Ep. 2004: The Annuity Rules Keep Changing

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A table set for two.
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A man with a borrowed smile swears he's looking out for you.
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The wine is red, the candles blow the stove cut just right.
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The returns of the market with no risk.
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That stakes not free.
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That stake was never free.
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Talkin' real money.
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A reprise of uh well, shorter reprise of uh the financial physicist's hit song.
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Hit song.
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It's already up to a dollar and ninety cents in rut in royalties.
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That's stakes not free.
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This is not your entire retirement, right?
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There's other sources.
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I'm getting rich as a as an AI musician.
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I just want to make sure that's the same.
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Anybody think there's a lot of money in this, please.
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Yeah,$1.90.
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Is that after taxes or is that before taxes?
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Oh, that's before.
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I'm sure I'll get my$1099 for that.
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And are you I'm sure you're taking money out of that and saving it right into your 401k, too, right?
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Sure.
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Just want to check, make sure you're saving properly.
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No, actually, I decided that is money I'm gonna put into an indexed annuity.
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I'm just gonna try it out and see how it works.
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Right, let's just do it.
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It's all the rage.
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Indexed annuities are selling, I mean, they're selling billions of dollars of uh our most hated annuity product.
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And today's episode, I know we're going to flog this dead horse again, but it's not dead.
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The problem is it's not dying.
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It's not a hundred and twenty-eight billion with a B dollars of these sold last year.
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Well, now, if you're Elon Musk, that's not very much.
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I okay.
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If they bring him in, then yeah, things look pretty good.
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But that's a lot of money,$128 billion of equity indexing.
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That's of a product that we have we have uh criticized pretty robustly, but there was a recent piece was that I know I forget.
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Wall Street Journal.
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Was it the journal?
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Yeah, it was the journal on a number of these products, and how some they're they're doing something that I didn't even I thought they were bad enough.
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And then I thought they were terrible with the commissions they charge and and the surrender charges and and the promises and the promises, you know, they promise you high returns, and then the reality is you don't, but there's something new that the journal discovered, and I didn't even know this.
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It's kind of confusing, too.
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Well, it's not really.
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I mean, well, okay, I'll allow you to explain it, but let's first, before we do that, talk about the returns because this is the promise is you don't lose and you get the returns kind of like the market.
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Kind of it's squishy, right?
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It's not the returns of the market because they couldn't sell it that way.
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But the promises that and in the piece they talk about I've been to these pitches.
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I've been to a steak dinner, and the pitch is here's what the stock market did.
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Yep, and you can get rid of all this volatility by buying this, and you can still get the returns of the market.
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And in a bad year, you just make nothing.
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You don't lose, you just make nothing.
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Well, that is an incredibly enticing pitch.
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Absolutely.
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Give me the market's return and no downside.
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I'm all over that.
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Because, I mean, as we know, in complete disclosure, stocks lose money about one out of every four years.
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I I know it feels like it's been a long time, but uh that's about the historical average.
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But for example, the woman here that sold a prod product by Athene uh 12 years, annualized return 3.7 percent.
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Does that sound like the market?
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By the way, had you owned the S P 500 in that same period of time, 13%.
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Had you owned treasuries, about 3% a year, right?
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I mean, so you didn't need to that guy didn't need that big commission that he didn't disclose, and you didn't need to get locked in.
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Huh.
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But here's the part that really bothers me.
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It's not just that, and we've said that before.
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We've said the annualized returns have averaged three to five percent on these.
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No one believes us when we say that either, by the way.
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Because of the way they're structured, they're they're based on a part of an index's return up to a maximum and things like that.
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But here's the part I did not know.
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With this particular, let's use this policies case that they talked about in the WSJ article.
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Um in the first year of this woman's policy, 60% of her money earned returns tied to the stock market, okay?
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So 60% the other 40% didn't.
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60% earn money tied to the stock market minus 2.9% spread.
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But then in the seventh year, instead of it being 60%, they said, We're only gonna give you 55% of the market's return.
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And then less the spread.
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Then forty-five percent of the market's return.
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So they're changing the rules, even though you may still be subject to a hefty surrender charge.
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And by the way, that money that that other 55% after year 11, what was that earning?
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One percent per year.
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That's how you arrive at the arithmetic, which I hope you learned in fifth grade, of like less than four percent a year for a period of time where stocks soared.
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Uh that honestly, that was new news to both you and I.
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I didn't know that they could just sort of hack back how much you're gonna make.
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But you know what?
