What is Safe Money?

by FindYourAnnuity.com8. November 2012 18:31

What exactly is “Safe Money?”

  • Is it money that needs to be risk free?
  • Is it money that needs to be available?
  • Is it money that must provide a safe and secure retirement?
  • Is it money that must last years? A lifetime?

What exactly is the true definition of “Safe Money?”

The answer may surprise you: The answer is based on your specific personal situation and your desired goals. For many people “Safe Money” is money that will be there when it is needed. For others it could be a calculated risk factor on some selected asset allocation plan. Once again…it all depends. For the truest definition of “Safe Money” let’s look at it in its purest forms… safe and free from risk. This may come as a surprise to you; if your money is to be completely risk free you only have three options. These options are based on the underlying guarantees that come with each category. If the very worst scenario happened…would your money still be safe…. Your options are:

  • US Treasuries: guaranteed by the full faith and credit of the United States.
  • Bank and Credit Union Accounts: guaranteed by the Federal Deposit Insurance Corporation (FDIC) and the NCUA with underlying guarantees of the full faith and credit of the United States.
  • Fixed Annuities: guaranteed by the assets of the insurance company and the underlying guarantee of each state’s: State Guarantee Fund.

So why don’t all of us keep the majority of our money in one of these three options? One reason could be the yield or the interest earned. The safer the deposit the lower the yield. If you demand the total and complete security of a guarantee then your yield may not be enough to sustain your goals. Like all things in life, common sense is a solid reminder of how to maintain momentum and not lose sight of your goals. Approaching this issue with common sense may be the very best possible option. When the need for a higher yield is your goal what other options can be considered?

  • Stocks
  • Bonds
  • Mutual Funds
  • Gold and other precious metals
  • Real Estate
  • Variable Annuities

So here is a tip for you that is unsolicited and it is also free. Ready? Do it yourself! The only way to personal and financial freedom is to depend on no one but you! Self-education and self-management of your money is at the very basis of this book. By assuming responsibility for your own goals you remove or reduce the fees, expenses and charges which would have been subtracted from your hard earned money by the financial experts who are happy and ready to assist you. Do it yourself and you will find a new freedom. You might ask, “How can I be such an expert?” The answer is very simple…information. Information is the key and using this book as a guide will help you find, locate and evaluate information that can be truly helpful to you in meeting your goals. Here is a tip worth its weight in gold when looking at sources for information!

Ask yourself this:

  • Who and what is the source of information?
  • Why is it being offered?
  • Is someone trying to sell me something? If they are, is their rate of commission a priority over the right investment choice for me?

These are great question when dealing with financial planners. Information is the key and information will provide the guidelines to making the best possible decision for your Do it yourself and be informed!

The Health Benefits of "Safe Money"

by FindYourAnnuity.com22. October 2012 21:32

If you are concerned about your retirement savings and income, you are most likely cognizant of the time-span between your desired retirement date and your life expectancy... but could you be decreasing your health by practicing risky investment strategies thus decreasing your quality of life during your retirement time-span? Many brokers ask you to pick your desired age of retirement and use powerful illustration software to demonstrate which indices, on historical basis, will provide the hypothetical returns needed to meet your retirement savings and income goals. The core issue with this approach is that no one really knows how long they will live and what the market indices will be. This is really a two guess retirement strategy.

Why guess at all and can you afford to guess? What about leaving money to your spouse or beneficiaries? We have seen market drops of 30 to 40%. Even if we guess a conservative drop of 10 to 20%... is that kind of drop going to affect your stress level or your future plans for relaxing in your golden years. Shouldn’t your retirement income plan provide you sufficient income to last the rest of your life, no matter what?

Putting your money into Safe Money investments, such as certain types of Annuities, that ensure a lifetime of stable and guaranteed income can remove a significant burden and reduce stress in a time of your life where stress should not be the emotional focus.

A recent study from Duke University found a link between how key stock indices performed and how many heart attacks were treated at their North Carolina hospital shortly after the recession began in December 2007 through July 2009, when sign of recovery began. We have known for years that stress causes many health conditions. During stressful situations, both short-term and prolonged, we experience many negative symptoms. According to the Mayo Clinic stress can cause the following conditions:

On your body… Headaches, Back pain, Chest pain, Heart Disease, Heart palpitations, High blood pressure, Decreased immunity, Stomach upset, and sleep problems.

On your thoughts and feelings… Anxiety, restlessness, Worrying, Irritability, Depression, Sadness, Anger, Feeling insecure, lack of focus, Burnout, Forgetfulness.

