Structured Settlement Market Strength

Structured Settlement Market Strength

September 11, 2019 – As volatile markets continue to spook some investors while inspiring others, we take pleasure in being able to constantly reassure our clients they make wise decisions and are in good company when they choose structured settlements and retirement income annuities.

Safe. Steady. Secure. Strong. That’s what we’re all about.

In addition, according to LIMRA Secure Retirement Institute, the guaranteed future income options we offer our clients are also quite popular!

Structured Settlements: Income Strong

With over 1,000 years of combined experience, the life markets offering structured settlements have unparalleled strength and staying power.

So how strong and popular are the structured settlement life markets we represent?

Four of them account for approximately 30% of the $93.6 BILLION worth of annuity purchases through the second quarter of 2019 and boast Top Ten rankings from the aforementioned LIMRA study referenced above.

AIG Companies – 1st ($10,221,715,000)

New York Life – 4th ($7,196,481,000)

Prudential – 7th ($5,367,321,000)

Pacific Life – 8th ($5,209,920,000)

That’s a high vote of confidence and speaks to the public’s appetite for safety, security and financial strength when it comes to preserving their money.

Congratulations to these excellent companies on their success. We are proud to represent you along with the other fine companies who comprise the structured settlement marketplace.

On a Somber Note: The infamy surrounding today’s date will never leave us.

It shouldn’t.

Even those of us without a direct personal connection to the tragic events of one of the worst horrors ever perpetrated on American soil felt its devastation and continue to live with its consequences.

Today, we honor those who died as a result of that unspeakable tragedy and offer thoughts of peace for their families.

The Illogic of Annuity Trashers

April 29, 2019 – Articles, commercials and opinions of those who trash annuities shouldn’t bother me as much they do.

But seeing the general public constantly bombarded with misleading information on the issue, I can’t help wondering how many people are swayed by them to their detriment.

And feeling angry about the disingenuous and self-serving prejudice.

People aren’t always conscious of it, but they often base their financial decisions on emotion rather than logic. Fearmongers who play to this behavioral science truism can sway the odds in their favor when it comes to issuing financial advice.

And the slant is very transparent when you take the time to logically dissect their rationale for advising against annuities.

For instance, allow me to pick apart some of the more obvious biases in “Why annuities are a bad idea for almost everyone” from the August 18 issue of MarketWatch (free subscription may be required):

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Fixed Indexed Annuities On Fire

September 24, 2018 – If you still believe that guy on the radio castigating you to hate annuities, it might be worth seeing what the top industry research association’s statistics reveal about 2018 YTD fixed indexed annuities (FIAs).

Hint: They’re HOT!

Through the first half of 2018, $32.1 billion worth of fixed indexed annuity purchases were made according to LIMRA Secure Retirement Institute. That’s up 14 percent from 2017 and its $17.6 for the quarter is an alltime high.

Compared to the $30 trillion market capitalization of the U.S. stock market, this is a drop in the bucket. But for an idea hatched just 23 years ago, fixed indexed annuities are making some important strides as people seek a reasonable blend of security and return for their money.

Besides, unlike the stock market, FIAs never lose money.

Fixed indexed annuities offer investors a simple proposition: In exchange for money today, you receive two promises:

You will never lose money; and,

You will receive guaranteed future income FOR LIFE, the value of which will be determined by the investment experience of the selected index and the timing of your withdrawal.

Admittedly, the nuances of the various life market offerings and index choices can be daunting. But millions of individuals have benefited from the peace of mind that comes with guaranteed lifetime income without fear of market downturns.

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The Sultan of Annuities

September 17, 2018 – The Los Angeles Angels have been officially eliminated from the 2018 postseason.

Drat!

The year started with such promise, too. Not only do we have a perennial MVP candidate in Mike Trout, but this year brought some new excitement when the Angels signed Japanese phenom Shohei Ohtani, a young player who is making comparisons to Babe Ruth for his ability to hit AND pitch at the highest possible level in professional baseball – a feat nobody has been able to successfully accomplish in over 100 years.

George Herman “Babe” Ruth – the Sultan of Swat – was a larger-than-life celebrity who, during his era, had no equal in terms of popularity. Idolized by kids, frustrated by opposing teams, he lived life to the fullest known almost as much for his excess on the party circuit as he was for his prowess on the baseball diamond.

Despite this tendency toward extravagance, however, Babe was not a big risk taker when it came to money. Early in his career, he was introduced to the concept of annuities by a player on an opposing team and he was an immediate convert to the concept.

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Football Annuities

August 25, 2018 – With college football upon us and the NFL’s 2018 season right around the corner, this is the perfect time to discuss fixed indexed annuities.

Hunh?

