Situation
Glenn is 69, married to Karen, 65, residing outside of Houson, TX
They have one adult daughter, and two 22-year-old twin grandsons both in college, graduating soon.
Glenn is a retired law enforcement officer, and Karen is a retired nurse administrator. They both collect Social Security, and each receive a substantial employer pension.
Their total guaranteed income with pensions and Social Security comes to over $120,000 per year, which has been more than adequate for basic needs, and most of their ‘extras’.
Assets & Net Worth
Karen and Glenn are active in the community, and donate annually to local charities. They also feel fortunate to be able to help their grandsons with college, and pay for occasional family vacations.
They hold about $1.6 million in investments, mostly in IRA’s and 403(b) managed by Glenn. He’s been an aggressive investor, holding a high percentage in growth stocks and ETF’s, and they have seen large returns in recent years.
While their portfolio has grown significantly, Glenn understands their money can also experience losses, and feels it makes sense in retirement to begin reducing overall risk with their money.
Karen is naturally more conservative and doesn’t have much investing experience. She has deferred investment decisions to Glenn for years, but has also been concerned about how much of their money is at risk in the market.
They had heard about Fixed Index Annuities as a strategy for growing money based on a stock index without downside risk to principal. In doing their research online, they came across Annuityverse.
Solutions
In meeting with their Annuityverse Consultant, they discussed their goals and concerns, had an educational discussion on annuities in general, and learned the FIA basics:
-Funds are not in the stock market, or at risk of loss.
-Interest is tied to performance of an index (like S&P 500®), using caps & participation rates, so upside growth is limited
-In a negative year you earn no interest, but account value is protected.
-FIA’s are contracts usually lasting 5, 7 or 10 years, offering limited liquidity
With this information, Karen and Glenn were able to ‘shop’ among dozens of highly rated annuity companies, and evaluate the most competitive in terms of S&P 500® index caps, participation rates, and other crediting options.
Here are the findings:*
- Guaranteed Income Life insurance Co, (A-) currently offers the highest S&P 500® annual cap of 10.75% (7-year), and 10.5% (5-year), using straight S&P 500® Index.
- Oceanview Life and Annuity Co. (A) currently offers best S&P 500® participation rate of 65% (5-year), Lincoln Financial offering 60% participation rate. (5- and 10-year)
After discussion and review of product details, they choose to invest $400,000 of Glenn’s IRA into a GILICO 7-year Fixed index Annuity, using a combination of S&P 500® cap and participation rates. This strategy protects about 25% of their portfolio from future market downside, while offering some liquidity and opportunity for growth.
Post Note: Glenn will also be working to further reduce overall investment risk by allocating to a more balanced and diversified portfolio