Are you or someone you know considering to acquire income for life? If so, you might want to allow us to help you to become more familiar about the financial choices you will make or the choices to avoid before you considering the options about your current income or future income planning requirements.
Investment in equities is completely different than planning out your assets to achieve a consistent, predictable life-time source of income. The very fact that you attained this personal goal, by making years of contributions, financial decisions, and I’m sure at times, caused you some anxiety, in itself deserves applause.
Why is income planning so different from the accumulation of assets through equities? We’ll for example, during these turbulent market swings, it is imperative, to understand, that market volatility will always be apparent and when market volatility is considered not to be customary, when it is not supported by the fundamentals, rather by political posturing, individuals should know their plan/strategies, such as setting limits on the buy-side and sell side disciplines. If not, you could be exposing yourself to unnecessary loss of your principle. When the tapering of MBS and treasuries begins, our income planning discipline could help you avoid erosion of your assets and enhance asset preservation with consistent, predictable income rather than anxiety.
The last time the “Fed,” tapered the market, the market correction exceeded 10.00%-Can you afford a 10.00% loss of your principle or reduce your current income by 10.00% because of market correction exposure.
Having a personal investment policy statement, which is evident for qualified plans, should also be provided in the management of individual accounts and this is always in your best interest. Here at the advisory it is part of our best practice, especially for all our advisory partners.
“I help Retirees and Pre-Retirees overcome the Anxiety of Retirement by providing Security, Consistency, and Predictability to their Investments and Retirement Income, no matter what the stock market does.”
Retirees who watched in horror as their account balances
plunged along with the stock market now face a new challenge: how to generate enough income to pay their bills.
Read more at visit; account balances
A study by the University
of Pennsylvania's Wharton Financial Institutions Center found that by purchasing an annuity, you could create a stream of secure lifetime income for 25% to 40% less than it would take to generate the same income from a traditional portfolio of stocks, bonds and cash using the 4% withdrawal rule. (That's because with an annuity, you're tapping both your principal and your earnings as well as pooling your risk with other annuity owners.)
Say you're a 65- with a $1-million nest egg that has shrunk to $700,000. If you use half of your money to buy an annuity, you would receive nearly $29,000 a year in payouts and under the correct use of the GIWB, Guaranteed Income Withdrawal Benefit the guaranteed income distribution at age 65 would be 5.5% and if the individual delays the date of income, the Guaranteed Income Withdrawal Benefit increases and this can be accomplished without annuitizing your funds.
Used correctly, annuities work really well at helping investors avoid the biggest danger to their investment results: Themselves.
What do I mean by that? Well, many investors have a propensity of letting their emotions drive their investment decisions. When times are good, they like to be in the market (after the biggest gains are in the rear view mirror). When times are bad, many panic and sell everything (essentially locking in losses).
Annuities aren’t the only antidote to this destructive behavior, but they can help.
The other thing that will help investors is having a truly good retirement income plan (financial plan designed for retirement). When that is done correctly investors can see in advance the true pros and cons of all their investment options. After a solid education on how the different approaches work, they then select a plan that fits their emotional fortitude and desired financial outcome. It mitigates the emotional behavior that drives (sometimes) very bad financial decisions.
Nothing is perfect in investing. Nothing is worthy of pure praise at all times, or pure hatred. Every one of us is different, and for each one of our unique circumstances and emotional feelings about money there are appropriate investment plans.
Annuities done right will lower your returns. But they will also lower your risk. And for many, the tradeoff is well worth it (at least in moderation).
Where it works best:
· For producing a reliable, “pension like” guaranteed income stream (so long as GWLB rider is elected, and used shortly after purchase)
· For producing an income for life that cannot be outlived by a surviving spouse
· For investors who have a family history of life longevity For producing additional income for home healthcare needs (subject to state approvals and annuity holder qualification)
· For investors that have no need for their money or generating large returns, but want it to grow safely until transferred to their beneficiaries.
· For individuals who desire preservation of their current or future income-no risk.
· For individuals who want to avoid ongoing related trading or management fees.
