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The Perfect Annuity

October 30, 2018

Watch the video above to get important updates from David's latest successful retirement creation "The Perfect Annuity"

“Inflation is as violent as a mugger, as frightening as an armed robber, and deadly as a hitman.” That was Ronald Reagan in 1980 when he took over the economy, when interests rates were 13-1/2%. During the decade of the 70s and 80s, up until ‘81, interest, inflation averaged 7-1/2%, which is crazy. That means the costs of goods in a 10-year time frame doubled. We hadn’t had inflation for a long time but it will come again.


And the reason I want to talk about inflation and investing is because it is a super important part of investing. And most of us don’t really count for that. And one of the things we’ve been told through investing is that it’s a good way to – why you invest in stocks is one way to mitigate the cost of inflation. It is just kind of what said and it’s wrong. Because that works until it doesn’t. So if you’re earning in a portfolio of 5, 6, 7% a year and then all of a sudden go through a 2008 and you lose half your money, well that really didn’t help you with inflation, did it?


So one of the things that we focus on is how do we safely increase our income in retirement. And I call this the Perfect Annuity. I’m writing – this is a chapter in my new upcoming book with Jack Canfield called Momma’s Secret Recipe on a Successful Retirement. And it’s called the Perfect Annuities, this chapter. And I call it that, which I made up – I may trademark that, that’s a good slogan, “The Perfect Annuity” – is that it allows you to also have guaranteed lifetime income but also get increases in your income for inflation purposes. And very few people know about this, and it’s something we use as a foundation for planning.


Not only do you want income to last for the rest of our life but also it’s going to give us the opportunity to keep up with inflation. As I mentioned, inflation ran rampant, as most of you know that lived through this time in 70s, was double digits and high single digits. So there’s multiple ways that we use this strategy. And I’m going to give you the most straight forward – there’s three different ways this is credited.


Just think of it this way. So what happens is you’re going to get credit. So let’s just say you have $100,000 in an annuity. And every time there is a positive return in the market this is tied to you’re going to get that increase in your income. For instance, if the market went up 5%, this index went up 5%, you get a 5% increase. If the market goes down 20, you don’t get an increase that year.


So instead of getting the rate of return, that rate of return transforms into an increase in income. So it grows based upon the value of that index but once you take income that increase is going to increase your income. So I’m going to use like 3% to make it simple. It could be lower than that. It could be higher than that. But I’m going to use that as an example.


So if you had $100,000 in your account, and your one in the market was up 5% for this index, you got 3. If the market is up the next year 10%, you get 3. If the market is down 20%, you get zero. So over the first three years, you got two 3% increases in your invests, in your income. And over a 20-year period from age, let’s say, 60-80 that would basically be almost doubling your income. That’s pretty significant.


So I just did a case for a client that has a net about million dollars. And we used half of it for income purposes. In this case we just used an annuity. There’s other ways. And they were going to receive $20,000 a year for life from this income annuity. So we put them in the increase-in- income annuity and from age 60 to age 80, basically, their income almost doubled. And we need that. That’s just earning 3-1/2% per year will actually double your income over basically a 20-year time frame.


So over that 20-year period, it’s a little less than double but the fact is we need that kind of safe income and increase in income. And when I talk to clients about this, they’re just very surprised that you can do this type of planning. So not only do we get this increase in income, the best part is it is like a pension.


So we always do what’s called joint life expectancy. What that means is if, let’s say, it’s your husband IRA and he has $500,000 and we put this money into an annuity, and you’re getting $20,000 a year for the rest of your life and also we’re going to increase in income, which almost doubles in 20 years. Guess what? If you precede your wife, she gets the same amount of money. The same increases. And if there is enough money left over, your children get that.


Because one of the biggest knocks on annuities is 1)  That your insurance company will receive your money. They are the beneficiary of your money. This is not true with most annuities. And secondarily, does that income pass onto your spouse?


I’m giving you a real important investment strategy. We want to increase-in-income annuity. I call it the Perfect Annuity, and it’s in the chapter of my new book. And if you want to reach out to me and talk more about this, just call us at (858) 597-1966!


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, consult with your financial advisor.
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