Don’t buy an Annuity until you understand your “Why?”

I too often meet with new clients who want their past financial decisions checked to make sure they are in alignment with their current and future financial goals. My favorite question to ask is “Why did you purchase this?”. Most of the time there is NO clear answer or reason. I usually hear responses like “It felt like the right thing to do” or “Interest rates are so low that my banker suggested it as good alternative to my low rate CD”. Most of the time NO one can explain how it fits into their overall financial plan. Annuities are great financial tools if used at the right time and place.

I fear that many Financial Advisers are more interested in their own financial well-being than they are the clients. As an Adviser, if you serve the client in a “Fiduciary” role the potential conflict of interest can and should be avoided for the benefit of the client. There will be a time in the future when a client’s financial plan has to be put into place. With proper planning client’s goals can be achieved in the most effective manner based on their unique circumstances.

Annuities come in various forms and designs. You may want to simply grow your funds with a guaranteed interest rate by using a “Fixed Annuity”. This type of annuity is offered by various companies with varying guaranteed interest rate periods. Indexed Annuities are available and credit interest tied to various market indexes while at the same time guaranteeing principal. Variable Annuities have their performance tied to sub-accounts (separately managed investment accounts) and can vary in performance as well as value (no guaranteed downside value typically). All annuities have cost involved and typically don’t have front end loads. Most will have varying surrender fees in the early years of the contract life.

Using an Indexed or Variable Annuity in a financial plan can make sense if you utilize the “Guaranteed Minimum Income Benefit” or “Income Benefit” feature that provides a guaranteed monthly income based on a fixed growth rate. You pay for this feature via expense charges by the insurance company on an annual basis. This feature may work if you are attempting to pool all of your assets to create a monthly income plan that is reasonable for the future. The annuity product allows you to nail down a guaranteed monthly income in combination with the potential growth of the value of your assets that are invested in the stock and/or bond markets.

In summary, annuities are great tools if used in the correct manner. Don’t simply purchase an annuity until you can answer the questions, “Why?”

Disinherit your family.

Disinheriting your family can be easy if you don’t pay attention to how your assets will be handled upon your death. We all get busy with life and don’t keep our beneficiary designations up to date. Life happens – birth of a child, divorce, death of a spouse, remarriage, etc. We can help. Go to and view a short video on this topic. We can assist you in avoiding disinheriting your family.

“The Misunderstood Asset”

Life Insurance




With 40+ years advising clients regarding their financial plans, I am continually amazed at how little knowledge people have regarding the use of life insurance as a part of their financial plans.

Life insurance, like any other form of protective coverage is intended to protect against loss.  Life insurance is money, pure and simple.  You are shifting the risk of loss off of yourself onto an insurance company to deliver money when a loss occurs.  Pure and simple.  I have never had a widow or widower tell me their spouse was over insured or “insurance poor”.

Over the years the media has distorted the real meaning of life insurance.  Several talking heads that come to mind make a very good living distorting the true use of life insurance as a financial tool.  The media gets caught up in life insurance – vs – ?.  You name the product.  Many media outlets can’t profit from the subject unless they bring controversy to the table.  “Controversy” sells, period.

Life insurance is money that is delivered at the time of loss to the named beneficiary.  It replaces income, secures a child’s education, pays off a mortgage, secures the line of credit for a business, etc.  When money is needed, life insurance can be one of the most cost effective ways of providing capital at the least cost to a family or business.

Life Insurance is not for the insured, it is for the beneficiary.  If you understand the “why”, then you can address the “reason”.  We have been brainwashed by the media to get bogged down with all of the “controversy crap” that is regurgitated out of the TV, Radio, Newsprint, etc. without any explanation as to “why”.  In my opinion we have failed to think for ourselves and choose to act on information from a poorly vetted source.  I have witnessed too many situations where in the end there was not enough money for the family or business to continue on.

Ok, you maybe sense my frustration with the problem.  In this and the following blog posts I will be bringing the truth to you so that you can make your own decision as to the following:

  1. Do I need life insurance?
  2. If so, what type?
  3. What amount?
  4. Which company should I choose to provide the coverage?

But first, here are a few basics that you may or may not be aware of:

  1. A life insurance death benefit, if properly structured, should be paid to the beneficiary totally “income tax free” . As I like to say, “It is not what you have, it is what you keep that is the most important”.
  2. If you use a permanent form of life insurance that generates a cash value, your funds grow “tax deferred”, not “tax free” (more on this when I address using permanent, cash value, forms of life insurance).
  3. You can access your cash value, without a taxable consequence, via policy loans.
  4. The owner of the policy controls the policy.
  5. The biggest mistake I see on older life insurance policies is the failure to keep the beneficiaries up to date. It is not what you meant to do, it is what you have done that takes precedent at time of claim.  I have seen a few former spouses benefit at the expense of the current spouse (this is NOT funny!).

In my next series of blogs I will go into each type of life insurance plan you can purchase with full details as to the advantages and disadvantages given the specific circumstance.