Future Income Balancing Act

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

Managed or Mangled Money

April 20, 2017 – If you’ve had money in an actively managed large cap fund in the United States for the past five years, there’s an 88.40% chance your manager underperformed and you would have been better off in a simple, low expense S&P 500 indexed fund instead.

Would you board an airplane that only had an 11.70% chance of reaching its destination?

According to Spiva® Statistics & Reports, managers in the United States were particularly bad at coming out ahead when compared to the general market. Only in Chile were the fund managers less successful.

Remember when, nine years ago, Warren Buffett made a million-dollar bet that a simple, low cost, passively managed S&P 500 indexed fund would outperform an actively managed hedge fund? Absent something unimaginable happening over the next few months, the Berkshire Hathaway Chairman is poised to win his bet.

This report suggests Mr. Buffett knew what his odds were.

Injured Plaintiff Beware

For the past 25 years, I have helped thousands of individuals make decisions totaling hundreds of millions of dollars from $10,000 dog bite injuries to quadriplegics receiving jury verdicts and negotiated settlements totaling more than eight figures and everything in between. For most, dedicating a sizable portion of their settlement toward a structured settlement allows them and their families to move forward from their accident and live their lives with dignity and financial, if not always physical, peace of mind.

But somewhere along the way, a push from the fund management community managed to ingratiate themselves into the plaintiff bar and convinced them, the judges who approve certain settlements and plaintiffs themselves that a managed money fund (with high taxes, fees, and costs) held more promise than a structured settlement to benefit someone whose future has been compromised.

Not all settlement planners, trust attorneys and fund managers touting these managed fund options are intentionally leading their clients to a potentially more insecure future. But with data like those linked in this post, odds of a more positive outcome just don’t seem to be in their favor.

Structured settlements on the other hand, while perhaps too straightforward for some and somewhat boring by comparison, provide safety, certainty and tax advantages not easily replicated by ANY managed fund.

S&P 500 Linked Option

Fortunately for plaintiffs anticipating personal injury proceeds, the attorneys who represent them AND those with retirement accounts wondering how to best take advantage of the market upswings without the downside risk, there are annuity options available with a market component. A shield, if you will, against market loss.

Fixed Indexed Annuities are available in most states for those with savings and retirement accounts which allow them to invest their money which increases, subject to a cap, when a chosen index increases yet remains neutral when the market declines before ultimately converting it to cash flow they can never outlive.

For those anticipating personal injury settlement proceeds and the contingency fee-based attorneys who represent them, such an option exists with even more distinct tax advantages. Pacific Life introduced its Index-Linked Annuity Payment Adjustment Rider (ILAPA) for those settling injury claims three years ago and it continues to grow in popularity as the market performs well and familiarity increases. All future income is 100% tax-free to the plaintiff while any structured attorney fees are tax-deferred if established properly.

I’m sure there is contrarian data one could point to saying all this research is flawed and actively managed funds do perform better than the attached report suggest. But you know what? I’m not willing to bet too much of my own money on it given these poor odds.

If your injury settlement money or retirement savings represents everything you’re relying on for your future, common sense suggests not taking risks you can’t afford to take and you, too, would be wise to weigh your options carefully. For most, a balanced approach will yield (pun intended) the best outcome.

Image courtesy of Sira Anamwong at FreeDigitalPhotos.net

California DOI Press Release on Annuities

April 18, 2017 – Earlier this month during National Retirement Planning Week, the California Department of Insurance issued a Press Release urging Californians to “plan for retirement and carefully consider annuities.”

This statement serves as a timely reminder that annuities offer many benefits that simply cannot be matched by traditional retirement investing approaches and often go overlooked by those who continue to focus on asset accumulation in the years leading up to and during retirement.

The newsworthy announcement includes some excellent information and links, including cautions and warnings, designed to help people understand the law and to make the most informed decisions possible about their own financial futures.

Pensions, once a staple of retirement income security for the American workforce, have all but disappeared completely over the past few decades forcing workers to rely on their own skills to ensure they don’t run out of money once their working years come to an end.

Left to their own devices, most people fail to appreciate the statistical probability that any retirement funds they’re able to successfully accumulate during their working life could become fully depleted before they die leaving them dependent upon others for care.

Only annuities can provide guaranteed income for life.


Annuity guarantees are subject to the financial strength of the life company, naturally, but because life companies pool the mortality risk of large numbers of people, they’re able to help individuals achieve the goal of lifetime income in a fashion that somebody relying on traditional investing methods cannot.

Retirement income planning doesn’t happen by itself and it’s not a particularly fun exercise. But it’s a necessary step for those seeking to make the transition from working to the next phase of life and can be made much easier by dedicating some portion of their portfolio toward life income annuities.