OK, so maybe I’m stretching a bit but as this year’s first kick-off approaches, it occurs to me there’s a perfect parallel between something that happens on the gridiron and the popular retirement income option that people spent $32.1 billion on so far in 2018 alone.

Here’s hoping my analogy helps the unconvinced better appreciate the value of indexed annuities.

First: What Is a Fixed Indexed Annuity?

An oversimplified explanation goes something like this:

A fixed indexed annuity (FIA) is an insurance product whereby an individual trades a lump sum of money today (or periodic deposits over time) in exchange for the promise of tax-deferred, guaranteed lifetime income, certain income, or a lump sum at some point in the future.

The money earns interest credits based on the direction of one or more indexes selected (S&P 500 is a common one) from a variety of strategies available depending on the risk tolerance of the individual.

The design of the FIA is such that if the market index increases, so does your account balance up to the maximum permitted by the contract.

The trade-off for having a cap on your upside potential is the floor which prevents your account from ever losing money.

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Harvesting the Bull

August 23, 2018 – As the current stock market is busy toasting itself for the longest bull run in history, at least one chief investment officer is keeping his bubbly on ice while cautioning investors about a market he believes is on a “collision course with disaster.”

Guggenheim chief investment officer Scott Minerd sounded two dire warnings over the past four months:

April 4, 2018 – “Guggenheim investment chief sees a recession and a 40% plunge in stocks ahead.”

August 15, 2018 – “‘If there were ever a moment to harvest gains . . . it is August 2018,’ warns Guggenheim’s Minerd.”

Many of us not-so-fondly remember the last 40% drop in the stock market way back in 2009. Minerd wonders aloud if investors have become lulled into a false sense of complacency since then.

Recession? 40% plunge? Who’s got the stomach for that again?

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Dear Congress: This is Wrong!

August 6, 2018 – When the Tax Cuts and Jobs Act, as it’s known, went into effect earlier this year, many hailed the legislation for simplifying things and saving the average taxpayer money.

Others protested the legislation disproportionately benefits the ultra-wealthy who didn’t need and weren’t asking to have their taxes reduced.

Whichever side of the debate you happen to fall on, one category of taxpayers stands out as being most unfairly and adversely impacted by this legislation:

People who hire legal counsel for nonphysical injury claims.

That’s because, whether intentional or inadvertent, Congress failed to consider one disastrous consequence of the new law:

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A Cure for the CD Blues

May 2, 2018 – Stored lovingly in the back of a closet in my house rests a box filled with vinyl record albums of (mostly) rock ‘n’ roll artists whose music I listened to growing up.

From The Allman Brothers Band to The Zombies, these Long Player, or LP, discs, once turntable-revolving staples of my high school, college and early professional career existence, now lie dormant, an undignified, coffined homage to my younger self.

Compact discs, or CDs, offering digitally enhanced sound, emerged in the 1980s and became the preferred medium for most of the music-listening public for several decades, easily outlasting 8-track tapes which had a brief run.

Now that streaming services have emerged, threatening to relegate CDs to the same passé status as the LPs they themselves supplanted a generation earlier, I am reluctantly making room in the closet for my CD collection even if I have yet to publish its obituary.

Non-Musical CDs

Certificates of Deposit (aka CDs – no relation to compact discs), offer investors a haven for funds they can afford to set aside for a period of time. Generally available at any FDIC-insured bank, they usually pay interest which is around 25 to 50 percent better than what’s available in a typical savings account, depending on the term.

Today’s available 3-year CD Rate = 2.80%

Individuals seeking the highest possible return with the lowest possible risk often choose CDs when they want to “live off the interest” and preserve their capital.

Even multi-million dollar trusts often have a CD component for the security portion of the assets under management.

What’s Better Than a CD?

No, not two CDs. Multi-Year Guaranteed Annuities. If you invest in CDs and never heard of MYGAs, you’ll want to learn about them. Especially if you are within a few years of or are already in retirement.

Today’s available 5-Year MYGA Rate = 3.80%

Multi-Year Guaranteed Annuities (MYGAs) work just like longer term CDs except you’re dealing with an insurance product (regulated by the state) instead of a bank offering (regulated by the Federal Government). You simply purchase a single premium fixed deferred annuity which guarantees a fixed rate of return through the maturity date.

The best part of MYGAs is that they pay roughly 33% more (5-year MYGAs) than bank CDs (which, remember, are already 25% to 50% better than savings rates).

Bonus MYGA Advantage: Whereas CD owners receive 1099-INTs each year for interest earned (unless held within a qualified retirement account), MYGA owners can roll funds over into the next year until maturity at which point all accumulated interest not previously withdrawn (along with original principal) becomes due and payable. Optionally, contracts can then automatically renew at prevailing rates or be rolled into another MYGA.

