Annuity fine print can cost you money.

Recently a client of ours came to us with an indexed annuity that he had just bought and wanted us to take an independent look at.  We called the annuity company with him and asked a wide variety of questions to better understand the terms and conditions of the product.  Our clients’ main concern was how he could access his money.  What we found out was news to our client and he didn’t like what we learned. This particular product had ten-year surrender period.  This means if our client needed to pull his lump sum of money out he would have been charged between 12% and 4% depending on which contact year he did so.  He did have access to 10% of the contract value every year without penalty but not until the second contract year.  This annuity also had a lifetime income payment benefit.  The longer he waited to access this benefit the higher percentage of his benefit base value he could access.  At our clients current age he could access 5.2% a year for the rest of his life.  The major problem with this was that once he attempted to access this income rider, the payment amount was fixed for life, which would not keep up with inflation.  This benefit was costing our client .95%. After the phone call I asked our client what he told the people who sold him this product.  He said, “I want to be able to access my money when I need it.”  This statement threw up a giant red flag to me because this particular annuity had plenty of limitations on how he could access his money.  Then I looked at the start date of this contract and realized that he had purchased this product within the last month. I immediately thought of the free look period. Every insurance-based product has what is called a free look period, which varies by company… | Read More »

Make health your priority when you create a financial plan

While my main role as my clients’ financial advisor is to focus on their economic health, I often counsel them on matters related to their physical, emotional and spiritual health as well. No matter how you define your retirement, you have to prepare for it by nurturing all four aspects of your life. The easiest aspect is the one that has inspired thousands of cottage industries in this country. But your physical health doesn’t require an acai berry shake, a thigh master or the latest how-to-lose-weight-and-eat-what-you-like book. It’s much simpler than that. Keep an eye on what you eat and include plenty of fresh fruits and vegetables. Pay attention to the source of your food as well. Exercise even if, like me, you don’t think you enjoy it. Try to get enough fresh air every day and enough sound sleep every night. Don’t avoid your annual checkups. Just as important as your physical health are your emotional health and spiritual development. Take time to nurture your friendships. We’re all busy, but we can and should find time to chat with our friends, play a little Bunco or enjoy a special meal. Value the time you spend with your family members. Spend some moments in quiet reflection and appreciate your faith. Find ways to strengthen it, through prayer or study. Pay attention to your finances too. Choose wisely the means by which you’ll grow your investments. Don’t allow someone to sell you a product when they should be helping you formulate a plan. Understand that even with vigilant attention to your physical health, you could face unexpected threats to your financial health. Accidents, illnesses, financial setbacks to love ones, all pose threats to the retirement you envision. Review your plan quarterly and reevaluate your goals and your risk tolerance. Even if you don’t plan to live until you’re 156 like I do, you need to plan carefully and pay attention to… | Read More »