And sooner is usually better than later.

Just like any purchase, consumers need to educate themselves on the pros and cons of ANY type of retirement income strategy and this California Department of Insurance press release is a good first stop.

We invite you to also check out the rest of our Retirement Income Blog for additional educational information and hope it helps you with your planning.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

The S&P 500 by Presidents

January 20, 2017On Inauguration Day, here’s a little financial food for thought as you contemplate your own financial future and the decisions you’ll be making over the next few years.

Twelve of the last fourteen presidents served at least one full term in office (Kennedy and Ford did not).

As measured purely by the S&P 500 returns during each’s first full term in office, which presidents were the most and least economically successful?

Give up?

Here they are ranked with the percentage return from Inauguration Day to Inauguration Day shown in parentheses:

Roosevelt (206.3%)

Obama (81.4%)

Clinton (79.2%)

Eisenhower (69.5%)

George H.W. Bush (47.5%)

Reagan (38.7%)

Johnson (28.4%)

Carter (27.0%)

Nixon (12.6%)

Truman (-0.7%)

George W. Bush (-13.5%)

Hoover (-77.1%)

There are many more ways to measure economic success than the S&P 500 and, to be fair, there’s a lot more driving the engine than simply who happens to be sitting in the Oval Office when economic activity occurs.

But it’s interesting to look back, with the benefit of hindsight, to see how the market responded to different administrations.

More Financial Food

When you consider that during 27 out of the last 88 years (31%), the S&P 500 has yielded a negative annualized return, it’s worth considering where you are in life so you can choose the appropriate risk profile for your own unique situation.

Are you in your 20s or early 30s? Go ahead. Stick some money in the stock market, ride out the highs and lows for 20-40 years and you will probably be rewarded.

But if you’re within 10 years of retirement, banking your entire future on the market can lead to untold misery if your timing happens to be bad or you are living during one of the down year presidential terms.

Nobody has a crystal ball but a sensible retirement or post-settlement income strategy includes locking up some of your future with guaranteed income that fixed income or structured settlement annuities provide.

Some years are up. Some years are down. Choosing a slower, steadier upward path might not be terribly exciting. But the predictability that comes with fixed annuities can certainly make your life less stressful.





Outliving Your Retirement

August 23, 2016They call it “The Longevity Paradox” – People recognize they’re living longer but don’t seem to be taking the necessary steps to ensure long life financial security.

A few staggering facts from yesterday’s InvestmentNews article of  the same name:

There are 44% more American centenarians today (77,197) than there were a decade ago.

That number is expected to grow to more than a million by 2050.

Remember when people living to age 100 was so rare it used to make the newspapers? (Heck, remember newspapers?)

Increased longevity probability is good news for those who are healthy and have the resources to enjoy their long life. But too many don’t or won’t for a variety of reasons.

Managing one’s longevity risk while simultaneously matching financial assets needed to meet uncertain and often-changing future needs is an impossible task at best.

Make Mine Insurance, Please

Fortunately, life insurance companies are in the business of managing large scale mortality risk and efficiently matching future dollars to the future needs of those who live long lives.

They can do for you what is nearly impossible for you to do on your own:

Guarantee income for life!

Here’s a nice little six minute video from WealthTrack featuring New York Life’s Chris Blunt and Kiplinger’s Personal Finance‘s Kim Lankford making the point far more eloquently than I could.

Annuities are like gravity. They work whether you believe in them or not.

About a year ago, we told you about a working paper which did an excellent job comparing and contrasting retirement income strategies. Here’s the link if you missed it the first time. Worth revisiting.

Retirement TreeSo if you need your retirement tree to provide enough cash to last your entire lifetime, a life annuity is your best choice.

By the way, balance is the key. Only rarely does it make sense to put all your retirement funds into an annuity basket. Likewise, only rarely does it make sense to NEVER put any of your retirement funds into an annuity.

Just make sure you sprinkle at least some annuity fertilizer on your retirement tree to ensure a healthy retirement.


Major Milestone Surpassed

July 29, 2016 – In March of 2009, in the depths of the Great Recession, I launched the Finn Financial Group with a pledge to help clients achieve maximum financial success and security through the effective use of structured settlements and related specialty products and services.

Pretty dumb of me, right? I mean, who starts any kind of financial business when the financial world is collapsing?

But it is precisely because people lost fortunes that I knew a market would always exist for individuals desiring to incorporate guaranteed future income for themselves and their loved ones into their overall financial planning strategy.

Since that time, our firm has helped hundreds of people in dozens of ways but recently, we eclipsed a major milestone that really humbles us:

Master isolated images



That’s how many dollars worth of structured settlement and guaranteed income annuity contracts we’ve placed since our firm’s founding seven short years ago.

