In Retirement, Which is Better:
Guaranteed, Lifetime Income or Asset Accumulation?
You Will Be Surprised!
Large amounts of guaranteed income for life is the most important asset you can own in retirement. Not only because of the obvious financial reasons but as we get older, it becomes increasingly more difficult to manage complex investment portfolios. Many people have investment advisors to help them manage these complex retirement portfolios but as we get older, even keeping up with the minimum knowledge required to engage with the advisors can be challenging, at the very least. The trouble is that,
, investment value and asset volatility are simply the wrong measures if your goal is to have stability based on guaranteed, predictability. Communicating with savers in terms of asset accumulation or the size of investment accounts can be unhelpful and some retirement thought leaders would suggest, even misleading.
There is a disconnect caused by how the brokerage industry expresses the value of what matters in retirement. This disconnect is putting people at risk without sufficient reward. You must ask yourself what is more important, guaranteed principal protection and guaranteed lifetime income or a few more percentage points of yield?
Can you afford to lose 30% of your retirement assets? Is the difference between a 4% return and a 7% return worth losing principal? It just happened to millions of people in 2008. If you were one of those people,
can you afford it again?
Maybe the more important question we need to be asking is this: What is the upside for taking on this risk? From my perspective, the risks far outweigh the rewards. Using $1,000,000 as an example, the chance of getting an extra 3% or $30,000 in a given year does not come close to being an acceptable risk if there is a chance of a 30% loss, or more? Do you
believe the market has a greater chance of being up 30% from here or down 30% from here?
A Better Alternative.
Considering that you CAN participate in market gains when there are gains to be had and NEVER lose principal when the markets are down, why choose to forego the protection guaranteed by the insurance company? In most cases, the ins
urance companies are rated better than the stocks in your portfolio. Doesn't that tell you a lot?
Using an indexed fund, you can be in the market and benefit from the gains without putting your retirement assets at risk.
Would you rather have an unprotected account made up of equities whose value can decrease by events for which you have absolutely no control?
Not to mention that with this better alternative you can "flip the income switch" whenever you choose and begin to draw
a guaranteed, lifetime income stream that can NEVER go down, for as long as you live.
Nothing else can do this. It is that simple - that cut and dry.
Guaranteed Income + Liquidity is finally being recognized as a powerful combination for retirement security. Lifetime income hedges away longevity risk and liquidity of assets ensures flexibility with the ability to maneuver when necessary. It is more important than ever for people to understand the difference between asset accumulation in retirement versus guaranteed, lifetime income streams. Until now, the primary goal has been to increase your assets in order to draw them down in retirement. Professors at leading universities and retirement centers around the world are now asking retirees to re-think the conventional wisdom. Using the right annuities that guarantee liquidity from day one, you can have your cake and it too:
"A portfolio of stocks and bonds cannot provide a guaranteed income for life, with Zero risk. On the other hand, the right longevity annuity contract does GUARANTEE you will never lose a dollar's worth of principal and it will guarantee income you cannot outlive. Today, people want to protect their IRA assets and their personal retirement assets from any market loss and interest rate risk. But, they want some upside when the markets are up. I am not against having assets in the stock markets but I am against having retirement assets in the stock market WITHOUT AN INDEXING WRAPPER TO PROTECT THE ASSETS FROM LOSS. Whenever we encounter a client without the wrapper, we ask one simple question: 'Why; what benefit are you getting from investing without the protection?'
Once people understand these specially designed tools work exactly this way, they re-balance immediately since there is no downside.
If your understanding of a longevity annuity is different than this, please contact me. I will clarify and answer any questions on a complementary basis."
Ted Bernstein, Boca Raton Tribune
In keeping the complex as simple as possible, you want to maximize guaranteed income and optimize the taxation of how the income is received.
You Need To Know.
An Indexed Annuity guarantees you will never lose principal. The floor is fixed at 0%. For example, if the S&P is down 25%, or DOWN AT ALL next year, you
lose anything in a Fixed Indexed Annuity. Billions of dollars is pouring into this vehicle each year because nothing else guarantees principal while allowing you to participate in the gains, when the market is up. Call us to learn precisely how this will protect you and your retirement assets.
LIFE CYCLE PLANNERS
Who should you choose to help you with important things such as planning your retirement, protecting your family and business and helping your loved ones when you cannot?
I believe it matters a lot. It does for me. When I am in need of a doctor, I want the best. When I need legal help, I want the best attorney I can find. I understand that "the best" means different things to different people. There are only a few ways to measure someone in order to be certain. How experienced is the person you are considering, do they excel in their field and how well do we relate to one another? They all matter and depending on the job and its importance, some things matter more than the others.
