The Finn Blog

Great News for Annuities

April 15, 2015 – Yesterday was a great day for annuities!

According to a report in InvestmentNews, Ken Fisher is leaving the building.

You may have never heard of Ken Fisher but you’d be hard pressed to miss him if you’ve ever spent any time on Google trying to figure out what to do with your retirement money.

He’s the guy who goes around saying (and presumably paying decent money for ad space to have him quoted saying) “I Hate Annuities” and beseeching others to do the same.

When you’ve dedicated your professional life to helping people using various types of annuities to improve their lives as I have and understand firsthand how valuable they can be, it’s hard not to be offended but such an antagonistic statement.

“Hate” is a very strong word. Most of our parents and teachers frowned upon our usage of it when we were children.

Negative advertising and fearmongering must work, though, and I’m sure those ads directed more than a few people to Fisher’s $60 billion money management firm.

For that reason alone, he shouldn’t hate annuities. He should love them!

Don’t get me wrong. I don’t begrudge him the success of his advisory firm one bit.

And even though it’s not the focus of our practice, you’ll never catch me unilaterally advocating against actively managed funds or passively invested mutual funds. They obviously have a place in the financial planning discussion.

But so do annuities and Fisher knows this. Or should.

I take issue, however, with anyone who uses incendiary half-truths and red herrings to cast aspersions on an entire industry that serves such a public good. Especially when I’m suspicious of that person’s motives.

Hopefully, the investing public is smart enough see this tactic as the self-serving sleight of hand that it is.

When a guy like Ken Fisher says he hates annuities, people would be well advised to be doubtful.

If fictitious oil baron J.R. Ewing said he hated solar energy, wouldn’t you feel you intuitively understood why?

Eventually, possibilities become clearer for those who look under the surface to explore what else might be driving the negative sentiment.

A quick trip to the calculator reveals that if Fisher could capture even a fraction of the $2.36 trillion in annual annuity purchases made over the past decade as reported by LIMRA Secure Retirement Institute, it would be a hefty boost to his personal net worth.

According to the authors of the scholarly Rational Decumulation, annuities are one of the most cost effective and least risky asset classes for generating retirement income for life. They have been around since the Roman Empire and they’re not going away anytime soon.

If the InvestmentNews report is accurate, the same cannot be said for Ken Fisher.

And those of us annoyed by his audacious ads won’t mourn his departure.

Fishing for Money

Image courtesy of bplanet at FreeDigitalPhoto.net

Celebrating Our 263rd Anniversary

April 1, 2015 – Although most of our clients have come to think of the Finn Financial Group as the people who help them meet their 21st century future financial security needs, it is with great pride that we pause today to pay tribute to our firm’s original founding father who, on this day in 1752, originated the concept that would grow to be known as a structured settlement.

When my 6th great-grandfather Benjamin Franklin, in his spare time and before his foray into starting a new country, founded the Philadelphia Fire, Life and Structured Settlements Company, he did so with the noblest of intentions. He wanted to do something that would, according to his will, “secure the blessings of financial security to (him)self and (his) posterity” in hopes that his many offspring and their descendants would be properly taken care of.

With that simple mission, he allocated a portion of his wealth to be set aside in such a way that, upon his death, it could be “structured to settle the meants which are and of Right ought to be . . . totally dissolved” and to “thereafter pay sums in perpetuity or until death, whichever comes first, with the interest therein earned” for all his descendants known and unknown.

“Meants” were the 18th century colloquial term for “intents” of those who had borrowed money. Today, we would call these debts.

Fearing overexposure, GB6 (6th great-grandpa Ben as we call him around the shop these days) didn’t want his new “structured settlemeant” firm to bear his name but did want to have at least some noticeable, if obscure, affiliation to its founding.

Upon arrival at the Fifth Continental Congress, he lamented, “Curse this rankling gout! Would that I could extract it from my surname and live in peace like the nobles I despise but strive to emulate.”

He paused, and then smiled realizing what had just occurred.

