“I get no respect, no respect at all.”
In the retirement and investment space, there are a few little known types of remarkable and ideal investment for baby boomers and generation x ers to place their money. And to coin another famous phrase from TV product marketing genius, Ron Popiel – the best investments are those where one can simply “set it and forget it.”
The uncharacteristic and wild volatility in the stock market and Dow Jones today, since the financial crisis of 2008; have made most investors worried about planning for retirement. The stock market news today indicates that 2015 will be yet another “lost year” lacking any gains in portfolios. Coupled with our burgeoning national debt and with the Federal Reserve surely to increase interest rates in 2016; it is likely to be awhile before the investment waters are “safe” to tip toe back into with ones hard-earned money.
Boomers are in the retirement red zone and desperately need a “Score.” Our US economy is stalling. The ideal investment solution that wealthy and wise investors such as Ben Bernanke and Tony Robbins both place their own assets into and highly endorse as the solution is the most disrespected and misunderstood safe money place. And it’s no surprise since there are at least 15 “flavors” of these highly rated and very popular retirement investments of the rich and famous. But gaining knowledge on the types of annuities is daunting and boring. Perhaps you’ve noticed that even mentioning the word “annuity,” elicits as much enthusiasm as does staring into a bottomless bowl of cold oatmeal.
Or maybe you’ve been alarmed about the alleged reputation surrounding certain types of annuities. Attempting to make sense of the oft maligned and reviled indexed annuity on your own, is frustrating and at best, confusing. They definitely rank as the Rodney Dangerfield of investments: they get no respect at all.
Yet experts say that annuities – already setting sales records again this year with those enlightened – could well innovate how and where you will obtain your maximum future income. Up to now, the traditional annuity sales model is currently like the old-school travel agencies. Today, nearly everyone books their travel online, and sooner than later, we’re going to see that same change in buying annuities. Even the IRS has cleaned up the annuity business and encourages people with 401k plans to invest into the newly approved QLAC. More on this new rule below…
More and more savvy shopping baby boomers and gen x consumers are taking charge of what is now, a business driven by salespeople – often aggressive ones – who hawk certain über long-term annuities that historically pay the insurance agent a high commission. But not all annuities are created equal. Financial boutiques, like My Money Track offer specialized information, help and advice on these new and life changing, near risk-less and lucrative investments. This could easily be your best financial planning tool ever.
Still, that doesn’t take into account one threat: the bad reputation variable annuities have earned. Variable annuities, which are tax-deferred and invest your funds, come loaded with costs. These include large, upfront sales commissions, surrender fees for the first withdrawals, account administration fees and insurance company charges over time. Indexed annuities, on the other hand, are free of commissions and fees. But one must take the time to learn and understand how the best index annuities work.
Some consider annuities to be bad because they have surrender charges for taking out all of your money early. Annuities are a long-term product, so the surrender charge really shouldn’t be a deterrent for someone looking to save for the future.
Even so, 99% of index annuities allow totally free withdrawals of at least 10% of the contract, each and every year! And in case of a medical emergency, one may withdraw 100% of their money from an annuity without any penalties or charges. And there are several annuities that allow one to always have the option to withdraw 100% of their principal invested at any time, no matter how long one has owned the annuity.
So could this be the new age alternative to a money market account?
In this example, one has the reward of earning as much as 3.5% per year without stock market risk and still have full access to their principal without penalties. In spite of these new annuities that are literally chock full of features; annuities are a tough financial category to explain in detail. Until now, they are primarily offered solely through insurance agents, who often do not have the training or expertise to determine the best mix of annuities for their clients.
At the core, annuities are designed to accept and grow your funds without market risk, and then pay out a lifetime income in the future. The longer one waits for that future pay-out, the more they will receive. Sounds a lot like social security or a retirement pension; but boomers and gen x eyes often glaze over when agents try to explain the many kinds and best retirement uses of annuities. Even so, the secret is out.
Even funny, animated YouTube videos don’t seem to be changing the reputation of annuities much. Whimsical as they are, even entertaining information can only go so far in unraveling a tangled financial web.
But annuities do have a fascinating history that dates back to the Roman emperor Tiberius. The term comes from the Latin word annua, and the Roman government created annuities in 13 B.C. as lifetime pension plans for soldiers and their families. When soldiers went off to war for years, annuities guaranteed they’d be taken care of.
In modern times, Andrew Carnegie started the first company that sold annuities, and it’s still around today: TIAA-CREF Financial Services is their name. This is the company with whom that both Ben Bernanke and Albert Einstein invested their money.
Today, the IRS has legitimized the viability of annuities and a more solid reputation; thanks to the Qualified Longevity Annuity Contract (QLAC). Established by the Internal Revenue Service in 2014, it sets new guidelines for investors to create annuity-based pensions. These are now available to use when making your 401k maximum contribution.
“I think QLACs are great,” says Clarence Kehoe, chairman of the tax department at Anchin, Block & Anchin in New York.
“It was a very creative suggestion by the government to assist retirees and provide them with some retirement security for the future by keeping them from running out of money.” That is, as long as a person lives, the annuity payouts keep coming. And when you die, there is a death benefit remaining for the heirs and beneficiaries. Gone are the use it or lose type of old outdated annuity contracts.
But as is with everything awesome, the IRS limits how much one may invest in a QLAC. The IRS caps the amount one may invest. 25 percent of your total IRA-type assets into these annuities, or $125,000, whichever is less, is all that is currently allowed.
“These contracts do provide some form of protection against running out of funds in retirement,” says Mark Edwards, a tax attorney with Gardere Wynne Sewell in Dallas.
Regardless, it will be virtually impossible for insurance salespeople to game QLAC. Because variable and indexed annuities do not qualify, “they can’t juice the numbers, they can’t over hype it and you can explain it to a 6-year-old,” says Michael Ham, founder of My Money Track. “The government sets the guidelines for QLAC’s.”
Some day, one may be able to buy their best annuity online from Amazon. But until then, do yourself and your 401k, IRA and Roth IRA a huge favor and let My Money Track and Michael Ham provide you with unbiased valuable information and advice on your best investment in a mix of the new style annuity that will contractually guarantee an annual increase of ones income account of 6% or more. And the financial institution that provides your guarantees, will also guarantee the income you receive, will last for your entire lifetime!
The old adage of “if it sounds too good to be true, it probably is,” doesn’t fit this little known secret investment loved and owned by the smartest people in America. Even if you reside outside of our local Dallas and Ft. Worth service area, we will assist you and your advisor with educational materials. Call or contact us today at 972-490-9400. We carry an A+ rating with the Dallas Better Business Bureau. Never forget that, A bird in hand is better than two in a bush…