From the time I was 20 years old, I have been passionate about the financial world. That early interest took me in the direction of retirement planning, asset protection, the issues facing family businesses and succession planning. Through easy to understand education and communication, I work with my clients by serving as a resource and a guide.
I have been describing my practice style as consultative since the beginning of my career. My goal has always been to create better insurance and retirement solutions - ones I believe are beneficial for my clients and then deliver them to the market in ways that are easily understood. As a columnist for the
Boca Raton Tribune
and a contributor to insurance industry publications, I contribute to the betterment of my industry by raising awareness about what is important at the time.
Over the course of my career, I have been fortunate to make great things better, leading to the creation of many innovative products and distribution alternatives. Life insurance without commissions is one perfect example of how these innovations have transformed the insurance industry. The Installment Payout Option is another, being one of my favorite innovations for life insurance as it drastically reduces premiums up to 45% by paying your beneficiaries over time instead of a lump-sum which never lasts as long as you intend. Today, we offer annuities that are
100% liquid from day one with everything guaranteed, including the lifetime income you receive. This alone is creating another industry-wide transformation that is bringing annuities out of the dark ages and into the mainstream.
Innovation is hard to see with intangibles. Several good examples of innovation in financial services include mutual funds, ETF's and REITs. The innovations I have created have several things in common:
- Much better value by eliminating surrender penalties,
- Transparency and;
- Immediate liquidity.
Making great things better is nothing new of course. Steve Jobs made the personal computer better and he made Motorola's cell phone better with the iPhone. Tesla has proven that cars can run solely on battery power today, the self-driving car is here, both completely transforming one of the world's most important industries.
Bringing change to a market is hard and it must be like having a baby. Each time, I promise to never do it again as it is painful, overwhelming and unforgiving. However, once the hard work pays off and the change is firmly in place, there is a sense of great satisfaction.
Customization: Now that we have the technology tools to handle mass scale customization,
the future is bright for consumers who work with experienced and dedicated professionals. I believe in flexibility, disclosure and options. Newer and better solutions offer more options, providing exactly what is needed to best meet your goals and objectives. More tools and more knowledge are always beneficial. Whether it be in an auto lease, airline tickets or financial services, inflexibility and unnecessary surrender penalties are never optimal.
What matters to me today? I am concerned about how annuities are perceived because they are severely misunderstood. Some of today's annuities, especially longevity annuities are high performance tools that do it all. If you think negatively about annuities today, you have either had a bad experience or they have not been presented to you correctly. Liquid from day one, guaranteed to never lose principal, guaranteed income for life, all gains stacked on the guaranteed principal and backed by many of the safest financial institutions in the world. Professors and economists from Harvard, Yale, Stanford, U of Chicago, Duke, The London School of Economics and many more are all lined up on the same side about the brilliance of today's indexed annuities for guaranteed income in retirement. And that is saying quite a bit since economists are rarely in agreement about anything!
Most of the women I meet with want guaranteed, lifetime income in retirement. To my surprise, the majority of women we meet with still DO NOT have sufficient levels of guaranteed, lifetime income. Most have social security, some have a pension and most have a large percentage of their retirement assets in the form of stocks and bonds. With longevity risk being the most dangerous threat to a stable retirement, this remains a top concern for me and Ted.
Once they become aware of what the Professors from Yale, Harvard, M.I.T., Duke, the University of Chicago and the London School of Economics have to say about guaranteed lifetime income being more valuable in retirement than the accumulation of assets, they begin to re-balance their portfolios in favor of guaranteed, lifetime income solutions.
We talk with people in or near retirement every day. Many of you have attended our retirement enlightenment seminars where we discuss the most common threats to your retirement. In all of these meetings, women share their fears about longevity risk, the markets and their desire for guarantees. Women are unwavering about their desire to be unaffected in retirement about the financial markets or in the rest of the world:
Q: Why do so many women WANT income annuities?
Deborah: The simple answer is that once our clients are properly informed about today's annuities, both men and women opt for them. To NEVER lose principal, to be able to participate in the markets and keep all contract gains without ever risking principal, to build up an increasing income stream until withdrawals begin and to have all the income GUARANTEED FOR LIFE is a near PERFECT retirement plan.
Q: Can you simply explain a Fixed Indexed Annuity?
