Is your annuity not working the way you thought it would? Are your returns much lower than the market returns? Are you an annuity orphan or even know what an annuity orphan is?  Are you stuck every year deciding the index strategy?  If you answered yes to these questions, you might have the annuity blues.

John, What’s Going On Here?

A couple of weeks ago, somebody sent me an email:  Hey John, I’m going to take you up on your free offer.  I would like to talk to you about my situation. So, my office called him and set up a date and time to talk, and I gave him a call.  The nice gentleman said, “I’ve kind of been a do-it-yourself investor my whole life, and I’m getting a little tired of that, but I want to tell you my situation:

“About seven or eight years ago, I put about $200,000 in different kinds of basic domestic equities, and at the same time, I had put $200,000 into a fixed index annuity.  Fast forward to today, seven-eight years later my equity-type portfolio is worth $400,000 - $450,000, and my annuity has only gone up about $50,000.  I don’t really understand what’s going on here, but last year in 2017, my equity portfolio did 17%, and my annuity only did 3%.”  He said, “Can you explain to me why this is?  And by the way, my insurance agent has left the business, and I have no idea on how to choose these indexes the companies keep giving to me.”

I responded, “I’ll tell you what, email me those statements, and we’ll set up a time to give you a call, and there might be a couple of different things you can do.”

What Can He Do?

So, I looked at the different accounts and saw that the indexed annuity product he had, had about eight or nine different index selections.  So, I gave him a call and said, “Hey, I’ve got good news for you.  Sometimes annuities are – I don’t want to call them out of date, but maybe they just don’t have the right options.  And if they don’t have the right options, you can always roll them into another one without triggering any taxes, but in your case, you don’t have to do that because I’ve looked at these different options in here, and it looks like you’ve been in the fixed interest option for all these years.”Probably the reason for the underperformance was the selection of the interest option.  And he said, “Well, I don’t understand what these different indexes do. I understand what most indexes are, but I don’t understand caps.  I don’t understand participation rates, and every year, they apparently change these things.”

I briefly explained to him what could be done.  I told him, “You have to look at this almost like as an investment type product with different selections, and you’ve got to choose the right markets going forward.

I believe that the products are so sophisticated now and the average insurance agent (I’m not trying to belittle them) doesn’t understand. What I mean when I say “they don’t understand” is, well, most of them don’t even have any securities licenses, so they haven’t proved their competency by taking the basic securities testing.  I think the products have gone off and left them.  So, I believe you should utilize a top-notch investment advisor because you’re picking from different segments of the market, just as if you were picking stocks or ETFs.  There is good news, and it’s that there are more options to choose from.  The bad news is that most people, especially the layperson, are just going to be like you and they are going to look at these statements, and they are going to turn around and say, “Let it ride.”

So he says, “You know, could you help me do that?” And I said, “Sure.  It won’t take me five minutes.  I spend my whole professional life studying different indexes and markets, and I have had 30 years of experience helping people.” You know, unfortunately, with these contracts, all the commissions are paid on the front end, but you’ve got your whole life savings in there.  And they’ve been underperforming for five or six or seven years.

Is your current annuity not performing? You know, the market has been giving double-digit returns for years. However, you aren’t seeing it.  Are you confused about your income options? Do you have an income rider that you don’t understand? Are you an annuity orphan? Well, maybe I can help. I certainly would be glad to. You don’t even have to come to the office, just shoot me an email or give me a phone call. I will either contact you directly or respond to your email. If you want to set up a time to talk to me on the phone, give my office a call.

Sincerely,

John Romano, CFP®