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Here's one of the problems with these products nobody reads the disclosure documents, not even us.
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I've tried, I can't read the whole thing.
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It's just too many pages of legal ease.
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I've gone through and and skimmed them and picked out bits and pieces and parts.
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But the reality is they can do all kinds of things that take away your return, and that's what they're designed to do.
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And here's the real rub of this, and we have talked about this for years now.
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It it almost any product you can think of that is tied to the returns of the stock market is regulated by the Securities and Exchange Commission.
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And originally, indexed annuities were going to be regulated by the SEC, but the insurance industry spent tens of millions of dollars lobbying Congress to remove the Securities and Exchange Commission from that because they knew the SEC would not allow them to do the things that they do.
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They would never have been allowed to say return to the market with no risk.
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Never.
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We couldn't say that.
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And we're we're we're SEC registered, regist regulated.
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But indexed annuities are only regulated by state insurance commissioners, and we've talked about the problems with them too.
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And this is part of the problem, is in the article it mentions quote-unquote educational materials for an indexed annuity sold by Delaware Life, for instance, show a premium of$100,000 growing to$2.7 million over the next 21 years.
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I'll tell you the other thing they're spending a lot of money on, other than lobbyists.
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Commissions.
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Wow.
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Oh, yeah, this part shocked me too.
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Shocking.
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They mentioned five, they mentioned seven percent.
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We've seen them as high as I think ten, right?
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Sometimes I saw one that was 12 once, but I can't find it now.
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I could not find the 12, but I do remember seeing one.
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10 I can find.
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Yeah.
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And here's the thing.
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I love this, what the insurance or the insurance companies say about that?
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Well, the higher commissions reflect the complexity of the products, which require greater explanation.
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I guess next time.
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You think that dude at the steak dinner wearing a polyester leisure suit actually studied the product?
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Come on.
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They don't know.
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They don't know.
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They don't know.
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Uh, shocking the numbers, shocking all of this, and it just every day it surprises me that we all, because we're part of you too, hear that siren song, I want to make money, I don't want to take any risk, and then you end up at the insurer's door because this is the product that answers that emotional problem that we have.
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I don't ever want to see my account balance go down.
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Well, good luck with that, right?
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If you don't want to see your account balance go down, guess what the expected return is right now in this environment when we're recording this?
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It's about four percent.
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Huh.
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Doesn't that sound similar?
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No similar, not as you know, that it's better than the return on indexed annuities for some people.
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And yet you you're you're enriching the insurance company.
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And the other thing is, and the article also got into this the fact that some of these, like uh that Athene uh product is owned by Apollo Global Management, which is a big private asset firm, and they're using these products to sell their own stuff into.
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Uh there was a big article, in fact, there was an update to that article about the owner of the Dodgers, who has the company company, and he bought the Dodgers using the indexed annuity holders' money.
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And it turns out that he was putting like half the money in private equity deals that were not arm's length transactions that he had something to do with, apparently.
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Yeah, and had you and I started on this 15 years ago instead of what we did, I'd have you as part owner of the Denver Broncos right now.
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So it could have me and Condoleezza Rice sitting in the booth.
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All right, I decided when you brought this topic up to have on the program, which we've covered some of this.
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Yeah, but this is worse than it was before.
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And this is a new development that we did not know about.
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That said, it reminded me of our friend Rick Edelman, who I no longer like because he's a crypto king.
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Um, he had a list of things.
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I was gonna call him a crypto creep, but if you want to say king, that's nice.
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A long time ago, I stole from him, which I always loved, a list of things he would never invest in, quote unquote.
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This is one, but I decided to think about the other ones.
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Whole life policies, right?
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Mm-hmm.
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Variable, I hate variable stuff.
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I'm just it's garbage, right?
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Variable annuities, single stock exchange traded funds, uh-uh.
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Leveraged exchange traded funds, which is where all the growth in exchange traded funds has been this year.
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Still can't believe it.
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IPOs, crypto and gold.
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Somebody asked me about this when we were just in our trip in this house.
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Rick Edelman didn't he said that?
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No, I this is my new list.
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Because he he likes crypto.
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Yeah, he but those are purely speculative.
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Private equity and private credit came up at a recent conference I was at, and I was just sitting there shaking my head saying, Nope, not gonna happen.
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Non-traded REITs, still see them sold.
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I just ran into one the other day.
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Still see this jump.
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Well, because they can offer such great returns because who knows what they're worth.
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I can tell you it's not what it was five.
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They can offer them.
