Don’t Make the same critical errors your parents made

401k, Retirement, Corporate Bonds, Bailouts, Pensions, Stocks, EFT’s, IPO., Insurance, Debt Ceiling.

The media is reporting both the positive and the negative about money.  Which is how we are conditioned to act the way we do when it comes to finances. Each camp has their mantra. Each one trying to influence the public with their ideas.

SO what did our parents do? Most of them followed like sheep follow their shepherd. Some of our parents found a good shepherd who taught them the true way that money works and they now either live a comfortable retirement lifestyle  or if they have passed, have left a nicely packaged inheritance for their loved ones or favorite charity. Unfortunately most of them listened to shepherds who were not fully educated in planning for a strong financial future. They listened to the stories of BIG MONEY being made in the likes of the oil boom, dot com and even housing boom to name a few. Only to learn the one simple rule.  It’s not only the time in the market thats important but more important is the timing.

What do I mean by that? Well, if the market is high, you cash in you winnings and principal, you walk away on top. But if you need to “cash in”

A fresh look at why we save

when things are declining or have hit the bottom, life can get a little bit stressed.


What happens when the Market goes sideways.

As a novice investor, you probably recognize that the market never moves only up and down, When you look at a chart for a specific stock, fund or index, they travel sideways as they travel the course of time.

Let’s pretend that each year there is an alternating 10% gain and loss. Could this really happen? Absolutely not. But this serves as a great teaching tool. Let’s also assume that the initial account value is $1000.


Here is what is interesting. If an account performed like this, with a 10% gain in year one, a 10% lossin year 2 and then alternated back and forth for 10 years, it’s average return at the end of the 10 years would be ZERO. But when we look deeper the ACTUAL return would be negative 4.9%. That’s right, you have now lost money in a ZERO average return performing investment.

But the market was flat. Right? Well, no. A flat market is defined as “A securities market in which there has been no tendency either to rise or to fall significantly. Also called sideways market.”The key is NO tendency to rise or fall.

The average return and the actual return will never equal one another when the negative numbers are factored into the equation. When you look at this example it would make more sense to have put the $1000 into a coffee can and opened the can 10 years later.

There are financial principals that protect your money in the exact example I have shown you above. This principal implements the power of zero in it’s calculation, protecting your principal and giving you a positive return in the end.

Year 1           +10%          $1,100

Year 2           –   0%          $1,100

Year 3           + 10%         $1,210

Year 4           –   0%          $1,210

Year 5           + 10%         $1,331

Year 6           –   0%          $1,331

Year 7           + 10%         $1,464.10

Year 8           –   0%          $1,464.10

Year 9          + 10%          $1,610.51

Year 10         –  0%           $1,610.51

How would it feel to live through the same situation and look at the account statement and see $1,610.51 int he account. That’s right. $1,610.51. $659.50 Actual money in the same Average period of time. Oh, by the way, that is an actual gain of 61% compared to an actual loss of -4.9% in a Zero average return market.

Add to this the effect of annual fees along with future taxes and you could end up with much less than you originally projected.

Do you see the power of Protected Growth Indexed Strategies? Are you starting to see how wealth is created? If you would like to learn more I will be happy to introduce you to an adviser that will help you out.

Average vs. Actual Rate of Return

Do you know the difference between average and actual rate of return in an investment? If not, you are probably losing a lot of money without realizing it. When you get the statements in the mail from your 401k or mutual fund and you see the percentage of how much your portfolio made or lost, do you know what they are talking about? One very important thing to understand is the difference between average and actual rates of return.

First of all what is rate of return? The dictionary defines it is “The gain or loss of an investment over a specified period, expressed as a percentage increase over the initial investment cost. Gains on investments are considered to be any income received from the security, plus realized capital gains.” Or, in real simple language it is how much your investment is making. But when you see that your portfolio has earned 8% for the past few years, what does that really mean? Is that an average rate of return or is it the actual rate of return?