On your behavior… Overeating, Under eating, Angry outburst, Drug and alcohol abuse, Increased smoking, Social withdrawal, Crying spells, Relational conflicts.

How we protect our retirement savings and income, can not only affect the way we spend our last years doing and enjoying the things we love, such as the activities we participate in, but it can dramatically affect our health when considering how financial safety affects our stress levels.

Questions to ask yourself:

  • Do you get stressed about your retirement accounts when they are losing?
  • Do you have mood swings when you get stressed about money? Here is a helpful hint to find out that answer. Ask
  • Have you spoke with a Safe Money Mentor to address these issues about protecting your money and lifetime of income?

See if a FindYourAnnuity.com affiliate can assist you with creating a stress free retirement savings and income strategy

How Safe is Your Indexed Annuity?

by FindYourAnnuity.com22. June 2012 09:36

The Legal Reserve System and the Multiple Layers of Safety

The key question is this: “How do I know that my money is safe? I want GUARANTEED income for life, safe, secure and void of risk. The Fixed Indexed Annuity provides just that. Consequently, each month, millions of dollars are being moved from stocks, bonds, mutual funds, variable annuities, ETFs, 401(k)s, and CDs into Fixed Indexed Annuities.

Why? The #1 reason is SAFETY. It is far better to avoid and eliminate any possibility of losses, than to try to make up for losses after the fact. This is the #1 rule in investing!

Having a principal guarantee makes fixed indexed annuities much safer than stocks, bonds, mutual funds, 401(k) plans and variable annuities, which do NOT have a principal guarantee. So, how does this safety work? On what is this safety based? The safety of Fixed Indexed Annuities is a multi-layered safety net that will give you great comfort. It begins with the insurance company assets and ends with a government guarantee.

Concerned about trusting an insurance company with your important retirement funds?

How safe is your indexed annuity? Should you trust an indexed annuity with your important retirement funds? What happens if an insurance company were to fail? These and other questions are vitally important and the answers may surprise you. Why even ask these questions? In the past investors simply trusted the third party, now after the financial meltdown beginning in 2008, questions must be asked... and answered.

The simple fact remains that retirees and retiring Baby Boomers today are looking for a way to guarantee that their money is safe, and that they will have enough income to last as long as they live. Income is the more important decision, far more important than having enough money.

"Income is King with the Baby Boomers."

So is the money safe in an annuity? Baby Boomers are very concerned about safety for one simple reason, "They Don't have Time to Make It Again!" Other than social security and earned pensions, most retirement investments are not guaranteed and are subject to variations of account values, volatility. How can they be assured their retirement accounts will last as long as they are needed?

Their worries are justified and the number one concern for retiring Baby Boomers is simple: safety. Is my money safe? So, how does this safety work? How are annuities actually guaranteed? The safety of annuities is like a safety net, a safety net to cover any possible occurrence.

Here is how it all works:

1. Insurance Company Assets:

The safety of an Index Annuity is based on the financial strength and claims paying ability of the company which issues the annuity. Annuities are regulated by each individual state Department of Insurance (DOI). The DOI regulates, audits, sets reserves of the insurance companies this assures the annuity purchaser of the solvency of the insurance company.

These highly regulated companies are also subject to strict capital reserve requirements which result in reserve level requirements. These capital requirements are higher than the capital reserve requirements for banks regulated by the FDIC.

Because of the high regulations required by each DOI the insurance companies must invest in solid safe and suitable vehicles. They invest in some of the most highly-rated and conservative investments available such as highly rated corporate bonds. In addition, a high percentage of their investments are in U.S. government bonds, U.S. Treasuries.

2.Protection from Creditors:

In many states, by law, the assets of insurance company policy holders cannot be attached by creditors of the insurance company. The amount that is protected and how it can be protected varies wildly form state to state (remember each state sets their own rules about annuities). The protection from creditors could be 100% or it could protecting only a few dollars per month. It is important to know what your state allows, always consult legal professionals or your state department of insurance.

It is always important to contact your local Department of Insurance of legal counsel before making any permanent decisions because each state has different rules and guidelines.

3. Surplus Capital:

Many insurance companies have on deposit funds in excess of the required 100% of benefits owed. Many insurance companies have in addition to their required reserves "surplus" capital Strong, well managed insurance companies could typically have from four to ten cents per reserve dollar in surplus capital.

