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Okay, got this email this night. Thought it was kind of hillarious! Follow this if you can James! I rather not but thank you any way Josh. Plus I love the way he uses his example case, what a joke!
Dear James,
Enough of the marketing stuff. I get tired of selling my services, and I am sure you are tired of hearing it. Let's agree that I can help you if you want help, but you are skeptical that I am even a real person, not to mention someone trustworthy enough to work with. Oh by the way, the Better Business Bureau still has us rated AAA...pretty good especially when compared to Fidelity, Merrill Lynch or Vanguard (see www.bbb.org).
Ok. On to the interesting stuff.
Today, I want to show you a quick strategy that can build a safety net for your long term income needs while at the same time position growth in your portfolio.
In a nut shell, this is a two bucket approach. Common amongst those of us that call ourselves financial "professionals", but probably lesser known to you.
So follow me if you can. First, we are going to divide your money into two buckets. The first bucket is your safety net, and the second is for growth. How much you put into each of these buckets depends on your income needs, risk tolerance, age, goals, etc., etc.
In the first bucket, we use a lifetime income annuity to guarantee a lifetime income stream for you or for you and your spouse. If you need income, then we set this up to equal the income you need on a monthly basis. If you do NOT need income, then we set this up so that it is used to meet other goals (gifting, funding a 529 college savings plan for the grandkids, funding a life insurance policy for estate planning purposes, etc.). Regardless of what it is used for, you cannot outlive this money and it is as reliable as the insurance company you purchase it from (that is right, if the insurance company disappears, you may be in a heap of trouble, but let's assume you are wise beyond your years and decide to work with one of the biggest companies around).
Now, in the second bucket, we get to invest the money into a moderatey aggressive portfolio for growth. Yes, I know what you are thinking. This stock market is crazy! What if you lose? What is we are entering a recession? What if? What if? What if? What if you are wrong? What if you miss a growth period? What if you are the typical investor who makes investment timing decisions based on emotion instead of a disciplined strategy?
The point here is that you do not need the second bucket right now. Your "needs" are taken care of by the first bucket. This second bucket is your hedge against future inflation, the money you will use in the future, and the assets you will likely bequeath to your heirs. You can afford to position this in a moderately aggressive portfolio because it has a long-term objective.
Let's look at a quick example.
Assume Mr. and Mrs. Smith are retired, age 70. They have $500,000 in a conservative portfolio that is averaging 5% after fees. The Smiths also need roughly $20,000 per year to supplement their pensions. As it stands right now, the Smiths are worried about decreasing interest rates, market volatility, and the losses in the bond market (which are always disconcerting) that directly affect their income withdrawals from the portfolio. They would like to at least maintain the principal of their portfolio and grow it slowly for future use.
In this case, the Smiths can put $250,000 into a joint lifetime annuity and make sure they will have $20,000/year for the rest of their lives (Bucket 1). This gives them peace of mind, and the security of knowing they are no longer dependent on falling interest rates or the bond market for their daily lifestyle.
With this renewed confidence, they can invest the remaining $250,000 in a moderate portfolio in hopes of earning 10% annually (Bucket 2). After 10 years, the Smiths are giddy. Not only are they continuing to receive $20,000/year with their annuity, but now Bucket 2 has grown to $650,000! After just 15 years, the Smiths are in a position they never thought possible - they just joined the millionaries club.
Yes, I hear your question about inflation. While the annuity does not increase with inflation, their other pensions do. That coupled with the fact that the Smiths are becoming less active as they get older means that inflation is a non-issue (and fortunately, the Smiths bought a long-term care insurance policy in their early 60s, so they do not have to worry about nursing home costs).
Does that make sense to you? Wow! I am ready to retire right now!
Ok, let's get serious for a moment.
I hope this makes sense. I have implemented this strategy with a number of new clients this year, and I personally enjoy the peace of mind it brings during an uneasy investing period.
If I can be of any assistance, please complete the form on our website and I will be in touch with you promptly with personal and professional service: www.annuity-experts.com/quote.html.
Thanks for your time today and God bless!
Josh
Josh Elliott, President
Annuity Experts, Inc.