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They not necessarily they're not gonna necessarily give them, but they can offer them.
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And then the entire so much of this now is out there because we've been in this bull market options, futures, derivatives, all this crap that is just like gambling.
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I didn't even throw gambling in there, even though people consider it investments as they do.
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Well, see that the I I actually uh that's where I that's my delineation, is it is it investing or is it gambling?
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And all the things you just mentioned really must be removed from the gambling side of the ledger and moved over or from the investing side over to the gambling side.
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The risk, if you can lose everything, then it's gambling.
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It's absolutely gambling.
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Who was a comedian who said, I think he he put it all in something and lost it all.
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He said, but not a penny more than I had.
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You know, I only lost everything I had.
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That was it.
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Well, but there are some things where you can lose more than you have.
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If you leverage, you can lose more than you have.
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So please but okay, I'm not saying you can lose all that you have in indexed annuities.
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Let's not draw that conclusion.
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No, it's not a good idea.
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Because they are there there are assets there, but the these are trick products.
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They're gimmicks, they're convoluted, they're complicated, they're not designed to be uh uh transparent, they're designed to be opaque, they're designed to confuse you, they're designed to baffle you with BS, and they are really, truly, I can tell you, indexed annuities, indexed annuities should be avoided at all costs.
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They are truly, to my mind, one of the most evil products ever sold to investors, ever sold to investors.
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Got questions for us about these or any other investments, just send them in at talkingrealmoney.com.
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And sometimes Tom will do this.
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He's gonna, oh, here he goes.
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He's going over to the phone lines, he's going to pick up the phone and we go to stunningly beautiful Mount Hood, Oregon, where we chat with Brian.
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Brian, hello and welcome to Talking Real Money.
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How are you?
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I'm good.
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Thank you for having me.
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My pleasure.
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What uh what's on your mind today, sir?
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Well, uh, been in this, uh interested in this for a bit and a bunch of different plans for setting up for retirement.
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Uh, wife and I in the mid-50s, uh just still working, still moving forward, but trying to come up with a plan for the future.
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Uh my thought is setting up a reservoir system.
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I've heard people talk about bucket systems and different ways of doing it, but my reservoir idea is to set up a bucket of cash in a taxable brokerage account and then use money from uh I currently have 457s uh with work.
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Uh plan to transfer those out into uh the um uh an IRA through the tax same taxable brokerage account using.
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And then set up uh essentially uh three years worth of extras.
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Uh wife and I are fortunate enough uh that Social Security and pension will cover uh all living expenses with extra.
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So um the the the plan would be to have that for things like roof, a new car, that sort of thing.
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And then once we have that bucket of cash, then just use money from the IRAs, uh, also have Roth IRAs, probably gonna leave Roth alone as we don't need it to let that grow tax-free.
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And then just feed it.
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If the market goes up, set up uh something like a large cap value, uh large cap growth, small cap international.
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And then just as those sectors go up, when you're looking at it, just start feeding the reservoir with cash.
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Um just kind of curious what your idea, what your thought is on that.
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I know that there is some um some potential loss by not having that m money in the market for growth purposes.
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Uh, but in retirement, again, with uh Social Security and pension covering daily living expenses, don't really see needing it.
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I I don't know if that's enough, but I just want to get your thoughts, any questions.
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Yeah, that's this is this is always where the rubber meets the road, right?
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When it comes to retirement, where's the income going to come from?
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How much should I have sort of sitting around waiting for whatever may come up?
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I think you mentioned a roof, et cetera.
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God, I hope I don't have another one of those.
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Um, because that's no fun.
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So here if if indeed the plan with the fixed income from retirement, you know, from your pension and social security covers the day-to-day stuff, which I think awesome.
00:17:25.039 --> 00:17:29.440
You know, my advice there then would be not to have so much in cash.
00:17:29.519 --> 00:17:33.519
I think you mentioned three years or four years, quite a bit.
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I mean, again, you what for the reason you stated at the outset, um, that is going to be a drag on overall long-term performance.
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It sounds like you're gonna have money left over at the end of your lives for others or charity or something.
00:17:47.759 --> 00:17:51.839
So, therefore, in that case, you really want to be pretty fully invested.
00:17:52.160 --> 00:17:54.559
But there's no right or wrong answer to this.
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Everybody does this differently.
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All of our clients, you know, it's a one-on-one, like, I want to have this much sitting around in cash because I don't know what's going to happen, et cetera, et cetera.
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And I don't have to sell something at the wrong time.
