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A Decision For Bob And Sue

Joshua Samander

Let me tell you about a couple named Bob and Sue, who are just like you and me. They have worked hard for many years and have saved a nice chunk of change to help them enjoy retirement. For example purposes, let’s say they retire at age 65 with $500,000 in the bank.

Their No. 1 concern is simple: How long will their money last at their current lifestyle? Since their work income stopped, what is the best way to invest their remaining money?

These are questions they can’t answer themselves, so they find a financial advisor. They discuss their concerns with the advisor, who puts together an income plan. The advisor wants to put their money in the stock market while charging a fee for managing that money.

Bob and Sue talk it over and weigh the pros and cons. The first positive they see is growth potential. They could possibly see some nice returns. And while that’s true, the flipside is they could lose money just as quickly as they could gain it. Is stock market risk something Bob and Sue want to take on at their age? Can they afford a possible 30% loss in their account?

They also consider how fees could affect them long-term. Like most management plans, the advisor’s proposed plan includes a fee of about 1% to 2% each year, which is $10,000 of their total $500,000. Over a 10-year period, that would be $100,000 deducted from your account, not to mention the interest you could’ve earned on that money.

Because of these concerns, Bob and Sue decide to get a second opinion. They do a little research online and come across Fixed Indexed Annuities (FIAs). Curious to learn more, they schedule an appointment with another local advisor.

After discussing their situation, the advisor makes a recommendation. He shows them a very different concept from the first advisor’s plan.

The advisor says FIAs generally have no fees (unless a rider is purchased) and are lower risk. Bob and Sue immediately wonder what’s the catch. The advisor explains an FIA is a contract between you and the insurance company that provides principle protection during a down market as well as opportunity for growth. 

The advisor asks, “Would you have homeowner’s insurance even if it wasn’t required?”

Bob and Sue both say, “Of course!”

The advisor says, “Then why not help insure something even more valuable: your nest egg?”

The lightbulbs go off for Bob and Sue. The advisor goes into more detail about how the strategy works. He explains the interest they earn would be linked to a major stock market index like the S&P 500. This particular contract had a 60% participation rate, meaning if the index earned 10%, their policy would be credited 6%. If the index suffered, they would earn 0% but never experience a loss due to market risk. He also explains there are zero recurring fees (unless a rider is purchased) for this product and generally a 10% penalty-free withdrawal option they could use, depending on the specific product.

Not wanting to make a rash decision, the couple decides to go home, talk it over, and sleep on it. The following day, they come to a decision. The same decision millions of Americans are coming to when deciding what to do with their retirement savings. They chose an FIA because of growth potential, lower risk, zero fees, and partial access to their funds when they need them.

An FIA is not for everyone. If you are interested in how these products can help you, I suggest talking to a trusted insurance professional to determine if an FIA is right for you. 

You can only make decisions with the information you have available to you. The more information you can gather, the better your decisions will be. It is important to go into retirement with an open mind. Weigh the options available to you. Ask questions. If you are paying fees, find out exactly how much and why. Have your advisor explain everything in detail.  

Making the right decisions could save you thousands of dollars in retirement. Generally, every time a trade is made inside an account, there is a fee or commission involved. If Bob and Sue never met the second advisor, they could have paid over $100,000 in fees and still have their hard-earned money at risk in the market. Bob and Sue did their research and came to an educated conclusion based on their specific situation.  

This hypothetical example is not intended to be indicative of any specific product. Results are for illustrative purposes only and are not intended to represent the past or future performance. This does not take into account possible fees, riders, or other charges. Annuity guarantees rely on the financial strength and claims-paying ability of the issuing insurance company. Guaranteed lifetime income is available through annuitization or the purchase of an optional income rider for a charge. Insurance and annuities offered through Joshua Samander, MS Insurance License #10508445.

About the Author:

Joshua A. Samander is a financial professional located in Brandon, Mississippi, where he resides with his beautiful wife, Reagan, and two sons. He has a strong passion for helping families find added peace of mind in their financial situations. Along with his grandfather, Larry Thornton, Josh operates a family practice that has served Mississippians for almost 40 years. They also hold workshops across the state, providing educational content to the public on a variety of retirement topics. It has been their primary goal to help families make the best decisions they can and live more enjoyable retirements.


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