Insurance companies function under a completely different system than does our banking industry and as such the reserves of insurance companies could exceed those required of the banking industry.

Solvency Ratio: This is the percentage of assets greater than liabilities. Divide the liabilities into the assets to determine the ratio.

When considering using an insurance company's products for your important invested assets, ask your local department of insurance about the company's solvency ratios. Anything above 105% means a well run and secure insurance company.

4. Strong Reserves, the Legal Reserve System:

Insurance companies must have on hand $1 in reserves for every $1 in benefits owed. 100% and nothing less. What does that mean? It means a system is in place to guarantee your indexed annuity is safe. A high level of safety is best served by a legal reserve system. A legal reserve system requires, by law, that a certain level of reserves be maintained by an institution at all times. The legal reserve system governs both banks and insurance companies, but the legal reserve systems for each is separate is different from the other.

Bank and savings & loan CDs are backed up by the Legal Reserve system, which is regulated by the FDIC (Federal Deposit Insurance Corporation). Banks are regulated under the laws governing depository institutions. In the United States, depository institutions must meet capital guidelines issued by the Board of Governors of the Federal Reserve System. (FRB) The amount of reserves required by the Federal Reserve Bank varies depending on monetary conditions existing worldwide. Normal adequate capitalization is around 8%, not the 100% required by annuity companies.

The result of these differences in "reserve" deposits is leverage. Obviously if your reserve is 8% instead of 100% you would be more leveraged than you would be with a higher percentage of deposit.

Because annuity companies are regulated at the state level, 50 different DOI are examining and auditing the same companies financials. An insurance company must honor the insurance laws, rules and regulations of each state in America in which it wants to do business. These laws, rules and regulations are complex and, because they are individual to each state, severely limit the types and kinds of investments that insurance companies can make. Insurance companies are required to keep the majority of customer funds in extremely conservative instruments such as U.S. government bonds and the most highly-rated corporate bonds. It is up to each sate DOI to determine the solvency of insurance companies doing business in its state.

As a comparison to other "no risk" deposits, bank Certificates of Deposit (CDs) are guaranteed by the legal reserve system maintained by the Federal Deposit Insurance Corporation (the FDIC), in amounts of up to $250,000 per depositor per institution.

Other investment possibilities such as stocks, bonds, mutual funds, etc. do not have any legal reserve requirements, their value is based on the volatility of their individual market sectors.

Red Money or Green Money?

Another way of understanding the difference between safety of deposit and the volatility of an investment is looking at each as a color. Savings deposits could be looked on as "Green Money” and an investment would be known as “Red Money”. Neither Green Money nor Red Money is “right” and the other “wrong.” Each has its place as an asset class. But it is very important to not confuse the two. For retirement investing, it can be a crucial distinction, and can spell the difference between having enough income to last ALL of retirement, or running out of income before death.

Stockbrokers and investment managers will talk all day about “asset allocation” and “diversification.” However, ALL of their talk and focus is diversification within the Red Money sphere. They know NOTHING about Green Money options, and often give incorrect information when asked about Index Annuities. They have little knowledge of Index Annuities, tend to glibly spout phrases they are told to say (“high fees and no liquidity”) which is incorrect. Correctly understanding the differences between Green Money and Red Money can be VERY helpful in guaranteeing and generating the income retirees need in retirement.

IFcome or INcome?

Think of your funds in color, red is danger and green is safety, now ad IF and IN.

Red Money Investments can rise in value and fall in value. They have both upside and downside potential. Red Money Investments can lose value because they are NOT backed by a 100% capital reserve. Even small losses can be very harmful to retirees. Large losses can certainly threaten your entire retirement savings plan.

Green Money Deposits can only go up! They are not designed for dramatic growth, but steadily rise in value over time. Very importantly, savings vehicles are backed up with a legal reserve system to protect the value of those savings up to the legal limit.

Income from Red Money Investments is NOT backed up with a legal reserve system. Therefore it can rightly be called “IFcome.” “IF this happens, or IF that happens,” I have income. It might be there. It might not.

Income from Green Money Deposits IS backed up with a legal reserve system. That’s why we call it “INcome.” It is guaranteed by the legal reserve system.

5. Re-Insurance:

Insurance companies do not take unnecessary risks, period. Over the years systems have been created to allow insurance companies to share risks so one company does not stand the liability of a loss on an entire claim. The idea of re-insurance dates to England in the 1700s when Lloyds of London began insuring shipping commerce. To "spread" the risk Lloyds would use a group of investors to share in the profit and the losses. As the insurance industry grew, the same concept was adopted between insurance companies. Each would bear the burden of a large loss with another.