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Because look at this year, where we're, you know, we some people may have to sell bonds because they're down a bit, you know, while they're down, and people don't really want to do that if they can avoid it.
00:18:14.559 --> 00:18:17.039
So there's there's no right or wrong.
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I would, I would say, in a general sense, that most people have about a year's worth of cash slash emergency stuff sort of in that bucket, if you will, or I guess in your parlance in the reservoir.
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But other than that, unless there was some unique rebalancing opportunity, and I'll give you an example of that.
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So the last year and a half, I've seen emerging markets just really go up a lot.
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I think they're up somewhere around 30% in that period of time.
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So if I was managing a portfolio, I might say, gosh, I really want to trim my winnings there a bit.
00:18:52.559 --> 00:18:56.240
That's really getting a little airy, a little out of out of ordinary.
00:18:56.400 --> 00:18:57.519
So I might want to sell those.
00:18:57.599 --> 00:19:01.759
And if I wasn't going to buy something in the portfolio, because today you'd be buying bonds, right?
00:19:01.839 --> 00:19:08.079
Because they've been down, then I might dump that in the reservoir just so I rebalance the account properly.
00:19:08.319 --> 00:19:13.039
But otherwise, I don't, I don't, I don't know that I can give you anything more specific than that because there is no right or wrong.
00:19:13.200 --> 00:19:18.640
I love the fact that you're thinking about all this stuff till a maybe a decade before you retire, something like that.
00:19:18.799 --> 00:19:23.279
Um, but I would, but I would, but I would be careful as to exactly what you said.
00:19:23.519 --> 00:19:37.359
You don't want to end up with too much in cash because that's going to be a drag on overall per portfolio performance um, you know, for for the people you're gonna leave that money for, or unless you're gonna have a really you know big time in your 80s or something, you know, whatever it is.
00:19:37.519 --> 00:19:44.640
Oh uh but but I I think the the fact that you're considering all this and that you've got your expenses figured out that way, it sounds pretty good to me.
00:19:45.359 --> 00:19:47.200
And it's the psychological part of it too.
00:19:47.359 --> 00:19:52.720
Don't have high risk have a high risk tolerance when money's coming in every two weeks.
00:19:52.880 --> 00:19:53.039
Yeah.
00:19:53.200 --> 00:19:58.960
Uh but then in that, just something where you don't have to uh you know compromise in retirement.
00:19:59.119 --> 00:20:01.440
You have that ability to do what you want when you want.
00:20:01.519 --> 00:20:03.920
So the psychological part of it is what appeals to me.
00:20:04.000 --> 00:20:04.400
Aaron Powell Yeah.
00:20:04.559 --> 00:20:06.880
And I think this that plays into it very nicely, right?
00:20:06.960 --> 00:20:23.599
Because you really don't have to think at all about the current situation if you have a lot in cash, because you're not you're not worried about what's going on with stocks or bonds or the market or oil or all the rest of the stuff that comes up that really seems to wreak havoc on people and their overall behavioral situation.
00:20:23.759 --> 00:20:27.279
So, no, I love the fact that that that eliminates it.
00:20:27.440 --> 00:20:38.319
And uh, because that is, as we know, the biggest drag on overall performance is people wanting to sort of move in and out of markets depending on the current situation.
00:20:38.960 --> 00:20:40.799
I think you're doing pretty well here, sir.
00:20:40.960 --> 00:20:42.079
Yeah, go ahead.
00:20:43.039 --> 00:20:45.039
No, I'm saying I definitely appreciate it.
00:20:45.200 --> 00:20:59.759
So again, uh my takeaway is that uh not maximizing the uh portfolio by that action, but um so might want to be a little more mindful about rebalancing uh the money if you do have a sector like you brought up, uh emerging market.
00:21:00.079 --> 00:21:03.440
Might want to move that over into something uh lower performing.
00:21:03.839 --> 00:21:04.400
Yeah, exactly.
00:21:04.480 --> 00:21:07.200
It'd be taking from the winners giving to the the losers.
00:21:07.279 --> 00:21:07.680
Yep.
00:21:08.799 --> 00:21:09.039
Okay.
00:21:09.279 --> 00:21:09.519
Yeah.
00:21:09.839 --> 00:21:12.960
Well, I think that I think you uh gave me a yellow light.
00:21:13.119 --> 00:21:14.640
And I appreciate a yellow light.
00:21:15.279 --> 00:21:16.079
No, that's awesome.