Let me give you a very simplified example over four years to illustrate this point. Suppose you start off with $1,000 to invest. You put it into the market and have a great year, earning 100% for the first year. At the end of the year you would have $2,000 in the account. In year two things don’t go so well and your portfolio loses 50%. At the end of year two you would have $1,000 in your account. In year three things go fantastic and you earn 100%. At the end of year three you would again have $2,000 in your account. Then in year four things look bleak again and you lose 50%. At the end of year four you have $1,000 in your account. Your spreadsheet would look like this:

  • Starting Balance              Year  Annual Rate of Return  Year End Balance
  • $1,000                            1                     100%                           $2,000
  •                                      2                      -50%                            $1,000
  •                                      3                      100%                           $2,000
  •                                      4                       -50%                           $1,000

What do you notice as you look at this spreadsheet? The biggest thing that should jump out to you is the balance in the account. You see that your beginning balance and your ending balance are exactly the same. So how much money have you made over those four years? ZERO!!! You have exactly the same amount at the end of four years that you started with. So what is your actual rate of return for the four years? That’s right, it is ZERO!!!

Now here is the real kicker. What is your average rate of return for those same four years? To figure this out, add up all the rates of return for each individual year and divide by four. If your calculator works the same as mine you should also come up with an answer of 25%. Wow! A 25% rate of return is great! Anybody would be dying to get a 25% rate of return in their investments.

Well guess what? A mutual fund that had this exact performance could advertise in print “Our fund has averaged 25% over the last four years!” That is a true statement. It is not deceitful, illegal, misleading, dishonest or anything. But with that 25% average rate of return, how much money did you actually put in your pocket?

So which is the most important to you, the average or the actual rate of return? Obviously the answer is the actual rate of return. Who cares that your portfolio averaged 25% over the last four years if you didn’t make any money? And remember, this is an oversimplified example. In real life there are also management fees, fund fees, taxes, inflation, and other costs that have to be factored into the actual rate of return.

As you can see from this example, having an understanding of the difference between average and actual rate of return is critical. Knowing how to spot the difference between them will make a huge difference in your retirement. Instead of retiring and wondering where all your money is, you will have both your money and peace of mind.

Cash on hand or cash flow. Which provides the greatest security?

When people think about investing and saving for retirement do they consider everything possible. Will I have enough money in the bank, 401k or pension to provide the lifestyle I am used to? Do I need to work so I have enough money to pay the bills? What if I make too much money and have to pay taxes?

The question of having enough money is a hard one to answer. Everyone has their own ideas and every investment firm tends to use their own formula. But what is that magic number.

Most people do not answer the more important question which is, How much money do I need each month to continue my lifestyle while insuring against unforeseen losses? Do you have an investment insurance program in place? Have you even considered one?



Make Every Dollar Count

I have many clients who set aside money or a particular asset with the intention of leaving the asset to their family, usually children or grandchildren, but sometimes to a church or a charity.  Most often these accounts are IRAs, annuities or savings accounts.


There are two questions that are commonly asked by clients regarding these assets.  First, is there a way I could increase the amount of the legacy for my loved ones?  Second, is there a way I can minimize the amount of income taxes I have to pay during the remainder of the time these funds stay in the account?


I am writing you to let you know that there is an excellent strategy for accomplishing both of these goals.  That strategy is called Capital Transfer.  You can immediately increase your estate and provide a legacy for your children or favorite charity that under current law is not subject to federal income taxes through using life insurance.


I am making a focused effort to inform all of my clients of this wonderful strategy for assuring that their beneficiaries receive “An Enhanced Legacy.”  I will call you in a few days to see if you might have “earmarked” assets to be left to your loved ones and if you would be interested in learning more about this strategy

What type of returns can you expect for an Equity Indexed Annuity?

Expected Performance

The interest rate you receive from an index annuity varies because your investment is linked to the S&P 500, or a similar stock market index. The returns will also differ from product to product, because of different crediting methods. An index annuity balance is impossible to predict, but we can look back at how they would perform in past market conditions.