While the total dollars is indeed substantial, it’s what these dollars represent that matters most:

They represent financial security for children whose parents were killed in automobile accidents.

They represent college funding and future scar revision for children bitten by a dog or hit by a car.

They represent a safety net for someone injured on the job who can no longer work.

They represent restored dignity for someone released from prison for a crime they did not commit.

They represent common sense tax deferral for someone selling a business or investment property.

They represent retirement income for attorneys who often are so busy they fail to address their own future post-career security needs.

They represent peace of mind for soon-to-be retirees who choose to dedicate a portion of their retirement funds to guaranteed cash flow they can never outlive.

One hundred million dollars worth of trust and confidence from hundreds of clients across the country reassures me that I made the right choice when founding this firm.

I’m proud of the role I’ve played in helping people secure their futures, many of whom will continue benefiting from the plans we worked out together long after I’m gone.

So, to all our clients whose demonstrated trust enables us to continue our mission of helping people who require knowledgeable guidance when they are making some of the most important decisions of their lives we extend a heartfelt

 “THANK YOU” for the opportunity to be of service!

Brexit, Stage Left

June 28, 2016– Financial markets like predictability. So when voters in the United Kingdom decided to pull a Snagglepuss by telling the European Union they were going it alone, the financial markets reacted accordingly.

They went barking mad, as it were. PinkBlue

With the pound sinking to its lowest level against the dollar in more than three decades and the Dow Jones Industrial Average (DJIA) losing 900 points in the first two days of trading, we’re surely a long way from predictability.

But like every calamity before this one since the beginning of time, calm will some day return leaving more than a few winners and losers in its wake.

Meanwhile, those whose fortunes rely on the direction of marketable securities better stock up (pun intended) on Pepto-Bismol. You’re going to need it even if the market eases up as it has a bit today.

Until then, some answers to questions that may be on your mind.

Are my structured settlements safe?

Yes. Safety and security are hallmarks of structured settlements. Benefits will be paid on time as scheduled. Nothing to worry about.

Won’t the stock market impact my structured settlement payments?

Unless your contract includes a future payments rider linked to a market index, such as Pacific Life’s Indexed-Linked Annuity Payment Adjustment Rider, your benefits will not change. If your contract does contain such a rider, Brexit will not cause your payments to drop.

What about the cash I set aside?

It depends on what you’re invested in. When settling an injury claim, many people hold back some cash in hopes they can “do better” than the structured settlement options they’re presented with. But the higher returns they seek aren’t possible without assuming a higher degree of risk.

If you invested in stocks, conventional wisdom says you’ll probably do OK if you don’t panic and have enough time to ride out the volatility. Meanwhile, ignore that grumbling in your stomach.

I’m an attorney and recently structured my fees. Should I worry?

Not because of Brexit, that’s for sure. In fact, you’ll probably win bragging rights around the bar association table since the effective rate of return for the structure you chose likely dwarfed anything the market could have done for you anyway. Minus the market risk!

Depending on assumptions about present and future tax brackets, some of our clients estimate they “earned” effective rates of return in excess of 10% because of the tax deferral. You made a very smart move.

Is it too late to get an annuity?

No. While structured settlement annuities must be chosen before the settlement concludes, a variety of others annuities are available for direct purchase. So if you’ve already taken some of your settlement in cash and are having second thoughts about investing on your own, an income annuity might be a good choice.


So, mates, best of British to you ignoring those collywobbles until the markets are hunky-dory once again.

Fast Annuity Stats

Stuart Miles StatsJune 13, 2016 – Some quick statistics we singled out from among the Key Findings of the 2013 Survey of Owners of Individual Annuity Contracts, conducted jointly by The Gallup Organization and Matthew Greenwald & Associates for The Committee of Annuity Insurers:

When Do People First Buy Annuities?

47% purchased between age 50-64

38% purchased before age 50

14% purchased at age 65 or older

Who Owns Annuities? (By Gender)

51% Female

49% Male

Who Owns Annuities? (By Occupation)

12% Support Staff

14% Blue Collar or Service Worker

15% Foreman or Manager

15% Business Owner or Company Officer

34% Professional, such as, Doctor, Lawyer, or Teacher

Reasons for Purchasing Annuities?

90% view as a “safe purchase”

How Long Do People Keep Their Annuities?

93% still own the first annuity they bought

This last one is especially telling since people tend to hold onto the things they like. For this reason, we think your time would be well spent checking out the full survey to see how your peers go about making their retirement choices.

It’s one thing to see a television commercial about the prospective benefits of annuities in the retirement planning abstract.