Then and there, in a rare display of humility but with typical ironic humor and quite by accident, he took the “rankl” out of F-rankl-in, added an extra “n” (in deference to William Penn whose hat he always coveted) and opened the doors to Ye Olde Finn Financial Structured Settlemeant and Annuity Shoppe.

Needing to take leave of the Congress to go next door to fill out the articles of incorporation for his new venture, he asked a young Virginia delegate tasked with drafting what he thought was the luncheon menu to mind his papers until he returned. Only later would he realize he had neglected to remove a copy of his will from his satchel which was liberally borrowed from by Thomas Jefferson in creating something that was not a luncheon menu after all.

So please join us in celebrating our 263rd year in offering structured settlements and specialty annuity products and services. We’re proud to be of service to you and look forward to our next 263 years!

Sincerely,

Dan Finn

(PS Dedicated to my friend, structured settlement mentor and world’s best practical joker Bob Kringlie for whom April 1 – our firm’s actual first day in 2009 – was considered a national holiday)

Life Insurance Industry Forecast: Smooth Sailing Ahead

Smooth Sailing

 

March 16, 2015 – Demonstrating that good news often travels in threes, I’m pleased to unfurl the attached triad of recent links which point to “smooth sailing” for the life insurance industry in 2015:

A.M. Best: U.S. Life/Annuity Health Rating Outlook Remains Stable

Fitch: Stable Outlook for Life Insurers in 2015

Moody’s outlook for US life insurance industry remains stable for 2015

When people enter into life insurance or annuity contracts, they are buying promises that future financial risks they face will be properly addressed.

As these three independent rating agencies look ahead, they offer assurance to policyholders that their promise is well placed.

Even when local, national or global events conspire to test that promise, as was the case during The Great Recession, the industry as a whole fared exceptionally well.

A United States Government Accountability Office (GAO) report on the “Insurance Markets – Impacts of and Regulatory Response to the 2007-2009 Financial Crisis” reveals:

“(t)he effects of the financial crisis on insurers were generally limited . . . .”

Life insurers, with the exception of the variable market (which our firm doesn’t offer), fared especially well.

The structured settlement and retirement annuity companies we are proud to represent have long histories of honoring their promises and making their payments on time.

So if you want to increase your chances that your money will be there in the future when you need it, know that if you choose a highly rated life insurance annuity, you’ll be choosing something that has weathered many storms and is still solidly afloat.

(Image courtesy of Stuart Miles of FreeDigitalPhotos.net)

Economists Say YES to Annuities

March 2, 2015 -With Superbowl XLIX recently concluded, if you played for the New England Patriots, CONGRATULATIONS! 

Earning a Superbowl ring puts you in very elite company.

With the 87th Academy Awards now behind us, if you were among the select few to take home an Oscar, CONGRATULATIONS! 

You own a rare piece of hardware.

If you’ve made the decision to use a portion of your retirement savings to purchase annuities, CONGRATULATIONS! 

A host of prominent economists, including several Nobel Prize winners, agree you have made a smart retirement choice.

You are definitely ahead of the curve! (Pun intended)

Smart Folks Here

While it’s a safe bet that fewer people read American Economic Review than watch the Superbowl or the Oscars, those who did read one particular article from about a decade ago derive something far more important than the fleeting entertainment value the first two diversions bring.

Say YES to AnnuitiesThey gain valuable knowledge which can lead them to a more secure future.

Using formulae and language only a calculus student could love, “Annuities and Individual Welfare” demonstrates that economists, who rarely agree on anything, all seem to agree that annuities make the most sense for most people.

Period!

And lest you think this is a bunch of life company propaganda, consider the collective brain power coming together to agree “annuitization of a substantial portion of retirement wealth is the way to go.”

Those holding this belief are economists from some of the world’s most prestigious centers of higher learning, including:

The Wharton School, Berkeley, Chicago,

Yale, Harvard, London Business School, Illinois,

Hebrew University, Carnegie Mellon, MIT

Reluctance to Jump In

Most of us intuitively understand the retirement wealth accumulation process: Save money. Invest it. Hope it grows.

But when it comes time for Decumulation, people just can’t seem to make the shift from a lifetime habit of acquiring to one of “dequiring.”