Index Annuity vs S&P 500 Performance

The above is a hypothetical comparison of an index annuity vs a direct S&P 500 investment. This is how your balance would have looked between 1999 and 2009. The index annuity in this example has typical contract terms: 100% participation rate, 9% cap, and it resets annually.

A $100,000 investment directly into the S&P 500 in 1999 would have resulted in an approximate balance of $73,459 by 2009. The investment would have lost over $15,000 not to mention inflation. On the other hand, your index annuity would be worth over $150,000, a difference of over $77,000.

Video of real life example.

Notice that index annuity never loses ground when the S & P has a negative year. The reason for this is that it ‘locks’ in pervious years’ returns, meaning it will never go lower than its highest point. Sound too good to be true? The trade off is that in periods of substantial market growth, the annuity will only participate in a portion of it.

Performance in a bull market

This second chart is show the same annuity vs the S & P 500, only in one of the biggest bull markets, 1990-2000. Because an Indexed Annuity ‘Caps’ the rate of return (in this scenario 9% per year), it will not see the full returns in market conditions such as this.

This means, if you’re looking for maximum growth and you are less concerned about the possibly of losses, a fixed indexed annuity may not be the right choice. However, if you want principal guarantees with the potential to surpass the rate of return of a traditional annuity, an indexed annuity would be worth taking a look at.


With respect to retirement planning, index annuities offer greater overall benefits than directly investing in stocks or even a market index. Debt-based instruments like bonds and CDs are a guaranteed bet (the same as index annuities), but they offer half the growth potential. This, in addition to miscellaneous advantages like tax-deferral, death benefits, lifetime income options, and probate avoidance, make index annuities a great candidate for your retirement plan.

For an in-depth explanation of index annuity products and to get a free comparison of quotes from the highest-rated insurance providers, Click Here

Disneyworld and the evil Life Insurance Industry

Perhaps one of the greatest  visionaries of the modern day, Walt Disney had a dream and pursued it with passion.
He made careful decisions throughout his life and did all he could in his power to make dreams come true for everyone.
But did you know that a whole life insurance policy helped fund his biggest dream. My guess is that he realized that if he borrowed from a bank he had a partner in his dream that made major financial decisions that could have hampered his plans. Or if he went to the private sector he would have to find ways to satisfy them so in order to be self sufficient he used the method that other wealthy individuals use.
If you and I could sit down I can show you a way to create the same type of “bank” that Disney used.

Fixed for Life

Fixed for Life

More than 40% of Americans ages 36 and older are at risk of running out of money in retirement, according to a retirement readiness study.

Researchers divided working Americans into four groups, ranging from the lowest to the highest income levels. They found that, even though the risk of running out of money decreases with a higher pre-retirement income, almost one-third of people with upper-middle incomes and 13% with high incomes may not be able to pay for basic retirement expenses and uninsured health-care costs after two decades in retirement.1

The risk of running out of money doesn’t appear to be reduced for people who have more time to prepare for retirement: Baby boomers and Generation Xers are almost equally at risk.2
Fortunately, it’s possible to purchase an insurance product that could pay an income for a specified period, including your lifetime or the lifetimes of you and another person. The guaranteed retirement income available from a fixed annuity could be just the fix you’re looking for.

Fund Your Future Income

A fixed annuity is a contract with an insurance company that guarantees a fixed rate of return during the life of the contract. The type of annuity that may be appropriate for you will depend on your situation.
An immediate annuity is typically funded with a lump-sum premium. Payments start soon thereafter and continue for the duration of the contract. This type of annuity is often purchased at the beginning of retirement.

deferred annuitycan be funded with either a lump-sum premium or a series of payments over time. Payments start at some point in the future at a rate that reflects any tax-deferred growth during the accumulation period. The income amount depends on the amount of the initial contract, the contract’s rate of return, the age of the contract holder, and the number of years over which payments will be received.

