Speaker 1:

One.

Tom Mosley:

Fixed indexed annuities. Can you trust what you’ve heard? Hey, today we’re going to dive right in and talk about annuities. Now, I’ll tell you what I’m not going to talk about. I’m not going to talk about what’s called a SPIA, S-P-I-A a single premium immediate annuity. That’s where you give all your money to the insurance company, and they just dole it out. And if you live a month, fine, they’ll give you one month. If you live 20 years, they’ll give you 20 years. If you live 40, in other words, for as long as you live. I don’t really like those because I think there’s some that are better than that. And I also really despise the variable annuities because in a variable annuity, which is the one that most people hate, and the most people have all the negativity about because the fees are high and other things like that. So, I don’t use, and the variable in this, it’s tied to the stock market.

Tom Mosley:

So, if the market goes down and you’re trying to live off the income off of that annuity, you’re going to lose that income on a regular basis. You’re going to lose that income month to month as things go, if the money goes down to zero because you incur the loss, if the market goes down. What I do like fixed indexed annuities, they can be a great way to build for retirement income. Now, let’s talk about all the negativity though… I don’t want to just ignore the negativity about a fixed indexed annuity. Okay, so here we go. But you say, “But I’ve heard.” And you fill in the blank of what you’ve heard about annuities. I mean, if there’s any word in the financial insurance language that conveys a four-letter word, it seems like it’s annuities, and you say, “But I’ve heard.” And I just have to ask you, who are you listening to?

Tom Mosley:

It’s pretty funny. And in 28 years, I’ve had people come in and they’ve said, “Well, I was listening to my plumber.” And I always say, “Where was your plumber?” “Well, he was underneath the kitchen sink.” “And, could you hear him really well?” “Well, yeah, but…” And they said, “Why are you asking?” “Because it’s a plumber giving advice.” Now, I got to tell you, don’t call me up and ask for plumbing advice. I’ll tell you that right now because I’m not a plumber. And so, you got to watch who you listen to. School teachers are really notorious for this because they’ll listen for financial advice on their pension that they have through STRS or through the government, and they’ll listen to financial advice from teachers. And that school teacher may have only taught 20 years, whereas some of the other school teachers that are giving them advice may have taught 34 or 35 years. Those pensions are almost unrecognizable as being the same pension when you go 20 years or when you go 35 years. So, when you say, “But I’ve heard,” you’ve got to be careful as to who you’re listening to now.

Tom Mosley:

Now here’s some you say, “I heard on TV.” I saw an advertisement one time for a guy who said, “I hate annuities.” We never sell annuities. Now think about it. If a product is out there that helps people retire and about one third, 33% to 40% of the people who retire with a plan have an annuity built into that plan. Now, if it’s something that’s good for 33% to 40% of the people and it’s valuable to them in a plan, are you really going to a fiduciary who stays, who’s on a commercial until we are fiduciaries, but we don’t consider annuities what they’re really saying, let’s translate. We are fiduciaries. We consider everything, we do what’s in your best interest unless it falls in that 33% to 40% of what people invest in. Huh? It really doesn’t make sense.

Tom Mosley:

So, you at least need to open your mind and say, “I need to find out about annuities.” Not just the ones that people hate, but the ones that are good. Another place people find their information is on Facebook. I am not here to argue with everything that comes to you on Facebook because we all know that everything on Facebook has to be true, or it wouldn’t be on Facebook, right? Right. You understand what I’m saying in jest? You got to be really careful on Facebook and I read an article this morning and it was talking about people are getting on TikTok and that’s not your clock. That’s something your kids do. But if you ever get on TikTok and your kids say, “Here’s some financial information from TikTok,” and they were looking at the people who have no whatsoever financial literacy and they’re giving information on TikTok to other people about advice.

Tom Mosley:

So, I’ve heard about annuities. Who are you listening to? TV, Facebook, maybe an investment company that doesn’t consider everything, maybe friends. And I always ask people, “Have you ever had an annuity?” “Well, no, but I’ve heard,” “Okay.” It’s like sometimes people say, “Well, I couldn’t stand California. It’s just a horrible place.” And then, they come out here and they go to the beach, or they come out here in February and they’re at the beach, and they see the snow on the mountains, and they really see there’s sometimes there’s a lot of redeeming qualities about a place that nobody would ever want to live. I always like to when it’s minus 20 degrees and all of my friends’ areas in the Midwest, and it’s 75 or 80 degrees, it was this Christmas. I always like to post on there. “Hey, you’re right. Nobody wants to come to California because here’s where we’re in the 80-degree level for the next week, and you guys are going to be sub-zero.”

Tom Mosley:

So, where are you getting your information? You got to make sure you’re listening to somebody who knows what they’re talking about. Now, there are some issues with annuities. I’ve always said there’s good and bad about every single investment. So, I’m going to be very transparent with you about what’s involved in some annuities. Are you ready? Let me tell you some bad things about annuities. Number one, you can get involved in annuities that have very high fees. Recently, we had a couple came to us and they had over 1 million in annuities and their fees were 4.65% overall in the variable annuities. So, you got to really make sure you know the fees and don’t trust that insurance guy who’s selling that to you or insurance lady who’s selling that to you to go over all the fees. They may not be a real fiduciary, or they may not be being a fiduciary when they sell you that product and they may not tell you what the fees really are.