Those who can make this transition will benefit greatly.

In their article “Investing your Lump Sum at Retirement,” Wharton Financial Institutions Center Fellows Babbel and Merril reinforce the finding that:

” . . . full annuitization was optimal for people who had no desire to leave a bequest to their heirs or charitable organizations.

It also concluded that for those with bequest motives, substantial annuitization of retirement wealth was still the most prudent way to act.” (Emphasis ours)

Ironically, those with the greatest wealth are the ones who stand to benefit the most from annuitization.

Not because they have the most wealth to begin with but rather because their percentage of assets dedicated to guaranteed lifetime income cash flows (i.e. Social Security) is much smaller.

When the Chairman of the Federal Reserve discloses, as Ben Bernanke did in 2010, that the bulk of his retirement portfolio consists mostly of two annuities, it’s definitely noteworthy.

If the person overseeing the entire central banking system of the United States chooses such a no-frills retirement allocation, maybe it can serve as a clue to the rest of us that annuities are a pretty smart, safe bet.

So why not join the chorus?

“Say YES to annuities!”

Image courtesy of digitlart at FreeDigitalPhotos.net

Happy Birthday, George

February 16, 2015 – If you’re off work today here in the United States, it may surprise you to know that it’s not because Presidents Day is a federal holiday since no such holiday exists.

5 USC § 6103(a) does, however, make Washington’s Birthday, celebrated the third Monday of each year, a federal holiday.

As presidents go, George Washington usually ranks among the top five all time in terms of overall net worth. Not all presidents were so lucky with their fortunes.

In fact, about 20% of our nation’s chief executives experienced insolvency at one time or another in their lifetimes.

Who knew the position was fraught with such a high chance of financial insecurity?

FranklinOne famous founding father whose age was likely the only thing preventing him from becoming president was Benjamin Franklin. Ranking No. 181 on the all-time richest people ever list, Franklin did pretty well for himself and his heirs moneywise.

Franklin was 83 at the time of Washington’s inauguration, 26 years older than our first president.

In addition to passing a significant amount of property and valuable personal possessions to his heirs, Franklin’s last will and testament laid out some pretty detailed annuity requirements.

The one for his sister, Jane Mecom, was a rather straightforward “fifty (later increased to sixty) pounds sterling . . . to be paid to her annually” annuity in addition to the house he bequeathed her.

The annuities left to the cities of Boston and Philadelphia for schooling, hospitals and apprenticeships were a little more creative and specific. And they were set up to run for 200 years. Now THAT’s forward thinking!

Unlike Washington, who married into his fortune, Franklin’s wealth was a result of his own initiative.

And you can bet a man who preached that “a penny saved is a penny earned” understood the value of the time value of money. No doubt this belief influenced his annuity decisions.

Perhaps helps explain why most people would rather have a Benjamin than a George.

Image courtesy of Gualberto107 at FreeDigitalPhotos.net

Why Retirees Don’t Buy Annuities

February 15, 2015

Are you among the 76 million people born between 1946 and 1964?

Worked most of your adult life?

Have some money sitting in a 401(k) or similar retirement account?

Want to make sure it lasts the rest of your life?

Retirement

If you answered yes to any of these questions and are retired or within a decade or so of retiring, there’s a good chance you could benefit greatly by converting some of your nest egg into some type of annuity.

But there’s an even better chance you will never do so.

Even though annuities have been shown to be “the most cost-effective and least risky asset class for generating guaranteed retirement income for life,” people still resist buying them.

Why does this annuity puzzle persist despite an excellent track record and strong evidence that people who choose annuities are happier and might even live longer?

They’re safe. They’re secure. They’re practical.

And They WORK!

To gain insight into this paradox, Forbes has a brief slide show that does a pretty good job identifying the “8 Reasons Retirees Don’t Buy Annuities.”

No reason for you to be one of “those” people. When you’re ready to put the “I” in your retirement, give us a call to let us help you decide whether or not a retirement annuity makes sense for you.

BONUS INFO:  By the way, contrary to rhetoric espoused by many in the financial planning community, annuities and traditional investing can co-exist very nicely.