Annuity Trade-Offs

Generally, annuities have contract limitations, fees, and expenses. They tend to offer more conservative rates of return than the financial markets because the insurance company is responsible for paying the contract’s stated return, regardless of market conditions. Of course, any guarantees are contingent on the claims-paying ability of the issuing insurance company.
Most annuities have surrender charges that are assessed during the early years of the contract if the annuity is surrendered. Distributions of annuity earnings are taxed as ordinary income. Withdrawals prior to age 59½ may be subject to a 10% federal income tax penalty.
If you are concerned about running out of money in retirement, it might be time to consider a fixed annuity. A stable source of income could be a welcome addition to your portfolio. Click here to learn more.
1–2) Employee Benefit Research Institute, 2010

>College Education Funding for your Children. Some thoughts to consider

>Saving for your children’s college education is important. Did you know that the current financial aid guidelines ignore any cash accumulated in the cash value of a life insurance policy? You know that you need a
strategy that will help protect your family in the event of your premature death. Permanent life insurance can help you plan for both.

Each premium payment you make builds cash value. Cash value can be used to pay college tuition and expenses. Cash value can be used for other needs during your lifetime, through income tax-free policy loans and withdrawals and can also be activated to generate an income stream that never runs dry while you are living.

Life insurance death benefit provides your family with an income tax-free death benefit that they can use to:
* Maintain their lifestyle and protect their future financial security
* Pay future education expenses for your children

Using cash value life insurance as a tool for college saving

Your goal:
Protect the people who depend on you plus save for your children’s college education.
• You want to protect the people who depend on you if you can’t be there to provide for them
• You want to set money aside that can be used to help pay college tuition costs
A potential solution:
Permanent life insurance provides death benefit protection and cash value growth.

Permanent life insurance provides:
• Income tax-free death benefit for your family if you die prematurely
• The savings component of a cash value insurance policy can be used to cover the cost of tuition
• Your money grows tax-deferred and as long as your policy stays in force, withdrawals or loans you take from your policy cash value are tax-free

>Variable Annuity? Mutual Fund? Indexed Annuity? What’s the best to choice?


Alternatives of Equity Indexed Annuities

There’s no shortage of index annuity alternatives when it comes to retirement savings, and you’ll want to examine all your options. If index annuities seem too unpredictable, fixed annuities, CDs, and money markets are a good alternative. If you prefer to manage your own portfolio and have higher risk tolerance, consider variable annuities, the S&P 500, or an IRA.

Index Annuity Alternatives Options: 

  • Fixed Annuities
  • Variable Annuities
  • CDs
  • Money Market
  • Bonds/Treasuries
  • Stock Market
  • S&P 500
  • 401(k) / IRA

Remember that in practice, the best retirement plans are diversified across multiple investment types — in no way are these alternatives mutually-exclusive.

Fixed Annuities

A fixed annuity is an interest-based contract issued and backed by an insurance company that locks in a yearly rate of return for a one-time lump-sum fee. Future rates are pre-determined at contract signing, typically ranging from 3-8% depending on the length of term. A 10% tax-penalty is levied against income withdrawals before the age of 59.5.

Generally, fixed annuities offer few benefits over their equity-index siblings. The most desirable feature of fixed annuities — the guaranteed premium — is also present in index annuities.

The one case in which a fixed annuity is preferable to an index annuity is if you require a predictable yearly return. With an index annuity, although your premium is guaranteed against loss, there’s no way to know what the account balance will be next year. It might grow by as little as 1% or jump 15%. If your retirement plan can’t handle deviations in rate of growth, fixed annuities are the way to go. Otherwise, you’ll be better with a variable rate that yields higher returns in the long term.

Fixed annuities are most disadvantaged in generating income through debt-instruments, meaning lower yields. Unless you need absolute predictability, stick with an equity-based instrument. For more info, see the Fixed Annuity Guide.