Even simple term life insurance policies issued today are really a shared liability (and profit). The idea or re-insurance has allowed the industry to grow and flourish while at the same time become extremely competitive. Client assets held by an insurance company are backed by the strongest and most conservative investments, supported with cash reserves, backed by state guarantee associations, most are also backed up by the re-insurance philosophy

6. State Guarantee Associations:

Every state now has a Guarantee Association, funded by mandatory contributions of the insurance companies, and varying in fund limits from state to state. The states have established a uniform system of laws, rules, regulations and mutual cooperation that every state strives to adhere to through the national Association of Insurance Commissioners (NAIC).

Annuities are not all the same type of insurance product. There are differences in how funds in an annuity is guaranteed.

Two specific classes of annuities are exempted from the State Guarantee Fund; Variable annuities and Fraternal Life Insurance Company issued annuities.

Variable annuities are securities and therefore omitted from any state guarantee. Insurance companies which issue variable annuities are not responsible for any losses in your annuity. The reason is simple, when you invest in a variable annuity, your assets are not at the insurance company, they are invested in accounts managed by investment professionals. These assets are subject to market movement and volatility..

To find out more about the limits and benefits of the State Guarantee Fund in your state simple call your local State Department of Insurance.

Is an Annuity a Good Investment?

by FindYourAnnuity.com18. May 2012 20:43

Money Puzzle Annuities are investment products that have an insurance component and are backed by the financial strength of the insurance company that structures the investment. An annuity allows an investor to convert the annuity into a stream of periodic income payments either over the annuitant's lifetime or a fixed period. Many conservative investors like the idea of an annuity because they like the certainty of an income stream over their life expectancy or their beneficiary in the case of a joint annuity. Annuities offer a measure of protection against market downturns, may provide a guaranteed investment return, and grow tax-sheltered until you withdraw the money.

Never say Never

There are definitely cases where annuities are not right for certain investors. That being said, never let a financial advisor say that annuites are never the right choice and never let a financial adivsor say that annuities are always the right choice. As with any investment you must weigh the pros and cons for your unique situation. Find an annuity expert that you can trust to help you determine if annuities are right for you. A good and trust worthy annuity expert will never sell you an annuity investment that they feel is not beneficial to your financial future. If you do not know an annuity expert, Findyourannuity.com can connect you with a proven expert since we only work with seasoned annuity professionals.

Explore All Investement Options

Many investors take a multi-faceted investment approach by ensuring that they maximize the benefits of all of their retirement investements such as personal savings, IRAs, 401(k), etc... epecially if an employer matches contributions to pre-tax retirement accounts. Annuities can be just another investement tool for safe and secure retirement income. Annuities are popular in many countries around the world, and there is good reason for this.

Key Benefits of Annuities

Annuities have several key benefits that make them attractive to investors. Benefits such as:

  • Tax-free transfers among annuity investment types
  • Competitive interest rates compared to other investments that have similar risk
  • Stock-market linked gains without the downside risk
  • Unlike other tax-deferred investment accounts annuities, do not have an annual contribution limit
  • Annuities can be idea for estate planning since proceeds from annuities can pass directly to your beneficiaries without the delay, expense, and publicity of probate in most states.
  • Flexibility... There are several different types of annuities that can meet the unique and diverse financial goals of many investors. Many annuities have flexible withdrawal options during the disribution period.

As an investor you must determine if these benefits outweigh the risks based on your specific financial situation and investment goals.

"Are annuities a good investment for you?" Talk to an annuity expert today to find out.

Qualified vs NonQualified Annuity

by FindYourAnnuity.com15. March 2012 21:22

What is the difference between a “qualified” and “non-qualified” annuity?

Retirement Nest Egg When purchasing an annuity it is important to make a distinction between the two categories of funds that can be used to purchase the annuity. The distinction is important since the IRS looks at funds in terms of qualified or non-qualified, in order to determine that money’s taxability.

Qualified Funds

Qualified funds are those that are currently placed within and IRS (Internal Revenue Service) approved tax-deferred account. Annuities purchased with Qualified Funds cannot be withdrawn before age 59 1/2 without an IRS imposed 10% penalty. Qualified funds must alwo be abtained from earned income... in other words they cannot be money that was inherited or given as a gift to the annuitant.