00:21:16.240 --> 00:21:20.240
We really appreciate you listening and reaching out to us and uh hope we get to chat again soon.
00:21:21.279 --> 00:21:25.599
Yeah, and feel free to pass on to Don that I do like that music and I do like how much he enjoys it.
00:21:25.920 --> 00:21:28.160
Well, that's unfortunate, but now he's gonna know.
00:21:28.240 --> 00:21:31.200
So I can't do a dark on it since you you put it, you're on the show.
00:21:31.279 --> 00:21:34.000
So, Brian, thank you for your time today and you take care.
00:21:34.799 --> 00:21:35.359
Thank you guys.
00:21:35.519 --> 00:21:35.839
Take care.
00:21:36.000 --> 00:21:36.319
Bye-bye.
00:21:36.400 --> 00:21:36.720
Bye-bye.
00:21:36.960 --> 00:21:45.920
All right, now we're gonna take the questions that he decided were better read off of sheets of paper, his one great love paper.
00:21:46.079 --> 00:21:47.920
And uh let me let him catch his breath for a minute.
00:21:48.000 --> 00:21:48.720
Okay, great love.
00:21:49.039 --> 00:21:49.359
Here you go.
00:21:49.519 --> 00:21:50.880
Don't tell my wife you said that okay.
00:21:51.279 --> 00:21:52.240
Grab the paper.
00:21:52.480 --> 00:21:58.240
My children, my grandchildren, stroke its smooth white finish.
00:21:58.480 --> 00:21:59.680
Okay, now now we're heading into.
00:22:00.160 --> 00:22:01.200
Bad direction here.
00:22:01.279 --> 00:22:03.039
So let's just not do that.
00:22:03.119 --> 00:22:03.839
What do you say?
00:22:03.920 --> 00:22:05.440
Uh, how about I just read it?
00:22:05.759 --> 00:22:06.079
Okay.
00:22:06.480 --> 00:22:07.839
If that makes you feel better.
00:22:08.240 --> 00:22:09.839
Might not be well, but I'll read it anyway.
00:22:10.000 --> 00:22:14.559
Little Elm, Texas, where David writes, Hello again, Don and Tom.
00:22:14.880 --> 00:22:25.200
I'm noticing since the beginning of March 2026, which I think is like six months ago, the prices of my holdings in BND, that's the Vanguard total bond.
00:22:25.759 --> 00:22:27.680
Oh, wait, let me let me let me let me guess.
00:22:28.000 --> 00:22:29.599
Your bond funds have gone down.
00:22:29.839 --> 00:22:30.319
Yes.
00:22:30.559 --> 00:22:32.240
Oh, there's a surprise.
00:22:32.559 --> 00:22:39.680
BSV ETFs have fallen 7% for BND and 4% for BSV over the past seven months, ending in September.
00:22:39.839 --> 00:22:42.319
Can you talk about this topic, please?
00:22:43.039 --> 00:22:43.680
Yes.
00:22:44.640 --> 00:22:46.400
Oh, bonds are too simple.
00:22:46.559 --> 00:22:46.880
Okay.
00:22:47.200 --> 00:22:56.720
High quality bonds are very, very safe from default, from dropping to zero.
00:22:57.200 --> 00:23:07.680
They are relatively protected from volatility because of that fact that high-quality bonds are unlikely to ever go to zero.
00:23:07.839 --> 00:23:09.839
A stock can go to zero.
00:23:10.160 --> 00:23:22.960
However, it's one little downside to bonds, and it affects longer-term bonds more than it than it affects shorter-term bonds, and that is interest rate fluctuations.
00:23:23.440 --> 00:23:36.160
If interest rates rise, then a bond that is still years away from maturing needs to cost you less for you to buy it.
00:23:37.279 --> 00:23:54.400
If there's a 5% bond out there, and there are, and there's an older bond that's only paying four, well, why would you buy the four percent bond at full face value when you could get a five percent bond at full face value?
00:23:54.640 --> 00:24:04.000
Therefore, I, as the owner of the four percent bond to get you to buy it, need to reduce the price by about twenty percent.
00:24:04.400 --> 00:24:08.079
That's just it for this for the for this illustration.
00:24:08.160 --> 00:24:09.039
And that would be an observable.
00:24:09.359 --> 00:24:13.440
So you're saying as interest rates went up, the value of the bonds went down.
00:24:13.839 --> 00:24:18.720
Yeah, I and that's something that I think we have a hard time understanding, though, because when you say it, it sounds counterintuitive.