Quite another to see how people who have already taken the annuity plunge truly feel about their decisions.

With a 90% chance of feeling “safe” and a 93% chance of feeling “satisfied” with an annuity purchase, odds are good you, too, can benefit from dedicating a portion of your retirement savings toward an annuity.

NOTE: The referenced survey is limited to individual annuity owners who purchased their own individual annuities using non-qualified (i.e after-tax) funds. Structured settlement annuity recipients ARE NOT counted among this pool of survey respondents.

Retirement Surprise

April 20, 2016 – “Lynn” called me recently for help with a few structured settlement annuities I helped place on her behalf about five years ago.

Our firm occasionally fields calls from former clients who are moving, changing beneficiaries or banks and simply need help submitting the correct documents to make sure their money arrives on time as scheduled.

I always enjoy these exchanges because I get great feedback on the client’s structured settlement or retirement annuity experience several years removed from their decision.

Back in 2011, Lynn chose to structure a portion of her automobile accident claim settlement as it was resolving. Still working at the time, she liked the idea of deferring some of her settlement proceeds into future guaranteed tax-free income designed to coincide with her planned retirement a few years down the road.

With retirement now just a few weeks away and her first annuity payments scheduled to begin, she needed to fill out the appropriate EFT forms so her funds could be automatically deposited into her chosen bank so her pension and structured settlement cash flows would be properly aligned.

One of the questions on the standard EFT form had to do with tax withholding. She wasn’t sure which box to check when asked whether or not to withhold taxes having completely forgotten that structured settlement payments are 100% income tax-free when paid as a result of a personal, physical injury.

aechanWhen I reminder her of this fact, her response was priceless.

“YAAAYYYYYYY!” she involuntarily and quite enthusiastically shouted.

Her excitement was contagious and I smiled as she offered all the reasons this was such welcome news:

Combined with her retirement income and Social Security, her combined effective tax rate in retirement would be lower;

It was an empowering sense of freedom and relief from having to pay higher taxes;

With prices increasing, not having to pay taxes on this income would help her money go further.

Her parting sentiment as we were hanging up is the kind of thing that always makes me feel so great about my career choice:

“You absolutely made my year!”

Glad to be of service Lynn. Thanks for sharing. Knowing I played some small part in you looking so forward to a happy retirement makes MY year!

Indexed Annuity Surge Continues

February 29, 2016 – According to a recent InvestmentNews article citing a LIMRA Secure Retirement Institute report, 2015 saw a 13% increase in indexed annuity purchases over the prior year to a record $54.5 billion.

To put this figure into perspective, Starbucks’ Fiscal 2015 Annual Report indicates $54.5 billion is just $3 billion MORE than the coffee giant’s total net revenues . . . SINCE 2012!

When was the last time you saw a Starbucks where someone wasn’t waiting in line?

Not that there’s any direct correlation between retirement income distribution planning and the caffeinated brew but it speaks to the ongoing (and growing!) popularity of both and there are some similarities:

Both are optional purchases people make daily.

Each can be tailored to individual preference.

Consumers enjoy the end result despite any long line anxiety (or, in the case of annuities, the application process).

Case Study

(NOTE: For compliance purposes, this case study is a hypothetical example presented for educational purposes only)

Consider the 60 year-old freelance consultant, still in demand, who plans to work another ten years in order to maximize his Social Security benefits.

He has no pension.

Still reeling from the aftereffects of the Great Recession, his greatest fear is losing his remaining accumulated wealth so he simply “parks” the bulk of his funds in a safe, guaranteed account, currently paying about 3.0% a year.

The Dilemma: With ten years to go before he plans to start drawing this down to live off of, how does he earn a higher return without sacrificing safety?

The Solution: Dedicating a portion of his portfolio to an Indexed Annuity from a highly rated carrier with a Guaranteed Lifetime Income Benefit (GLIB) Rider that does this:

A. Guarantees his account will be credited 7.0% per year until he chooses to start drawing it down.

B. Guarantees he will then receive 5.4% of the accumulated value for as long as he lives.

C. Guarantees he’ll never lose a penny.

All things considered – safety, security, guarantee, risk, capital preservation, legacy and life expectancy among them – this solution complements his retirement income planning strategy nicely since only Social Security, pensions and annuities can guarantee income for life.

Indexed annuities, like coffee, aren’t for everyone.Stuart Miles Income

But they are undeniably an efficient and effective method of distributing a portion of one’s accumulated wealth over a lifetime of unknown duration.

Converting assets to income when one’s work life comes to an end needs to be a top priority for those seeking retirement planning advice.

And indexed annuities can fill that cup nicely.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Finn Financial Group