Deborah: Near or in our retirement years, we want to minimize uncertainty. The roller coaster ride of the markets is a major concern for many women (and men by the way). A fixed indexed annuity with a guaranteed income rider will provide a steady retireme
paycheck" that is guaranteed for life. In exchange for a lump-sum payment to an insurance company, an annuity is a contract to get paid back. In conversations with clients and friends, their emphasis is first and foremost on finding a retirement solution that guarantees everything and removes all uncertainty and that is exactly what a fixed indexed annuity does.
Q: When is the best time to start? Is there a medical exam?
: There is no medical exam, like there is with life insurance. With longevity annuities, the sooner you put money into it, the higher the income will be in the future, much like a company pension plan. We recommend that our clients use contracts that return 100% of your premium upon surrender, minimizing your risk. Reducing or eliminating the risk of an early surrender is something Ted has been focused on since the beginning of his career. We stand for complete transparency, disclosure and always doing what is best for our clients. We recommend annuities with 100% return of premium, GUARANTEED, from year one.
This is very consistent with Ted's innovation of life insurance without built-in commissions, something he created 30+ years ago in the life insurance industry. Annuities with return of premium are better choices for many consumers.
Are you interested in attending our next Retirement Enlightenment event? We plan to have a distinguished speaker talk about the importance of healthy diet and food choices at every life cycle interval. Please contact me for details of the next event or if you are interested in joining us for any of our educational events. It is not a sales presentation. We are passionately committed to raising awareness to help you learn and plan for the real threats to a stable retirement while using guaranteed income solutions to stop worrying and never run out of income.
Are you near Boca? We usually select Mortons and we cover the cost of dinner for you and your spouse. We would love to see you there. We typically have no more than 40-45 people to ensure an interactive discussion with a lively Q & A session.
Please call me direct at 561-869-4500 or Email Deborah to arrange a time for us to get together! Sincerely,
You Need To Know.
In the event of a health care emergency, does your existing life insurance policy allow you to draw against the face amount of the policy? For example, can you take a tax free advance of $250,000 against your $1,000,000 policy, costing nothing if you have a critical or chronic health crisis? Most people do not! Let us help you with this, there is no extra cost to get Living Benefits in your life insurance policy.
Call us to learn how:
What to Expect From Us?
Recognizing that most people do not want too much complexity about retirement details and insurance until it becomes necessary
, we strive to create a smarter dialogue between us. We hope to educate our clients about how to protect assets and manage the real threats facing them in retirement. Together, we help identify broad retirement goals and objectives that are unique to many people. Ideally, we will make specific recommendations about the best products to meet your needs and how to customize them to fit your plan. Most importantly, we remain focused on making sure our clients have sufficient levels of
guaranteed income for life
In retirement planning, it's all about guarantees.
Insurance Industry Must Do Better.
Advertising & Marketing 101
If you stop to think about it, when was the last time you saw a life insurance company target an event like the NCAA tournament, the Super Bowl or the Masters (each is their target audience) with ads about the virtues of buying annuities, or life insurance, or any of their core products? What if Apple or Ford left the advertising of their "bread and butter" products to their local, privately owned distributors? They don't. It wouldn't be acceptable and it would be a disaster on every level, especially new sales. And yet, that is exactly how it currently works in the life insurance and annuity sector.
Life insurance companies continue to do a very poor job of advertising and marketing their products to life insurance buyers. They do not sell directly to consumers and as a result, there has been a lack of even basic advertising and marketing campaigns about these great products*. Insurance companies rely on a variety of distribution methods to the consumer of their products. If you think about the auto industry, it is similar. You cannot purchase a BMW directly from the manufacturer nor a Cadillac directly from GM. You buy from their middleman, their dealerships. Why? Because the auto companies themselves are manufacturers, not business-to-consumer sellers.
They are great at what they do; they do what they know best.
However, our industry can no longer afford to neglect their responsibility to advertise, promote and market their products. In the past several years, there has been an obsession to "crack the code" of consumer demand for life insurance and annuity sales. There is no magic bullet or secret code. The tail is wagging the dog here because there has been no concentrated effort on the part of the industry at large to create demand for their products.
The industry's "dealerships" are licensed agents and agencies and we simply cannot afford to shoulder the responsibility to advertise, promote and market the products we sell without the industry using its formidable resources to support us and help us do our work. The carriers and the industry must immediately begin worthy advertising campaigns that are singularly committed to influence consumers to take action for their life insurance and annuity products. These products require complex, multi-media campaigns that are only affordable by the multi-billion dollar manufacturers and industry organizations supported by their members.
Without this change, there will continue to be misinformation about these products, lack of the necessary education to make an informed decision and a shrinking of the overall market. In other words, the whole pie will shrink as well as market share for each distributor. Tragically and it pains me to say that the annual statistics coming out of our industry validate these very things.