00:24:19.039 --> 00:24:19.519
Yeah, it does.
00:24:19.839 --> 00:24:21.440
Rates went up and the bond went down?
00:24:21.680 --> 00:24:25.599
Yeah, because the old bonds have to charge less to get money into them.
00:24:25.920 --> 00:24:30.400
Now, that was not a a a clean illustration, but it was a it was an example.
00:24:30.960 --> 00:24:31.359
Straightforward.
00:24:31.519 --> 00:24:36.480
Yeah, David goes on, it's affecting me because I'm coming up on the time for rebalancing.
00:24:36.559 --> 00:24:44.640
It looks like I'll be selling my more risky stock ETFs, which have done well this year, and buying these quote unquote even riskier bonds.
00:24:44.960 --> 00:24:53.440
No, see he will be he will be selling stocks and buying bonds to report rebalance a portfolio, but they're not riskier.
00:24:54.079 --> 00:24:56.480
No, they've never been riskier.
00:24:56.880 --> 00:25:05.039
By the way, when stocks go down, do they would it be unusual for them to go down three or four times as much as five or six or seven?
00:25:05.519 --> 00:25:06.559
Three or four times.
00:25:06.640 --> 00:25:10.000
That's or or eight or nine, or I mean a lot.
00:25:10.160 --> 00:25:11.200
So there's no comparison.
00:25:11.519 --> 00:25:17.359
Yeah, and here's oh we look at this backward because we tend to this day, ladies and gentlemen.
00:25:17.680 --> 00:25:22.400
We tend to we tend to want to look forward and we we can't.
00:25:22.640 --> 00:25:23.440
It's impossible.
00:25:23.680 --> 00:25:27.279
So you say, Well, I'm selling the stuff that is doing well.
00:25:27.519 --> 00:25:30.559
You're implying that I'm selling the stuff that will be doing well.
00:25:30.799 --> 00:25:34.000
That's not a that's not a leap of faith you can make.
00:25:34.319 --> 00:25:38.240
No, you can't say, Oh, all my stocks have done so well, I don't want to sell them.
00:25:38.319 --> 00:25:39.279
No, no, no, no, no.
00:25:39.359 --> 00:25:54.480
The whole point of rebalancing is to sell those things that have recently gone up and may go down someday, and buy those things that have recently gone down and may go up someday, or may be more stable.
00:25:54.640 --> 00:26:00.799
I'm not saying bond values, I have never expected bond prices ever, ever to go up.
00:26:01.680 --> 00:26:06.000
You shouldn't be counting on it, but they have made a decent return over the long haul.
00:26:06.160 --> 00:26:06.400
Decent.
00:26:06.880 --> 00:26:11.759
Only because we had falling interest rates from the 1980s through the 2020s.
00:26:12.000 --> 00:26:12.559
Yeah.
00:26:13.359 --> 00:26:14.720
40 years of falling rates.
00:26:15.039 --> 00:26:15.279
Yeah.
00:26:15.359 --> 00:26:17.519
All right, let's go one more here before we run out of time.
00:26:17.599 --> 00:26:20.319
Richard from Lancaster, Pennsylvania.
00:26:20.480 --> 00:26:21.200
Hi, Don.
00:26:22.240 --> 00:26:23.359
Guess I'm out of this one.
00:26:23.680 --> 00:26:25.599
You had a couple of questions about mygas.
00:26:26.160 --> 00:26:29.200
I guess multi-year guaranteed annuity or something, right?
00:26:29.680 --> 00:26:31.759
A multi-year guaranteed annuity or something like that.
00:26:32.640 --> 00:26:40.000
On a recent podcast, you mentioned just deferring their income for the length of the myga, which is true, but you said you have to pay tax at the end of the term.
00:26:40.160 --> 00:26:41.359
This is technically true.
00:26:41.599 --> 00:26:41.839
Yes.
00:26:42.160 --> 00:26:50.559
But some continue to defer the tax earned by the myga by doing a 1035 exchange into someone, into another myga at the end of the term.
00:26:50.720 --> 00:26:52.400
I'm not recommending mygas per save.
00:26:52.640 --> 00:26:57.039
Never own one, but if someone's trying to defer the tax, this is a way to do it.
00:26:57.599 --> 00:27:00.000
Yeah, but you're just kicking that.
00:27:00.400 --> 00:27:06.000
What's the value of yeah, you gotta stay in an annuity product, which means you're gonna accept whatever the new rates are.
00:27:06.160 --> 00:27:08.960
And remember, these are insurance products.