In fact, when you address your non-discretionary retirement cash flow needs with annuities, you take a lot of pressure off your portfolio (and yourself) to constantly perform at an unsustainably high level.

Owning annuities allows you to better absorb the market ups and downs, reducing the chance you’ll make panicky moves which could leave you in a weakened long term financial position.

Image courtesy of hyena reality at FreeDigitalPhotos.net

Financial Health Assessment

February 13, 2015 – In less than the time it takes you to read this blog, you can give yourself a quick financial health check-up to learn where you stand financially.

CalculatorWhile I can’t attest to the accuracy of the Financial Health Calculator I stumbled across on CNNMoney’s website today, I found it personally very helpful and wanted to pass it along in hopes it might help you.

After entering your age and income, the calculator walks you through a series of seven categories of spending, savings, investments and insurance to arrive at a grade with recommendations on how to improve your score.

It’s quick. It’s easy. It’s fun.

No simple calculator should ever substitute for actual financial advice but as a starting point for further dialog, this one feels worthwhile.

So click the link and start typing.  Here’s hoping you earn a passing grade.

Image courtesy of foto76 at FreeDigitalPhotos.net

Oops! . . . It Did It Again

CAUTION: Blog post contains musical references which some readers may find bubble gummingly offensive

February 2, 2015 - If the stock market were a song and January were Britney Spears, right about now it would be singing a paraphrased version of the former teeny bopping icon’s hit, “Oops! . . . I Did It Again.”

What “it” did – decline more than 3% for the month – isn’t particularly remarkable in and of itself.  Over the past sixty-five years, January has been a down month for the market about 40% of the time.

But the reason it’s Britney Spears song-reference worthy is because of what this drop could signal for the rest of the year.

Key Stat: Since 1929, market indexes for the year followed January’s lead 72% of the time.

Any discussion about markets must begin and end with the reality that nobody can accurately predict what the market is going to do or when.

Bear_Head_clip_art_mediumBut regardless of whether or not you’re in the chance taking business, this might be a good time to pause and ask yourself whether the promise of higher gains really outweighs the historical probability of loss.

Are the bears back in town?

With the stock market bulls having had such a phenomenal run these past few years, doesn’t the very ebb and flow nature of the market increase the probability that a bear run – maybe even a recession – is nigh?

Young people usually have time to recover from these market swings. But those heading into the bell lap of life cannot afford to loose money.

So if you’re in the latter category, let a Retirement Income Certified Professional® help you make an informed decision about your future. Our firm is committed to offering retirement cash flow solutions that are safe and secure and will help you get the most out of your hard-earned retirement dollars.

By the way, even though “da Bears” weren’t playing in yesterday’s Super Bowl, another bearish statistic that’s making the rounds today has to do with New England’s win.  It goes like this:

When an original NFL team wins the Super Bowl, the market will go up.

If an expansion team wins, the market will go down.

Funky Stat This “Super Bowl Theory” has been accurate 80% of the time.

Sooner or later, the bear will arrive if he’s not already lurking about. Locking in some gains and securing your future now might help you prevent the next “Oops!” which is sure to come knocking some day.

Retirement: How Ready Are You?

January 9, 2015 - “Apples, peaches, pumpkin pie….”

Remember that?

If you once lived in a house without satellite, cable or, heck, even color television, you likely recognize this familiar jingle as part of something you shouted, before opening your eyes, when you were “it” during a neighborhood game of hide-and-go-seek you played as a kid.

You might even recall the Jay & the Techniques song of the same title still occasionally played on oldies stations.

For my part, it’s the second stanza of the popular kid game phrase which came to mind as I finished taking The American College Retirement Income Literacy Quiz earlier today.

“…Who’s not ready holler I.”

As recently reported on CNBC and in several newspapers – USA Today, Washington Post, and Chicago Tribune among them – many of us from the Leave It to Beaver generation are simply NOT ready for retirement.

[CLICK HERE] to Quiz Yourself on Your Own Retirement Literacy

The New York Life Center for Retirement Income at The American College commissioned an online survey to “assess retirement literacy among individuals who are nearing or already in retirement.”