As with CDs, you forfeit some flexibility with MYGAs in exchange for the enhanced returns (penalties for early withdrawal are the same for both CDs and MYGAs) but by staggering maturity dates, some of the opportunity cost can be mitigated.

If your desire is to stash away some cash for a few years and get the best possible return with the least possible risk, MYGAs may be right for you.

Your ability to purchase a MYGA depends upon the source of your funds since different tax rules apply and not all funds will be eligible. Other factors to consider include age, suitability, minimum deposit requirements and risk tolerance but they’re certainly worth inquiring about if safety and principal protection are key objectives.

Just Put Those Old CDs On the Shelf

Whether funded using personal injury settlement proceeds or your retirement savings, MYGAs are an excellent choice for money that you can’t risk losing and won’t need until age 59½ or later. Often paying nearly a full percentage point more interest than CDs, it’s an easy choice for the CD-oriented crowd.

Within the broad range of structured settlement and retirement income options, Multi-Year Guaranteed Annuities can play a significant role as part of one’s overall financial plan for anyone desiring to safely set aside funds with specific target maturity dates of 3 to 10 years.

Now, if you’ll excuse me, I need to end this post because I feel this sudden urge to “. . . reminisce about the days of old with that old-time rock ‘n’ roll.”

(Even if I have to stream the music)

One final word of caution: DO NOT listen to those self-interested financial planners who say they hate annuities. Pull back the curtain to understand their feigned cynicism by reading one of my earlier blog posts: Great News for Annuities. You can thank me later when you didn’t lose any money.

CD photo courtesy of Giovanni Sades at FreeDigitalPhotos.net

The Interest Rate Dance

August 31, 2017 – Ever since the global financial near-apocalypse of 2009 caused everybody everywhere to rethink everything we thought we knew about money, saving, the market, investing, et cetera, I’ve noticed a pattern here in America. If you’ve been paying attention, you probably noticed it, too.

Once a year or more, we hear “they” are going to raise interest rates. They have to, right? Interest rates can’t stay depressed forever. Something’s got to give and we need to get back to normal, whatever that is.

So, the day of this big announcement arrives and everyone’s on pins and needles in anticipation of a big jump in rates that will make us all feel better. Then, at the prescribed hour, the keynote address is delivered ending with an ignoble “Ha, ha, made ya look” tease. Maybe rates go up a smidgen, or maybe they drop a whisker but usually, it’s just crickets. No change.

In 2009 when I began circulating this chart on Historical Long-Term Interest Rates, a lot of people scoffed at the notion of interest rates remaining low for an extended number of years. I feel no profound sense of pride in being right almost a decade later but it was just too hard to ignore 135 years’ worth of data however painful it was to realize.

Kiplinger even removes the mystery of their latest projection earlier this month with their unambiguously titled article, “Long Rates to Stay Low”.

Economists don’t get more straightforward than that.

There is no shortage of reasons interest rates are likely to remain at or near current levels for the foreseeable future, possibly for another quarter century. So, don’t be surprised if the next time “they” say interest rates are going to go up, nothing much happens.

Since nobody ever really knows what the future holds, it’s worth reminding clients that waiting comes with a cost. Structured settlements and retirement income annuities still make a great deal of sense for most people and will ALWAYS be in style. Why?

Because guaranteed future income has a good beat and you can dance to it.

Images courtesy of sattva and IceHawk33 at FreeDigitalPhotos.net

Future Income Balancing Act

August 21, 2017 – A lot of people pretend to know a lot about retirement income planning. But few are truly as knowledgeable on the subject as Dr. Wade Pfau, Professor of Retirement Income at The American College and retirement researcher extraordinaire.

Not only does he analyze retirement alternatives with the precision of a Swiss watchmaker, he willingly shares the results of his thorough research with others in an engaging style that simplifies a subject that can otherwise Wade (I couldn’t resist) into esoterica.

As one of his biggest fans and followers, I find his research refreshing in a world where far too often practitioners focus solely on one approach to financial planning to the exclusion of all other approaches or who try to over-simplify the process. If you, like me and most of our clients, are looking for insight into how to more thoughtfully plan for your own future, I highly suggest this blog post by Dr. Pfau where he asks quite non-rhetorically:

Which is Better for Retirement Income: Insurance or Investments?

Like so much in life, balance matters when it comes to retirement income planning. People who drive cars that are out of alignment or subscribe to diets lacking variety often end up worse off for their planning failures or over-reliance on a single solution.

Why not be smarter?

Adopting a balanced approach to future income planning by understanding the benefits and risks associated with ALL the various methods advocated by knowledgeable professionals and then matching the strengths of each with your own future needs should lead you to your own retirement Zen.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Finn Financial Group