(Video) Strategy 3 of 3 – Equity Indexed Annuity

by | Jun 18, 2020 | Teachers

Don’t let the word annuity scare you! Being able to take advantage of the upside of the market without the downside risk is possible! They are not for everyone, but an annuity could be an integral part of your retirement plan.

Video Transcript

Hello everybody! How are we doing today? Yeah, I can write upside down, a pretty cool talent eh? I’ll tell you why I did that for you in just a second. Welcome to Strategy Number 3, in the Teachers Edge of how to combat what happening in your portfolio with what’s happening in the world with Covid-19. And, why did I show you I could write upside down? Well, you know what? The world’s pretty upside down right now. Wouldn’t we agree? Things are so different than they were even a year ago. My goodness even six months ago. Everything just seems upside down. The Strategy that I am going to show you today also seems a bit upside down. It’s almost like, boy that’s impossible. What I’m going to be doing today is showing you how to take advantage of the upside of the market without the downside risk.

Now, you may be wondering why hasn’t anybody ever shown me this before? Well, the products have been around for quite a while, however, they’ve come a long way in recent years. So, I am going to show you a hypothetical example of what’s called an equity indexed annuity. Which indeed is going to show you how to take advantage of the upside of the market without the downside risk. So let’s get started!

Equity Indexed Annuity

So the word Indexed refers to the index in the market. The index that we are going to be talking about today is the S&P 500. So, let’s say today was your lucky day and you put some money and your policy issued into this Equity Indexed Annuity. What the company is going to do is they are going to take a reading of the S&P 500 on today’s date. Then, they’re going to give you what is called a participation rate. That participation rate for today’s purposes is 50%.

So a year from now that company is going to take another reading of the S&P500. And let’s say, if we look at that blue line there, let’s say that the S&P 500 went up 10% in a year’s time. From today, until a year from today. You get a participation rate, so instead of earning 10, you’re going to earn 5 because 5 is 50% of 10. Pretty easy math right? I like to use round numbers.

All right you’re probably saying, “Why would I want to earn 5% when I could earn 10%?!” Well because there is a trade-off that is going to happen. The next year, if that S&P 500 goes down 10%, you see how your line stays straight, you don’t make any money but you don’t lose any money! It stays level. Then in the following year, if the market again goes up 10%, you’re going t continue with that participation rate of 50%. SO you’re going to earn that 5%.

So, the upside of the market without the downside risk.

It’s fabulous, isn’t it? You may have some money in a cash account, where you’re thinking gosh I’d like to keep up with inflation. However, you don’t want to lose anything. Might be a good place to put it! You may also be saying, “I have some money in the market, and boy, I’m really nervous about it right now.” Might be a good place to put it.

I’ll tell you, I have been doing reviews with my clients recently and they are giving me hugs, virtually, they can’t do it in person. Because any money that they have in these products has not lost a dime!

Equity Indexed Annuities, the Third Strategy, maybe it’s right for you. Maybe it’s not! I don’t know, we would have to look at the entirety of your retirement picture to see if it could fit, and there’s other things to consider. But if you’d like to talk to me about this, or any other aspect of retirement, I’m here. We can Zoom, Face to Face, or we can just have a chat on the phone. There’s a slide at the end of this video, that’s going to show you how to get in touch with me. Now I could grab my board and tell you goodbye by writing it upside down, I can do it! I can write anything upside down, believe it or not. Had a lot of experience with that. But I’m not, I’m just going to tell you bye for now.

Until I talk to you again, happy hibernation!

Equity Indexed Annuity Contact

If you would like further information on planning for or reevaluating your retirement, or simply want to chat, give us a call at 231-421-7391.

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