Variable Annuities

A variable annuity is a stock market portfolio contact managed by a broker for an insurance company. Sub-accounts of various risk levels are chosen by the contract owner and pay out interest depending on performance. Typical annuity terms and features apply: tax deferred growth, potential withdrawal charges, and the 10% tax penalty for withdrawal under the age of 59.5.

Variable annuities offer a slight advantage over index annuities on account of their potentially higher yields, but for a retirement savings plan index annuities arguably outweigh them with guarantees against losses. A variable annuity can be especially effective in the hands of seasoned investor who takes the time to study the markets and adjust his portfolio. If micro-managing your retirement sounds appealing and you have stock market experience, consider a variable annuity. Otherwise, most retirees would find comfort in an index annuity. 


A certificate of deposit is a bank contract that locks in a fixed interest rate for a period of 1-5 years. At the end of the term, the initial deposit + interest is returned in one lump payout. Interest rates on CDs range from 2-5% and depend primarily on Federal rates. The bank earns money on a CD by re-investing your up-front deposit in higher-yielding debt instruments like government bonds and treasures.

CDs are safe, guaranteed, offer moderate growth with marginal liquidity, and are easy to set up; they’re taxed at ordinary rates and feature no tax deferral benefits. Similar in many respects to fixed annuities, CDs are a preferred choice for younger investors, who would incur tax penalties when withdrawing from an annuity.

There should be no confusion in deciding between CDs and index annuities, as they has entirely different roles. CDs serve the purpose of sheltering your retirement plan from loss and counteract inflation. Index annuities are more aggressive instruments designed to actually grow your savings. Both vehicles have a place in your retirement plan.

Money Market

A money market is a high interest savings account run by a bank or brokerage house. Money markets are secure, FDIC insured, completely liquid, and offer interest rates in the range of 2-4% —substantially higher than ordinary savings accounts. Money markets offer lower interest than CDs and annuities. What’s more, that interest changes daily based on Federal rates.

Money market accounts have moderate minimum balance requirements ($1000+) and may limit withdrawals to several times a month. Even so, they are considered completely liquid, with no withdrawal limits or penalty fees. Money market accounts allow further investments to be made throughout their lifetime and never expire.

A money market account is hardly an alternative to index annuities. As a CD, a money market has its place along side more aggressive instruments, helping curtail annual inflation on funds that might be needed tomorrow.

Bonds / Treasuries

Bonds and treasuries are government or corporate loan contracts, including things like high-quality mortgages and federal promissory notes. Bonds backed by stable institutions like the U.S. government are very secure but offer low interest rates; typically 2-4%. Treasures come with short, medium, or long terms, but generally have low liquidity.

Bonds are solid, if not high-yield, retirement savings instruments. As alternatives, they’re closely in-line with CDs and somewhat resemble fixed annuities. As you approach retirement, it’s wise to transfer more and more of your assets into bonds, as long as you feel your nest egg is enough to cover the necessities.

Stock Market

Direct equity investment is risky business, but it is an option. Stocks offer the highest growth potential of any investment on account of their tendency to lose investors’ money. Over the very long term, stocks outperform all other investments, with an average yield of 14%+, but this figure averages hundreds of equities. There’s always the chance that you’ll stumble upon the next Microsoft or Google, but you must be mentally prepared to lose everything you invest.

The stock market is great for discretionary investment, and much less suitable for storing retirement funds — money that you’ll NEED to survive. And although a lot of risk can be hedged with a balanced portfolio and tempered investment strategy, the market often behaves irrationally. Investors with accumulated wealth and nearing retirement should not gamble with their future. Over the long-term stocks looks like a sure bet, but an unfortunate set of circumstances can wipe out our saving when you need it most.

S&P 500

The Standard & Poor’s 500 is a stock market index that tracks or averages the growth and dividends of 500 stable U.S. companies that represent a cross-section of entire U.S. equities market. Companies in the S&P 500 include 3M, Coca Cola, Exxon Mobile, and many other trusted brands. Historically the S&P 500 averages a 10-12% annual return. Indices such as these reflect the overall well-being of the U.S. economy.

