Safe-Money Strategies

Without losing credits during a subsequent decline, the financial services industry has made it possible to partially benefit from the stock market’s advances.  Hard to believe, but true.  Since 1994, these remarkable and popular savings platforms, known as Fixed Index Annuities, have been available.

The “Lost Decade” of 2000-10, dramatically demonstrates the ingenuity and suitability of FIAs, especially for retirees.  Take a look at the chart below.  The red line shows the change in valuation (dividends excluded) of the S&P 500 index from the annuity owner’s contract inception date of 9/30/98 through each subsequent contract anniversary date through 9/30/11.  The blue line represents their actual contract values during the same period.

As impressive as the differential above is, there are three points to make.  First, FIAs are not designed to out-earn long-term bull markets because they will only credit most, not all, of an index’s advance.  This is in exchange for never losing past interest credits during a subsequent collapsing market.

Second, the annual option to reallocate some or all of an account to a Fixed Interest option within the annuity was available to clients during those years when the market declined, an option that yielded perhaps 3 or 4% simple interest.  In consideration of the “zero interest credit” they received, certainly preferred to a  30% devaluation, the annuity owner could have received an even higher end value than the one shown by growing their account by better-than-CD rates of interest.

Third, the blue line represents a 1998 product-year annuity that is no longer available in today’s market.  Finding a similar product would be like finding a current-year Model T at a Ford dealership today.  Compared to the FIA’s available today, the blue line is an antique.  Today there are platforms with many different market indices of which to choose (not only the S&P 500), in any combination, as well as the ability to reallocate that mix yearly.  There are also at least 3 interest-crediting strategies, some including up-front premium bonuses of 5-11%.  Bonus products have been especially popular with retirees getting away from risk-depleted holdings for the stability, guarantees and safety of FIAs. Even though they require longer terms of course, the bonus allows them to get back some of the losses they incurred while in stocks/mutual funds.  Had current state-of-the-art FIAs been available in 1998, we can reasonably conclude this client would have had a considerably higher ending value, thereby, attracting retirees seeking age-appropriate holdings for savings and investments.

Last, another component to age-appropriate investing above the risk/time horizon concerns with complex and speculative holdings is considering what will happen if the “money person” in the marriage has a stroke or debilitating illness.  Instantly, the spouse is responsible for the family care as well as the “portfolio manager” of the couple’s holdings that are still-at-risk.  Customarily, the will sell and buy at the wrong times with avoidable tax consequences.  Adult children are often too busy with their own lives to oversee the funds the way their spouse did.  At Studemont Group, LP, we have met with many couples that delayed simplifying their holdings until a major loss or life-altering health event.

Doesn’t it make sense to simplify your portfolio when both spouses still have their health and when they can do it together?  The answer to this question for us, obviously, is yes.  All retired couples should consider shopping for a safe-money advisor sooner rather than later so this doesn’t happen to them.

Wealth Transfer Strategies

At our next meeting, if we could identify ways to double, triple, even quadruple the funds that are set for your children without market risk and income tax-free to your children, would that be of interest to you?  We have never once heard an objection in our many years of asking this question.  We have provided our clients and their heirs with financial choices, generous endowments and peace of mind. 

At Studemont Group, LP, the belief that clients and their heirs have every benefit, tax advantage, and the best choices available for them is first and foremost, whatever their situation.  Call us today to learn more.

Planning for your future with Long Term Care

As a result of medical advances, treatment for diseases such as Alzheimers, Dementia and mentally degenerative diseases have been partially halted. These medical developments have allowed us to live longer. Now, it is common for a man or woman to suffer a heart attack or a stroke and live well into their 80’s possibly depleting their entire savings.  This leaves their healthy or surviving spouse dependent on Medicaid.  The inheritance planned for their heirs becomes non-existent and their primary residence with possible Medicaid liens when the second spouse passes away leaving a large debt for their children forcing them to sell the home and any assets to pay. At Studemont, it is crucial in our day-to-day planning to protect these assets for all of our clients. 

Long Term Care ownership is far less conventional than auto and homeowner’s insurance.  The chance of needing to file an auto insurance claim is 1 in 1200. The need to file a homeowner’s insurance claim is even more remote at 1 and 1800; however, these premiums are accepted as part of our everyday lives. Long Term Care ownership is astonishing given that 2 in 5 couples ages 70+ needing some type of long term care are still hesitating to purchase this important coverage.  Usually embracing this important coverage amounts to devoting less than 0.5% on one’s net worth annually.  Primarily to ensure that 99.5% of their assets do not get spent down caring for a spouse after illness. A couple that is uninsured will be left with what Medicaid can provide rather than having choices.

We would all prefer familiar surroundings and being at home at the hands of a living spouse when receiving care. Long Term Care policies have features such as family care-giver training allowance, return-of-premium rider, third-party pending lapse notification and home modification benefits to name a few. 

At Studemont, we work with our clients to provide them policies that are tailored to each individual and will not lapse, therefore providing them comfort.

Below are a few questions to consider when meeting with us to help us provide the best coverage options for you:

• Your present ages and dates of birth.
• Current prescriptions (and their dosage) you may be taking and reasons for each.
• Any minor or major diagnoses of the past 15 years and treatments received for each.
• Ages of each spouse’s parents, if living, or their age at passing and cause of death.
• Any other relevant information we should be aware of or know about your health.

We look forward to assisting with protecting your retirement against the single biggest threat it faces:  Impoverishment due to sudden illness and an even longer life expectancy.