Non-Qualified Funds

Non-qualified Funds simply means money that is not part of an IRS approved tax-deferred account. Non-Qualified Funds are have already been taxed, so the funds are commonly referred to as "after tax dollars". Since taxes have already been paid on the funds used to purchase the annuity, only the interest earned on the principal is taxed.

Sources for Qualified and Non-Qualified Funds

The most important distinction between Qualified and Non-Qualified funds used to purchase an annuity, is the source that the funds come from. The table below illustrates some of the fund sources that can be used for Qualified and Non-Qualified Annuities.

Sources for Qualified Funds

  • IRAs
  • Keogh plan
  • 401(k) plan
  • 403(b)
  • Defined Benefit or Defined Contribution Plan
  • Section 1035 or life insurance exchanges
  • SEP (simplified employee pension)
  • And any other tax-exempt savings plan

Sources for Non-Qualified Funds

  • Mutual Funds, Investments, & Other non-IRA Accounts
  • Certificates of Deposit
  • Real Estate or Property Sale Proceeds
  • Inheritance of Life Insurance Payouts
  • Money Market Accounts
  • Savings Accounts
  • and Other Post-Tax funds...

Annuities or Stocks

by FindYourAnnuity.com20. February 2012 21:03

Can you afford to bet on the stock market?

When discussing annuities, many investors are still asking the question, "why not stocks or mutual funds?". The stock market indices saw relative stability and a steady incline from the late 1930s to early 2000. In the last 10 years though, the stock market trend line makes us wonder if we will ever see the stable market growth that was seen before 2000.
US Stock Market Graph

Many investors have made millions in the stock market and many have lost millions, including their retirement nesteggs. Many have watched their hard earned retirement account take a knuckle biting roller coaster ride with no guarantee that the ride will end on the up-turn at the most crucial time of retirement. There are reasons for this new found market volatility.

The Global Economy

One reason is, like never before, we are in a global economy and the US indices are directly impacted by what happens beyond our shores. In 2011 we saw the Greece economy collapse, Italy troubles and speculation of EU bailouts which all had a direct impact on the US stock markets. As overseas markets stabilize, we naturally see a stabilization of the US markets but the lessons are learned and hopefully remembered by those that wish to have a safe and secure investment medium. We now know, that even using the term "US markets" is something of a misnomer when considering all the large multinational companies trading on US stock indices.

Automated Trading

Another possible reason for stock market volatility, is that technology has brought stock trading to the masses, and I don't just mean human masses. Masses of huge computer systems running software using predictive analysis algorithms to make automatic trades on stock up-turns and down-turns. The numbers on automated program trades is staggering and in some cases darn right scary. The whole point of these new automated trading systems are to buy and sell massive amounts of stocks in an attempt to exploit subtle market patterns that would otherwise be undetectable by human traders. Up to 60% of daily trading is performed by automated systems using algorithms to make decisions on stock trades. This new trading paradigm has and will continue to affect stock market stability.

Some say, due to these two factors and others, that the stock market is broken... Others might argue just the opposite, the stock market is functioning as it is designed to function and works well for many investors. For many others though, that do not like the risk and uncertainty associated with the stock market, the writing has been on the wall for some time and they have moved to safer havens for their savings and retirement nestegg.

The Safety and Security of Annuities

Fixed and Indexed Annuities are not susceptiable to market down-turns so the volatility of the stock market would not affect the performance or investment returns of the annuity. The below graph illustrates a hypothetical comparison between an indexed annuity and an S&P 500 investment between the years 1998 and 2008.
Index Annuity Performance

The index annuity in this example has typical contract terms: 80% participation rate, 20% cap, and a 1.5% annual administration fee. Comparing hard numbers, a $100,000 investment directly into the S&P 500 in 1998 would have resulted in an approximate balance of $90,000 by 2008. You would have lost nearly $10,000 not to mention inflation. On the other hand, your index annuity would be worth nearly $170,000. The difference is a stark, near-two-fold improvement: $76,855. Notice that because an index annuity never loses capital, it's always inching forward and locking in pervious years' returns. During recessions the index annuity simply plateaus.

2008 was an exceptional year for stock market declines and the stock market did see a rebound in the last few years. That being said the lessons are still there to show that in a matter of weeks or even days, your retirement account can lose significant value and put your financial seucrity at serious risk.

Explore what annuities are and how they reduce investment risk for your hard earned retirement savings.
Start today by filling out our simple form. Findyourannuity.com will connect you with an experienced annuity expert.

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