Now, our competitors define our products, our services and our professional status. They spend more, they market better and their distributors have huge support from their banks, the brokerage firms, the media and the wealth management firms. And with all due respect to the media and to journalists who cover and really know the insurance and annuity space, there are too many others who are making un-rebutted claims about what our products do or do not do. I shudder every time I see an article about life insurance and annuities written by journalists without the credentials to critique these products. The misinformation from the second rate writers is alarming and the insurance companies and the industry associations need to push back.
That responsibility cannot
solely on the burden of the sales force. It is not a matter of willingness. I have seen Herculean efforts from the distribution system fire back and defend the virtues of these powerful products. By definition however, we are too easily dismissed for lacking objectivity and impartiality. Alone, our opinions do not matter because they are unheard, lacking scale and the repetition necessary to be meaningful.
The time has come for insurance companies to step up now, use their enormous balance sheets for Sales and Marketing 101. When I created and introduced life insurance without commissions for this industry 30 years ago, I did not think it would have taken as long as it did to become a mainstream alternative for consumers of permanent life insurance, especially for large policies. But, I am a little older and wiser now and I understand how long meaningful change takes.
Unfortunately, I do not think the industry can afford to wait another minute to begin this large scale advertising and marketing initiative. I am not suggesting that life insurance companies take on sales as that is not what they do best. The time is now for the companies to forever speak directly to life insurance and annuity consumers about all the great things their products do for them.
They need to create demand. Asking the sales-force to both create the demand and make the sale is unrealistic on so many levels. We don't have the time, nor the expertise. We don't ask the insurance companies to sell the products and they can't keep asking us to create the demand for them. From a simple time perspective, it doesn't make sense. The current strategy employed by the "industry" is not working. Sales are dropping every year and in years when sales increase, they are hardly worth mentioning. Compared to the market share of the industries competing for our client's resources, the numbers are embarrassing.
Other than rare instances, all insurance companies sell through a network of licensed agents.
What Makes Insurance Companies Special?
Insurance companies own assets called mortality credits:
"The mortality credit is also known as the mortality yield. With a participating annuity, premiums paid by those who die earlier than expected contribute to gains of the overall pool and provide a higher yield or credit to survivors than could be achieved through individual investments outside of the pool. The mortality credit increases significantly with age and hedges longevity risk, often creating a return that would be impossible to match in the broader financial markets.", says Tom Hegna.
Because of these credits, insurance companies are the perfect companies to offer us annuities. Many people believe that insurance companies are the safest, most regulated financial institutions in the world.
Insurance companies always pay.
Even during the depression, everyone was paid what they were supposed to receive from insurance companies. During every recession since, life insurance companies have paid all legitimate claims. There has been no Savings and Loan crisis, no 2007 banking crisis or any other kind of crisis in the insurance industry. Insurance companies don't fail. When one rogue carrier gets into trouble from time to time (Equitable, Executive Life and Mutual Benefit), the state in which that company is domiciled steps in and takes over long before a failure. The assets are sold to other companies,
usually at a premium
and the company is triaged to health or run off without a single claim going unpaid.
'Training On Empty', is information we hope you find useful. It is one way for us to thank you for visiting our web sites, our social media sites and following our blogs!
Life Cycle Fitness
Although we are not a fitness company, good health is does directly impact certain types of financial services products such as life insurance and some annuities. The indirect correlations are quite relevant too. It only seems fitting then to share this information about the do's and don'ts of exercising properly. It even covers "should you or shouldn't you" and it was welcome information for me as this has been one of those issues where I really want good guidance.
To answer the question of whether it's possible to train on an empty stomach we need to understand that every time our muscles are asked to exercise a number of complex, overlapping systems kick in. These systems intertwine which only adds to the confusion. To simplify and untangle them and get to a definitive answer we will look at this from the perspective of three simple elements that are involved in the process of muscle activation, every time:
- Fuel (Adenosine Triphosphate or ATP)
Every time that our muscles work these three elements combine to power several different chemical processes the efficiency of which is determined by a person's cardiovascular and aerobic fitness, diet, body fat composition and the quality of the muscles they carry.
Without oxygen of course, nothing happens, yet sufficient oxygen for things to happen is not always readily available within the body which is why there is an anaerobic response.
Ask your body to run away from a zombie horde, lift heavy weights or jump over a collapsing bridge and your muscles kick into high gear and respond. This instant response is made possible because there is glycogen stored in the muscles that can be broken down through a process called glycolysis to produce pyruvate which is then converted into Adenosine Triphosphate (ATP), carbon dioxide and water. ATP is what powers the muscles.
