most other types of
companies. In fact, insurance companies are even
required to insure each other so that no insured will
ever have policies and products that would be deemed
worthless. It is generally agreed, that next to the
Federal Government, insurance companies would most likely
be the last institutions left standing!
To address the
concerns of RETIREES and the nearly 80
millionBABY BOOMERS facing
retirement over the next 10 years, the insurance industry has
developed an exciting line of products referred to as
EQUITY INDEX ANNUITIES (EIA's).
The
basic idea of EIA's is to give the investor the majority of the
market upside... but ZERO of the market
downside. The financial backing inside the
EIA's that creates this type of SAFETY NET is a
usually a combination of S&P 500
Options and long-term government financial
paper. When the markets go up, the insurance
companies exercise the options... when markets go
down, the options are not exercised. If the market
generally declines during the "surrender period" of your contract,
then the long-term government paper ends up providing a
"guaranteed minimum return". S&P
gains are applied to the annuitant's
balance based on various "formulas" which are outlined in the
annuity brochures.
EIA's were
designed to outpace CD's and traditional FIXED
ANNUITIES offered by the insurance industry. In
fact, EIA's areactually categorized within the industry as FIXED
ANNUITIES. This is because, even though they are
associated with the stock market through S&P 500
Options, EIA's actually contain no
stocks.
However, after
weathering the stock market storm of 2000 - 2002,
most reputable EIA's actually outpaced nearly every category of
Mutual Fund and Fixed CD's for the 5 year period beginning in
2000. During the 3 down years, the EIA's simply
stayed on the same dollar value... but when the markets started
going up again in 2003, the EIA's resumed right where they had left
off in 1999... many posting double-digit gains. Had the
markets continued downward, most EIA's would have
STILL paid a minimum interest amount (defined in it's
brochure) at the end of the "surrender period."
Please ask me show you a product
performance illustration!
EIA's
are not just a "fad." Since their introduction in
1994, there has been more than $100 BILLION pumped into
these products... andno investor has ever
lost a dime of principle due to market fluctuations!
As of 2006, the EIA steam roller is now
on a pace of adding approximately $25 Billion
per year in new premium!
However,
please be aware that NOT ALL EIA's ARE ALIKE!!
Quite to the contrary... the range runs from
excellent to mediocre to poor performance
and/or unfavorable"fine print."
Pitfalls to watch out for include
long (more than 10 years) surrender periods with
expensive back-end surrender charges... and/or
"guaranteed" performance that "sounds too good to be true".
A wise person once gave me a pearl of wisdom that I
keep close to my heart... I will share it with you
here:
"The LARGE
PRINTgiveth....
the FINE
PRINTtaketh away."
There are
numerous excellent EIA's out there... but the search
can potentially create a "buyer beware"
situation. LIFE-HEALTH-WEALTH
ASSOCIATESwill help you through
the EIA maze and answer all your questions accurately and
honestly.
The arena of
EIA's is, by far, one of the most dynamic in the Insurance
Industry. In fact, not a month goes by that I have not
seen some type of new product, innovation, or formula
adjustment! This is why I
feel it is important to be an INDEPENDENT
producer... able to show you the BEST of what is
currently available in the EIA market... not just what a
"captive" agent or broker may be allowed to
offer... or has corporate pressure to sell
you...
Some
of the more popular EIA features available (may vary by
product) include:
Potential for double-digit
annual gains
ZERO loss in DOWN market years
("Zero is my Hero!!")
No RMD's taken at a loss
Minimum performance guarantees during the
surrender period
Signing bonuses
Multiple S&P Indexing Formulas
and Fixed Interest "Buckets"
Annual formula resets
FREE Access to 10% of your money each year
during the surrender period
Full account value upon death (YTD
interest credited, not lost)
Tax deferral of gains
Probate avoidance
Spousal Continuance upon death
FREE Nursing Home &Terminal Illness
Riders (waives surrender charges)
I have heard many financial
professionals refer to EIA's as the "perfect investment" for
retirees. If you have a quality EIA,
it's really NOT "too good to be true"... these
products really work! Let me show you how... then
judge for yourself.
Let LIFE-HEALTH WEALTH ASSOCIATES Find
the EIA that is RIGHT for YOU!!
TRADITIONAL
FIXED ANNUITIES
We
carry a comprehensive array of TRADITIONAL FIXED
ANNUITIES... all through highly-rated Insurance
companies. With the Federal Reserve continuously changing the
interest rates, we have witnessed quite a bit of volatility in
the FIXED market... fortunately for clients, the rates
are moving UP !! Generally speaking, the
longer your surrender period, the higher the guaranteed fixed
interest rate.
Let us find the FIXED ANNUITY that is the best
"fit" for you!