One of the most comprehensive surveys on retirement income literacy ever conducted, the RICP® Retirement Income Literacy Survey covered a host of retirement basics topics such as:

Social Security claiming options,

Medicare and health insurance planning,

Company retirement, IRAs and Investments,

Life insurance, Long-term care, Etc.

The “I’s” have it

Only 20% of those surveyed received a passing score of 60% or better.

ID-10094861With an average score of only 42%, the majority of survey respondents – and by extrapolation, Americans – are not knowledgeable enough about some very basic choices they’ll need to make leading up to and during retirement.

Fortunately, having spent the better part of 2014 earning my Retirement Income Certified Professional® designation through The American College, I had enough retirement knowledge fresh in my brain to be able to pass the quiz with flying colors.

I got a 91%.

But honestly, even though I’ve been in the insurance industry for nearly all of my adult life, until about a year ago I seriously doubt I would have scored nearly as well. I may not have even passed myself.

I strongly encourage you to take a few minutes to take the quiz for yourself to see how you fare.

Then, when you have questions about anything relating to your own retirement situation, don’t hesitate to call us to let us know how we can help you get ready for this important transition.

Because remember the song’s refrain:

“Ready or not, you shall be caught!”

(Image courtesy of stockimages at FreeDigitalPhotos.net)

2014 Reflections, 2015 Intentions

December 24, 2014 – A year ago, we prognosticated that 2014 would be “the year of the annuity” based on financial articles we were reading at the time.

Boy, was it ever!

Thanks to the faith and confidence our loyal clientele continue to place in us, 2014 was Finn Financial Group’s BEST YEAR EVER in terms of number of people we were able to help and number of structured settlement and other specialty annuities we placed on their behalf. This past year:

We helped claims associates close files while cost-effectively satisfying their obligations under the Medicare Secondary Payer Act;

We created dozens of structured settlements for minors which will help parents put their children through college;

We designed income tax-free settlement cash flows, many coordinated to work hand-in-hand with Special Needs Trusts to maximize their value, that will help catastrophically injured plaintiffs live their lives free of financial worry;

We designed and conducted training seminars and webinars for casualty companies, the CPCU Society, attorney groups and private law firms;

We helped plaintiff attorneys save money on taxes and secure their own futures by helping them structure their attorney fees;

We analyzed and evaluated options for baby boomers seeking to lock in their own future guaranteed cash flows with retirement funds and savings they didn’t want to risk losing and wrote a lot about the choices they face in The Finn Blog’s retirement section;

I personally re-dedicated myself to educational excellence with the goal of better serving my clients by earning my Retirement Income Certified Professional® designation through The American College and enrolling in the inaugural Master Structured Settlement Consultant course through the National Structured Settlements Trade Association.

All this in addition to the numerous mediations attended, consultations conducted, and questions answered combined to make this one very successful year.

We are extremely honored and grateful for the opportunities you give us to be of service.

Next Year?

So if 2014 was the year of the annuity, what does 2015 hold in store annuity-wise?

I’m so glad you asked!  Look for:

Longevity Annuities – We wrote about this our July 1, 2014 Finn Blog right after the U.S. Treasury announced longevity annuities were going to be an official part of the retirement landscape.  Fortune also has an article this month entitled “Why 2015 is the year for longevity annuities.”

Fixed Indexed Annuities  – The Insured Retirement Institute (IRI) believes this market-linked hybrid is poised to be a “bright spot” in annuity selection during the coming year.

Widely available for those doing regular retirement planning, earlier this year we told you about an indexed-linked structured settlement and structured attorney fee option, offered by Pacific Life, available to our clients who are settling personal, physical injury claims.

Oh, there will be more.  And we pledge to stay on top of it.  Whatever the year, whatever your need, rest assured we’re committed to being here to help you.

“Helping people with their guaranteed cash flow needs.  That’s what we’re all about.”

So as the 2014 Structured Settlement and Annuity season draws to a close, we leave you with all best wishes for a most joyous holiday season and a healthy, happy and very successful year ahead.

Skaters

Happy Holidays from Finn Financial Group!