Unless you have been hyperventilating beforehand, at that point there is insufficient oxygen in the bloodstream to power the process so the Cori cycle, also known as the lactic acid cycle, kicks in and the body works anaerobically (i.e without the need for oxygen). Lactic acid is produced during this process and it enables the muscles to continue to work past the stage where their ATP supply is exhausted. The muscle fibers that are activated to do all this are Type IIB, they are extremely fast in action, can produce great force but can operate only in short bursts before they get fatigued.
These are muscles that are great at helping you get away from the brain-eating zombies and taking action that helps you survive in an emergency but they cannot continue to power your workout past the first few minutes.
As you continue to work out your body's temperature goes up due to the thermic effect of muscle activity. You take deeper, ragged breaths, your lungs expand and more oxygen from each breath is delivered into the bloodstream which the heart then pumps to the muscle groups in the body that need it most.
The moment oxygen arrives on the scene the Krebs cycle, also known as the citric acid cycle, kicks in. The Krebs cycle takes carbohydrates, fats and proteins and converts them into glycogen which can then be broken down into pyruvate through glycolysis to produce the now familiar ATP, water and carbon dioxide. One of the byproducts of this cycle is lactate which is then used by the body to transport glucose out of the liver, where it is stored, and into the muscles.
The muscle fibers that make this possible are Type I. These are slow twitch fibers that have a slow response rate, do not produce tremendous force but are highly resistant to fatigue.
The presence of oxygen in the bloodstream means that the body is now beginning to use fuel stored in the liver (glycogen) which is essentially carbohydrates. Should you continue to run a little longer and that fuel source runs out the body would then go to the stored fat reserves and use them as its next available fuel source.
More Anaerobic Activity.
Suppose that having escaped the clutches of the zombie horde you decide that your best bet is to just get out of town so you just keep on running. At that point your breathing changes. The rate at which you ingest oxygen becomes less rugged and your breathing gets more even. Your breaths continue to be deep but now are measured. Runners and martial artists call this "second wind". At this point the body continues to ingest large quantities of oxygen but the muscles are working mostly anaerobically.
The muscle fibers employed now are Type IIA. These are moderately resistant to fatigue, can work anaerobically for a long time and can produce a high level of force which is why you can suddenly speed up again when you're running, after having slowed down to catch your breath a little. At this stage both the Cori and the Krebs cycle are in effect.
If your running away from the zombie horde entails running a marathon and your fat deposits are not enough then your body will look to protein to convert into glycogen to fuel its run.
This is a case of last resort. Protein (i.e. muscle) is not a great fuel source for the body as it takes between 20% and 30% of its energy value just to break it down plus by doing so the body cannibalizes its own muscle which makes its long term survival less likely.
Can You Train on Empty Or Not?
This is the question we set out to answer and seeing the processes that go into powering the muscles the answer is a definitive yes. Studies show that you can run for 2 hours at marathon pace before your body runs out of glycogen and a 2010 study published in the Journal of Science and Medicine in Sport showed that cyclists who completed exercise early in the morning without eating breakfast (fasted state) improved muscle glycogen stores by as much as 50% over the group that ate breakfast before their exercise.
There is additional research that shows that training on empty sensitizes the body to the insulin response allowing it to utilize glycogen in the bloodstream better. Plus, for athletes, there is the added benefit that on an empty stomach there is no diversion of the blood supply to anything but the muscles that need it.
So, why all the confusion?
Timing is important.
A study, published September 2008 in the Journal of Physiology and Pharmacology found that those who trained on an empty stomach and then went to bed, without eating, exhibited slowed muscle repair and growth, even though they consumed enough calories after they woke up. The same study also showed that people who are new to exercise, as a whole,
should not exercise on an empty stomach because they experience lightheadedness, dizziness and even nausea as a result of low blood sugar which is usually the result of inefficiency in fat and glycogen breakdown in their bodies.
Showing just how important timing is, the most recent study from Northumbria University, in the UK, showed that you can lose as much as 20% more body fat by exercising in the morning before breakfast.
Absolute beginners who are looking to jump-start their fitness by training on empty, shouldn't. Body builders who need to build muscle, also shouldn't train on empty. Trained athletes who train on empty and then go to bed without having eaten are not gaining much in their performance. For everyone else, training on empty in the morning, before breakfast or a little later in the day, and then having something to eat, is fine and it is likely to deliver faster results in reducing body fat and increasing muscle mass.
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