Jim Byrd and Biff Hamel of Safe Harbor Financial Services, LLC host Safe Investing in the New Economy on WABF 1480 AM radio, FM Talk 106.5 radio and Fox News radio 710 WNTM. Listen weekly to the show on the radio, or plug into the podcast on iTunes. This week’s discussion covers retirement planning with information about various types of annuities compared to other investments.
Crazy Stock Market Last Week
After a severe fall-off in prices last week, we had one of the strongest one-day rebounds of the year this week on 10/16/18 with a rise of about 500 points. Many think this is the adjustment the stock market needed to continue its growth, but not even the experts agree. Do we know if the adjustment over? William Watts of MarketWatch Magazine quotes Jeff deGraaf, chairman of Renaissance Macro Research, who says no, “a big one-day stock market rebound doesn’t mean blue skies ahead.”
At Safe Harbor Financial Services, LLC, we don’t like that kind of excitement in our retirement portfolios. And there are some alternatives to that kind of market volatility and risk that are smarter investments for most retirees and pre-retirees. After all, who can afford to lose their retirement portfolio when they’re about to retire? There simply isn’t enough time to make it up by leaving it in the market as many do in their earlier growth years. One of the ways we combat market volatility and risk for our clients is by offering fixed index annuities, often called hybrid annuities.
What Are the Different Kinds of Annuities?
Many brokers bash all annuities but not all annuities are created equal. There are different kinds of annuities, some better than others. What kind does Jim Byrd recommend and why?
- Variable annuities are quite costly compared to other types of annuities. Plus they don’t have an income rider and are as risky as the market.
- Fixed annuities are much less risky but they aren’t paying enough right now to be in them. They pay like bonds, which are also not a good investment right now.
- Indexed annuities- Old style annuities that were indexed- matched- to the market return. Hybrid annuities offer a better value.
- Hybrid annuities- A good balance of features. The downside risk is minimized because they pay a minimum guaranteed amount or the market return, whichever is greater. Some critics will say they don’t pay well, but actually they are guaranteed at 7% income currently and many annuities come with a bonus paid into the account.
Why does Jim Byrd, also a licensed fee-based adviser, prefer hybrid annuities in your retirement portfolio?
- Guaranteed income based on the greater of the guaranteed amount or the market return.
- Ten year annuity is the longest term we recommend. We offer 2 to 10 year terms.
- Guaranteed lifetime income for you and your spouse. The longer you wait, the more you get paid each month.
- 8% bonus or more on the front end on many products.
- Nursing home doubler is available on some annuities. If you need to go into a nursing home, your payout doubles.
- In case both spouses die, the beneficiary gets the money, which also bypasses probate. This is not the case with ordinary pension plans.
Commission Structures of Managed Money vs. Annuities
Critics also bash annuities for their high commissions. What is the truth?
The commission structure in a brokerage house is based on the value of your account and usually is a percentage of your account’s total value. For example, the broker might get a 1- 1.5% managerial fee on an annual basis, paid every year. So if you’re with that firm for 10 years, you’ve paid them approximately 10% of your portfolio’s value and that fee never ends. As the account value grows, your annual commission fee increases each year also.
By contrast, hybrid annuities commissions are higher, but they are paid entirely by the insurance company to the independent agency selling them. No money is taken out of your principal. For example, if you start out with $100,000, you will often get a bonus too, so you might start out with $108,000. And that value grows for you. Note that if you take the money out early, you would pay a surrender fee which would lower your income.
Call For Your Complimentary Consultation
Give us a call at 251-625-1226 and make an appointment for your complimentary consultation. We’ll help you understand the differences in all these investment options as we evaluate your current portfolio and devise a plan that meets your needs. We believe just about everyone needs some portion of their portfolio in guaranteed income as protection from market volatility. There’s no pressure and no cost or obligation for this service. Take advantage of this complimentary offer by emailing us today or calling 251-625-1226.
Also consider signing up at 251-625-1226 for one of our financial seminars, this month at two locations:
- October 25th at Briquette’s Steakhouse in Mobile, AL
- October 30th at Original Oyster House on the Causeway in Spanish Fort, AL.
We’re educators about retirement planning and we’re serious about helping you plan for a safe, happy retirement!