00:27:09.119 --> 00:27:19.519
They even though they can claim, which again, I just hate that the insurance industry gets this right, to use the word guaranteed when the guarantee is only as good as the company.
00:27:19.599 --> 00:27:25.519
That's like that's like uh me saying, well, you know, I guarantee that I'm gonna borrow money from you, but I guarantee I'll pay you back.
00:27:25.680 --> 00:27:28.640
Well, how good is my guarantee?
00:27:29.119 --> 00:27:30.559
How good is their guarantee?
00:27:31.119 --> 00:27:32.799
You raised anybody's taxes lately, have you?
00:27:33.119 --> 00:27:36.079
No, I can't raise taxes to anyway.
00:27:36.400 --> 00:27:37.119
That's another point.
00:27:37.279 --> 00:27:42.400
Uh yes, if you do a 1035 exchange into another annuity, you can continue to defer taxes.
00:27:42.559 --> 00:27:50.079
But I think there's a much better way to defer taxes, and that's using growth-oriented vehicles.
00:27:50.960 --> 00:27:56.799
Equity funds, any non-realized capital gain is a deferred gain.
00:27:57.440 --> 00:28:00.079
And it can defer without you having to do an exchange.
00:28:00.240 --> 00:28:01.680
It just defers.
00:28:02.480 --> 00:28:19.920
And when you take the money out of a growth-oriented vehicle like a stock fund, you pay taxes at the capital gains rate, which is today substantially lower than the uh higher income brackets, which is what you pay on the annuities.
00:28:20.079 --> 00:28:32.400
So annuities aren't again they're they they serve some purposes, but the insurance industry would like you to think they serve all purposes because they make them lots of money that way.
00:28:32.880 --> 00:28:34.480
Yeah, and can I add one thing?
00:28:34.720 --> 00:28:36.720
Because this is something that does come up.
00:28:37.440 --> 00:28:41.200
When we answer your questions, we try to give a general answer.
00:28:41.359 --> 00:28:44.079
It doesn't cover everything this seems very, very specific.
00:28:44.880 --> 00:28:49.119
We don't, we leave a lot of details out because we have to say all those extra words.
00:28:49.440 --> 00:28:49.599
Yeah.
00:28:49.759 --> 00:28:51.519
It it we don't have that much time.
00:28:51.920 --> 00:29:00.079
So, um anyway, so yes, you can do, as in many cases, you know, an exchange like you could it with real estate.
00:29:00.240 --> 00:29:01.119
I don't know if that's the best.
00:29:01.279 --> 00:29:05.599
By the way, do you know how diversified your portfolio is?
00:29:05.839 --> 00:29:06.160
Hmm?
00:29:06.400 --> 00:29:10.799
How much small, how much value, how much profitability you got?
00:29:11.440 --> 00:29:12.079
Are you looking at me?
00:29:12.160 --> 00:29:12.240
Yeah.
00:29:12.400 --> 00:29:13.599
Yeah, I'm looking, I'm talking to you.
00:29:13.680 --> 00:29:14.960
I'm talking, you're the only one here.
00:29:15.039 --> 00:29:15.839
I'm talking to you.
00:29:16.000 --> 00:29:16.960
Uh if you'd like to know.
00:29:19.119 --> 00:29:20.160
If you'd like to know.
00:29:20.480 --> 00:29:22.400
A secret I wasn't gonna tell you.
00:29:22.640 --> 00:29:25.279
I was kind of hoping somebody else is listening, Tom.
00:29:25.519 --> 00:29:26.079
Oh, okay.
00:29:26.319 --> 00:29:28.559
Gotta be more careful about what I say.
00:29:28.799 --> 00:29:39.680
If you'd like to know, and you'd like to make sure you're all properly positioned for whatever's ahead, even though some of you are sure you know what that is, I wouldn't preclude to know.
00:29:39.759 --> 00:29:42.880
I wouldn't claim to have any idea what tomorrow brings.
00:29:43.119 --> 00:29:45.279
But if you want to know, guess what?
00:29:45.440 --> 00:29:47.440
Um, we do this free.
00:29:47.519 --> 00:29:49.440
We actually we just did it with a guy.
00:29:49.599 --> 00:29:51.200
We he sent us his stuff.
00:29:51.680 --> 00:29:52.799
What did you do with the guy?
00:29:53.039 --> 00:29:57.359
We we sent he sent us his stuff, and then he no, he disappeared.