Rather than purchasing a particular stock, investors can purchase and ETF (equity-traded fund) that tracks the S&P 500 or another index. Similarly, the S&P 500 can be invested into through mutual fund and 401(k) / IRA sub-accounts.

While direct index investment via ETF has the benefit of letting you pocket all the earning and pay very low fees, there is a great advantage to investing in an index annuity instead. For more real-world example of how an index annuity would have fared again a direct S&P 500 investment, see Index Annuity Performance.

For an in-depth explanation of index annuity products and to get a free comparison of quotes from the highest-rated insurance providers, Click Here




>Did you know? An outline of investing principals.


How do your retirement and investment accounts look? When you signed up for the 401k did you choose a plan that was a high growth plan? If so you have a plan with stocks and bonds in it. How are they performing you have enough income from your investment to get you through your entire lifetime?

Did you know that most Americans us pensions & 401k plans as their only form of retirement planning along side of Social Security? That disturbs me and is the root cause of retirees being in the shape they are in today. Think about taking a 40% pay cut in 2008 because the stock market crashed and there has only been modest increases in ’09 and ’10. Couple that with taxes at 20% and you have people trying to survive on pennies instead of living life without worries. 
Even the most aggressive investors with the mindsets of the Wealthiest money experts have only 65% of their total plan in the market. Take a look below and see where you fit. I think you will be surprised. 

The Conservative Client

Conservative clients have a very low risk tolerance and will place prime importance on preservation of principal. They will usually be willing to accept lower potential gains for a higher level of safety. Fixed instruments and annuities may make up the majority of their investments. The following allocation picture may best suit this client.


The Average Client

The average client is interested in some safety but also wants some of the potential gains that are associated with the equities markets. With this client, the assets allocated for retirement income would be placed in annuities and other available income would be in more aggressive investments. Equity indexed annuities may be good for the retirement income objective with this client, depending on the length of time to retirement. The allocation may appear as shown below.

The Aggressive Client

This client is willing to risk safety for higher growth potential and is more prone to invest in equity funds. Equity indexed annuities may provide safety for retirement funds and still allow for participation in the market, without the downside risk. This graph shows how this asset allocation may appear.

When these charts are measured to the Rule of 100 a person can be on the path of having enough to live on. Who is helping you with your current financial strategies? It was said that the average American will have 2 separate financial consultants. One who works on their money accumulation and another who works on their income stream for later years. I specialize n putting people on the road of financial security through time tested practices and principals that have weathered over 160 years. If you are ready to make the step into a more stable financial life you owe yourself the time and courtesy to get with me. My email, phone and office are available for you. Just reach out and ask for my time. It will be well worth the investment.


>The Rule of 100.

>Planning for your future income needs can get overwhelming to the point where most Americans tend to put off the process making it harder to meet their goals. The trend of putting off planning can cause our investments to stay in higher risk/higher gain vehicles for a longer period of time than necessary, creating a risky, stress filled retirement life or even a delay in the retirement process.

A simple plan is to follow the Rule of 100. This Concept creates a consistent process of review and transfer of your money.

Here is how it works. Take your age today and subtract it from 100. That number is the percentage of your investments that should be in the market. If your 401k is setup with 100% of your money in Growth and Income Funds, it’s time to make sure that you have money in a protected growth strategy. A $30,000 401k Balance for a 30 year old should be no more than 70% of the total holdings for the future. This amount is above and beyond the Emergency Fund you have established for Roof, Auto and Major medical expenses that may come up in the future.

Unfortunately, Americans are retiring today with 100% of their money still in the market where it can erode with a one day downturn in the Dow Jones industrial average. How does your retirement plan look? Are you in line with the rule of 100? A second opinion will cost you nothing but time but the benefits can pay dividends for a lifetime.