Patrick Marshall August 1, 2013 at 3:50 pm
My wife and I purchased one of these last year with 1 million dollars. We were both 60 years old when we bought the investment. Our goal is to start taking money out as lifetime income when we turn 70 basically 10 years after we opened the account. So here’s the way I crunched the numbers. My account got a bonus of 7% or $70,000 the day it opened. The guaranteed income rider grows my income base at a minimum of 4% annually until withdrawals are started. 10 years from now the income value is guaranteed to be $1,583,861 and my wife and I can start taking a withdrawal rate of 5.5% based on our age 70. That’s an income of $87,112 annually. I am expecting my account value to still be somewhere in the $1,000,000 range that I deposited because the fee and low index returns. At that withdrawal amount I will be through my $1,000,000 in 11.5 years and then I will be in the insurance companies pocket so to speak. If the indexes can produce a 2% return annually on average (I think that is reasonable) then that 2% is added to my guaranteed 4% according to the and Security Benefit (I checked, they called it stacking) Based on that possibility my $1,000,000 will grow to $1,916,207 and produce an annually income for myself and my wife of $105,391. So I am in the insurance company pocket in 9.4 years. Both my wife and I’s 4 parents are still alive in there late 80′s early 90′s so we have longevity on our side. Have I missed something? Now I compared this to having my money invested the more normal way. For us to produce $87,112 in annual income 10 years from now I would need to grow our account from $1,000,000 to $2,200,000 and then withdraw 4% annually + inflation. I would then have about the same income $88,000 (Why 4% well that the magic number that everyone seems to think is a safe withdrawal so we don’t run out of’ money) We figure we stomach having 50% in stocks and 50% in bonds, but no more risk then that. If I purchased $500,000 of 10 year treasuries paying 2.5% I would have earned interest and had a total value in that part of my account of $640,000 after 10 years. That means my stock portion need to earn 10.54% annual to give us the dollars we need. Can that happen I think you said it best a snow balls chance in Ecuador. On the upper side of my number crunch my stocks would have to earn 14.6%. Do I think this annuity indexes can make 2% after fees yes, do I think my portfolio could make 10.5% or 14.5% after fees, no. So for us it was a no brainer which way to invest. As you can see I’m a numbers guy. And I really could care less how it works. Heck I don’t know how the stock market works and I doubt anyone else does either really. We wouldn’t know if this was a good choice until 10 years from now. But I do know that 10 years from now I will be cashing $87,000 checks and that I will get those every year that my wife or I are alive. And hopefully they will be bigger. That make us feel pretty good especially when I look at how the stock market has performed over the last 15 years. I think the stress would kill us if we had to go thru that again. Pat PS since the S&P 500 index is over a year since we started our return on that 1/2 of the investment (the other half went into the 5 year index) was up 1% even after fees so this year out income base increased 5% not 4% so we are already ahead of the guaranteed amount.
Source-Independent Review of the Security Benefit Total Value Annuity | Annuity Gator
“Our goal is simple; help our clients live more enjoyable lives with a little help from smarter income and investment portfolios.”
Step 1.Risk Profile
Our introduction to you, your needs, and where you currently stand with your financial goals.
We identify your unique views about money and provide you our financial advisory expertise the foundation to your income requirements and apply our managed portfolio expertise.
· Time Horizon Duration of your investment needs.
· Long-Term Goals Overall return objective.
· Short-Term Risk Attitude Comfort of investment volatility.
· Liquidity Needs Projected need for distributions.
Step 2.Investment Policy Statement
· Ensures you and our advisory to understand the advisor’s role, and accountability. There are four key elements to review:
· 1. Income Provision: When is income needed and for what purpose? Are there lump sum needs to prepare for?
· 2. Decision Making: How you want your money to be and will be managed.
· 3. Asset Allocation Provision: Your custom, highly diversified investment allocation designed to meet your needs without excess risk or no-risk. It’s your choice.
· 4. Provision of Periodic Review: A written agreement of how, and how often your investments will be personally reviewed with your advisor. Our advisory clients have 24/7 account access through our institutional account custodians.
Step 3.Select Allocation Model
· TGA Capital Management Advisors has created a custom portfolio for equities, fixed-income that optimizes client portfolio allocations based on:
· Income Needs Return Goals Risk Tolerance Tax Considerations
· By using our proprietary management, each client has a truly customized allocation specifically designed for his or her unique situation and financial goals. Each year, we revisit these three steps to continually offer the portfolio allocation most appropriate for each client as their goals and financial needs change.
Nearly 80% of all money managers fail to outperform their benchmarks and often produce less than desirable risk adjusted returns. As a result, TGA Capital Management- Separate Account Management is an investment strategy that emphasizes wealth preservation and views risk with a “Prudent,” common-sense approach, unlike any other in the market today, and embodies the idea of being simple, because of the concepts it is based on, yet sophisticated, because of its advanced step-by step mechanical approach to quantitative analysis.
“it’s not always about beating a given benchmark in the income planning mode, It’s about preserving your account wealth, since it needs to last you your overall retirement years with minimal risk-if any.
The advisory can provide income analysis reports and will send separate report analysis of the selected offerings for your review with a no obligation consultation.
Reaching superlative actual results is also our main focus, of any recommendation(s) with continual ongoing, daily monitoring of capital under our management. This is why we are known for “Prudent, verifiable, measurement for your result(s), though our thirty years of Capital Management. Focused on managing your account through ongoing account monitoring (daily) so that your results are a reality, supported by unbiased, process, selection, through our rigorous advisory disciplines, that our client come know us for and expect.
Since we also aim to keep your costs low, your consultations with us, is simplified. Since we embrace the use of technology, we are only a “click away.” We can and will provide ongoing consultation with you via email reporting, on-line personal consultation (Webinars, Teleconferencing, Document sharing, telephone, and Personal appointments are also available.
I look forward to discussing the attached with you and feel free to call the office in the interim. I can be contacted for more detailed information at; mgreen@tgacapitalmanagement.com or call 508-224-9646.
Warmest Regards,
Michael D. Green, Principal
1-508-224-9646
This is not a solicitation nor recommendation to buy or sell a securities nor to imply any tax or legal advice, always seek a registered investment advisor to attain your risk/averse attitude and investment suitability before investing. All information is considered accurate and reliable, however, due to changing market, economic, taxation, institutional, and other pertinent potential cycles and variations, future results cannot be guaranteed by past performance and should be monitored on a continual periodic systematic basis to provide current advisory recommendations that meets the client short-term potential deviations and management disciplined style, while advisory provides solely long-term recommendations.