00:29:57.519 --> 00:30:09.279
No, we we took all his statements and then we analyzed them and we showed him how much he had in big companies, how much in small, how much growth, value, et cetera, how much in U.S.
00:30:09.359 --> 00:30:09.839
international.
00:30:09.920 --> 00:30:12.160
He was shocked as to how little he's exposed to.
00:30:12.319 --> 00:30:16.000
For example, emerging markets, which have been the best place to be for the last year and a half.
00:30:16.160 --> 00:30:20.000
Doesn't mean they're gonna be the best place starting tomorrow, but you want to make sure you're exposed there.
00:30:20.079 --> 00:30:24.559
That's the kind of thing you've got to know about your portfolio if you're invested.
00:30:24.640 --> 00:30:25.759
So we do that free.
00:30:25.920 --> 00:30:30.160
We even have a conversation with you after that to say, here are the things you might change, etc.
00:30:30.480 --> 00:30:36.160
So if you want to do that, you just go to I think it's talkingrealmoney.com and click on meet and advisor, right?
00:30:36.319 --> 00:30:37.680
No, you think it's that?
00:30:37.920 --> 00:30:38.559
I think it's that.
00:30:38.720 --> 00:30:41.519
I'm always the have you ever been to talking?
00:30:42.000 --> 00:30:43.039
There's a website, right?
00:30:43.200 --> 00:30:46.640
Have you ever been gone to four websites in my life?
00:30:47.119 --> 00:30:49.519
Have you ever gone to talkingrealmoney.com?
00:30:49.839 --> 00:30:51.119
Oh, it's not a store, right?
00:30:51.200 --> 00:30:51.759
It's a place online.
00:30:52.079 --> 00:30:53.359
No, no, no, no, no, no, no.
00:30:53.440 --> 00:30:56.960
Don't don't don't uh don't try to to change the subject.
00:30:57.440 --> 00:30:58.799
We'd have to do it right after this.
00:30:59.119 --> 00:31:01.279
Have you been to talkingrealmoney.com?
00:31:01.599 --> 00:31:04.799
I I don't sit around, I don't sit around and listen to the show every day.
00:31:04.880 --> 00:31:05.279
You know that.
00:31:05.519 --> 00:31:05.680
No.
00:31:05.839 --> 00:31:05.920
No.
00:31:06.240 --> 00:31:08.319
I listen to the Friday show because I don't know what's on it.
00:31:08.400 --> 00:31:09.279
I want to see what that's about.
00:31:09.599 --> 00:31:11.839
Ah, because that's a you already know what's on these.
00:31:12.319 --> 00:31:12.559
Exactly.
00:31:12.720 --> 00:31:16.319
You know, when I had a TV show, I didn't watch that either because I'd been there.
00:31:16.559 --> 00:31:20.400
Um so anyway, go to talkingrealmoney.com, click on meet an advisor.
00:31:20.720 --> 00:31:20.960
All right.
00:31:21.440 --> 00:31:27.519
And if you have questions, go to talkingrealmoney.com and uh type in your question or speak it using the microphone button.
00:31:27.680 --> 00:31:28.640
We'll put those on Fridays.
00:31:28.720 --> 00:31:29.920
And thanks so much for listening.
00:31:30.000 --> 00:31:32.960
Please tell a friend or two or ten and hit the follow button.
00:31:33.200 --> 00:31:36.720
Hit that follow button on your podcast app.
00:31:36.880 --> 00:31:39.839
I don't know what it does, but something amazing apparently.
00:31:40.079 --> 00:31:46.079
And keep listening as we, that's me and him, are talking real money.
00:31:51.200 --> 00:31:54.160
The opinions and views expressed on this podcast were current on the date recorded.
00:31:54.319 --> 00:32:04.559
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00:32:04.720 --> 00:32:13.519
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00:32:13.839 --> 00:32:17.519
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00:32:17.599 --> 00:32:20.319
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00:32:20.640 --> 00:32:27.200
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00:32:27.519 --> 00:32:31.519
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00:32:31.680 --> 00:32:37.440
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00:32:37.680 --> 00:32:41.279
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00:32:41.440 --> 00:32:46.240
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00:32:46.480 --> 00:32:51.519
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00:32:51.680 --> 00:32:57.680
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00:32:57.839 --> 00:33:03.440
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00:33:03.599 --> 00:33:07.759
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00:33:07.920 --> 00:33:13.519
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00:33:13.839 --> 00:33:22.000
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00:33:22.319 --> 00:33:24.319
And the lawyers get richer.