Tom Mosley:

There may be huge surrender value. So, you don’t want to put any more money in the annuity than you’re going to not need. Yeah, that’s why I said it, right. Not need for that seven-year period or 10 year period. You want to dedicate some money to the annuity, but not all of your money. Just like the investment company that says, “Oh, we don’t sell annuities. We hate annuities.” There are insurance people that they’ve never seen an annuity they don’t like because that’s all they can sell. They can’t sell investments because they can’t pass the licensing test to become an investment advisor. Or maybe they can’t pass the background test, or for whatever reason. You need to work with somebody who at least can show you annuities and the value of them and the negative about annuities as well as investment. So, you don’t want to be on one side and say, “I’ll never consider annuities.” And you also don’t want to be on the other side that says, “I want all of my money in an annuity or all of your money in an annuity.”

Tom Mosley:

Great story. A couple came to us about a year ago, and I noticed that when they had gone with this advisor, we went back to the beginning, and they had done really poorly with this advisor. And I said, “When you went to this advisor, it looks like you had $600,000 right on the money and they put 300 in annuity and 300 in investments. Why did they do that? Why did this person do that?” And the lady looked at me and said, “Well, this guy said, ‘that’s what he likes to do.’” Well, let me tell you something. Anytime you hear somebody say, “I want to do it this way and this way because that’s what I like to do,” then you better back up and say, “Wait a minute, I’m here. This is my money. This is what I’ve built through the years.” You better be having somebody work with you who’s doing what you like to do, what you need to do and what’s going to be in your plan.

Tom Mosley:

You see that person was not starting with a blank sheet of paper. That person was starting with, “I want to put 50% in the annuity and 50% in investments.” That was their idea before the client ever came in. So, you got to be careful that you don’t put yourself to where you put too much money and you have too huge of a surrender charge. And like I’ve already mentioned, sometimes with the annuities, you’re going to get a really, really low rate of return, if you get in the wrong annuity, you may be only making 2% or 3%. So, make sure… There are some annuities, by the way, where we’ve gotten an average of over 6% with a guarantee, no backwards, no going backwards. And we’ve gotten as much as 17% in one calendar year for growth within the annuities that we use.

Tom Mosley:

So, you can have growth, but make sure you don’t lock yourself into an annuity with low return. So, here we’re talking about it. So, what kind of annuities? You don’t want to go to that extreme either way, okay? You don’t want to have somebody who says, “No annuities, won’t sell you an annuity.” And a person who even says, “I’ll sell you half annuities and half no…” you want to go to somebody who’s going to say, “I need to build a plan for you.” You don’t want to go to either extreme either way. So, what kind do we use? We used fixed variable or fixed index. I use fixed index and you know already I don’t use variables. Why I use fixed? A fixed annuity is like a CD on steroids right now, in March of 2023, there are fixed annuities that are paying north of 5% through some of the strongest investment in financial companies in the world. That’s the fixed annuity.

Tom Mosley:

There’s also the variable. I’ve already told you I don’t like those because of fees and the ability to lose money. I saw one variable annuity this month that they were down 35% over last year because they’re in the market and they’re paying the expensive fees for the annuity. But I do really love the fixed indexed annuity because that gives you guaranteed income for the rest of your life. And the ones we use gives you increasing income as the market index goes up that you’re tied to, it’ll last as long as you do and if you’re married, it’ll last as long as your spouse lives. Okay. So, well, is anybody using these? Look at these numbers. $79.4 billion went into them in 2021. That’s no shortchange. Okay? No small change in that pocket. And last year in 2022, $87.6 billion went into fixed indexed annuity.

Tom Mosley:

Again, what are their features? They’re guaranteed. There’s some that have no fees to them, whatsoever. Now, the company’s making money, but it’s like a CD in the bank. No money comes out of your CD. The bank just pays you X amount and they take their money out of what they make in excess of what they pay you. So, they’re guaranteed, they’re either no or very low fees that are involved in the fixed indexed annuity. There is no market risk because when the market goes down, you simply make zero that year. I always kid around with people in 2007 and 2008 where fixed indexed annuities didn’t make any money either year, zero was your hero.

Tom Mosley:

Why was zero your hero? Because in the market you would’ve lost 54% in the S&P 500. So, if I’m going to lose 54% or just make zero, I’m going to choose to make zero. I hope you’ll make the same decision, okay? They have increasing income that allows you as you’re drawing from the annuity and you still living as long as you live. It will last as long as you do to pay you out income that’s increasing for the rest of your life. And if you’re married, it lasts times the two of you, as long as as both of you.

Tom Mosley:

Now, let me tell you some real practical stuff. The people that we have, not everybody that we work with gets a fixed index annuity. I want you to know that if it fits, you get it. But we call those people SWAN people. All right. Swan people. If you get a fixed index annuity in the market drops off the table. It’s amazing. The cause of panic that we get from investors who work with us are never from the people who’ve in integrated into their plan, a fixed indexed annuity for income, or for base, or for something solid to ground their portfolio. That’s money. They’re never going to lose. They might use it, but they’ll never going to lose it because the ups and downs of the market do not affect it in a negative way. And we call those SWAN people because they’re able to sleep, sleep well at night.

Tom Mosley:

That’s what SWAN means. You need to get used to it. If sleeping well at night is not something that you’re doing at any time because you’re staying awake, worried about your financial situation, you’re worried about whether your money’s going to last for the rest of your life. It might be that dreaded four letter, horrible word annuities might be something that could fit within your portfolio. How do you find out? Get in touch with us after you sleep well at night info@mosleywealthmanagement.com. I spell my name, M-O-S-L-E-Y. I’m a thoroughbred. My mom spelled her name before she married my dad, M-O-S-E-L-E-Y. But we took out the extra E, info@mosley, M-O-S-L-E-Y, wealthmanagement.com, or you can call us at 714-421-4288. And here’s what we’re looking at, fixed indexed annuities. Can you trust what you’ve heard about them? Or do you need to give them another look, so that you can sleep well at night.