How to Safeguard Your Retirement in Today’s Volatile Market? | A Retirement Expert’s Advice

Back in September 2022, I gave you an update on the record amount of dollars being poured into indexed annuities and explained why this was taking place. Today, I’m bringing you the year-end results. I think you’ll be blown away.

Hello again, Dave Dooley with Georgia Advisor Group here in North Atlanta, a full-service judiciary wealth and income money management firm. If you’re still scratching your head about whether annuities can play a critical part of your retirement planning, you’re in the right spot. First and foremost, let me make clear that we are a fee-based firm, so before you begin to think we’re pushing a product, think twice. We are money managers focused on building wealth and holding on to it, and secondly focused on creating increasing income in retirement.

So let’s dive right in. In the fourth quarter of 2022, total annuity sales across the U.S. were $87.2 billion, an increase of 39% from the fourth quarter of 2021. This marks the third consecutive quarter in which annuity sales set a new record. The expectation for the first quarter of 2023 is that the trend will continue.

Now, open your mind and listen to why this trend continues. Major firms like Fisher Investments, Merrill Lynch, Morgan Stanley, and Goldman Sachs won’t spend five minutes on this topic. Why? Because it takes money out of their pockets and eats into their ego to talk about saving investments that are boring and don’t pay them extremely high fees. Over $22 trillion dollars today are in some type of annuity vehicles. The bad press is overwhelming and the confusion is even worse, but the bottom line is they can play a critical role in supplying you with many sound benefits heading into retirement and well beyond.

I believe the reason we are seeing such an influx, especially over this past year, is uncertainty. Even today, as we see the markets taking major swings back and forth, banks actually closing their doors, national debt setting new records, interest rates continuing to rise, consumer prices still soaring, families being squeezed with record car prices, and real estate prices slowly falling, people are saying, “Where can I place dollars to ensure safety today for retirement income in the future?”

Thirty years ago, when the stock market was in a recession and interest rates were rising, you ran to bonds. You may remember back in those days the 15% certificate of deposit or 10% yield on a bond was not unusual. Who needed risk in stocks when you could lock in some great returns in CDs or bonds? Today, it just doesn’t exist. Knowing rates are still on the rise means buying a bond today puts you at risk that the bond you may buy will be worth far less six months from now as rates continue to go up and new bonds will be paying a higher return. This is exactly what got these last two banks forced to close their doors and the Feds stepping in last year. Those banks bought bonds paying 1.85% return with all the cash they had on deposit. The problem is when the depositor realized a year later they could get a 4% return on new bonds or some other dollars, they came looking to cash in their money. Unfortunately, there were too many customers asking for the money at the same time. Those previous dollars were long-term bonds that had to be sold at a major loss to create liquidity for the demand they were receiving. The banks became insolvent.

I’m not going to dive deep into the inner workings of the indexed annuity here today, as I’ve covered that in my earlier video called “Zero-Risk Investments: Do They Really Exist?” So you can go back and watch that video. But for those of you who are looking for a guarantee of your principal with market-linked growth with increasing income if you decide to draw on your annuity during retirement, then you’re in the right place.

There are many different types of annuities, each with specific goals in mind. Most today focus on lifetime income provision. There’s nothing wrong with that, but many people want accumulation as the primary goal while protecting downside risk. Income is the secondary consideration. Growth is the focus.

The index annuity that focuses on growth and always protects principle is a great vehicle for qualified dollars. No, I’m not looking for additional tax deferral, which is an argument for the ignorant on annuities. What I do know is my IRA or 401(k) is a lifetime investment, meaning I will have it for the remainder of my life or until it’s depleted.

The index annuity allows me to tie my money to an index on an annual basis. If the index increases over the year, I receive gains. For example, in 2022, if the index drops by 20 to 30 percent, I take no losses whatsoever. These are ideal for my long-term dollars. Imagine never taking a loss. These dollars, behind the curtain of the annuity, are being placed in what’s called a leap option. This means that if the option is up in value on my annual anniversary, I participate in the gain.

If the index loses value, they don’t exercise the option, and I take no losses. The key is that I get a reset, meaning I get to start fresh for the new year at the index’s current price. Now, that’s huge, and people don’t give that much consideration. Imagine if you bought a 65-inch TV at Walmart for $1,000, and a year later, that same TV is now $700. Imagine going back to the store and they say, “Here’s a $300 refund or reset.” The same principle applies to the index annuity over a five, seven, or ten-year period of time or longer in retirement. Knowing that you can never lose value but only participate in gains can be very beneficial.

Now, should you run out today or go online and start shopping for an annuity? No, you should consult experts in this area. Figure out which dollars are best suited for this type of investment. Research and ask questions, and deal with licensed fiduciaries. If you like the information you heard here, please subscribe below and visit our site, where you’ll find a ton of great information. Don’t forget to subscribe to our newsletter on our website to receive a video each and every week. Till next time.