How to Choose the Right Financial Advisor

In order for you to take charge of your finances and household, it’s important to appoint a solid financial advisory team. You may have hired a personal trainer to maintain or improve your physical well-being, so why not hire an independent advisor to work on your financial health?

It’s crucial to find a truly objective and independent financial and insurance consultant. To do this, seek out an advisor that can provide you with a wide range of services and products. You no longer have to simply settle for the ideas or products of one bank or firm. There are advisors out there that can guide and help you choose what is best for you in the investment and insurance universe.

When looking for a qualified financial advisor, your main priority should be to seek out an advisor that can show you ways to improve your profitability and protect your risks.

Did you know that a comprehensive planner or advisor should be reviewing your estate plan, insurance needs, investments, taxes, and retirement funds with you at least annually? Is your advisor or group of advisors doing that for you? Are they offering you alternatives and new ideas, or just relying on the status quo?

Many believe that old Wall Street techniques have failed, as they watched increased volatility erode investor portfolios. Often, these traditional strategies have failed to adopt new techniques and tools, holding to old methods like the buy and hold strategy, passive static mutual fund portfolios, and more. This isnt your grandads Wall Street, it is a casino flush with the Fed’s cash.

Today, the investor must be better armed with new tools and a clearer understanding of risk—and how to address it. The client deserves to see their interests be of paramount importance, and should demand a firm and an advisor that believes trust is the ultimate goal in building asset management relationships.

Many investors have found disciplines and adaptive strategies that can effectively prepare them for a constant search for opportunity. Indeed the time ahead will remain a challenge, even for the best of managers. However, while nothing is ever guaranteed, there are strategies available that will allow you to be more confident, and provide a foundation to help target absolute returns for your portfolios in the years ahead. There are strategies that can help preserve capital and can help limit downside.

Building wealth has a key first step – managing risk. Wealth is preserved and grown by avoiding big downturns, not necessarily by hitting homeruns in the up years and you certainly need to protect the portfolio rather than giving back gains when markets inevitably correct. Search for an advisory team that can show you how they actively manage client assets each day and save money. / 352.340.2942

Erick ArnettHow to Choose the Right Financial Advisor
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What happens when my insurance company goes out of business?

In general, a court of competent jurisdiction will work with the department of insurance in determining when an insurance company requires special regulatory control. Some steps that might be taken are not publicly announced, but may include supervision of some kind. If early steps do not turn the company around, a period of public rehabilitation may follow. This means a receiver is appointed for purposes of operating the company more effectively. The receiver’s power allows for strong actions to be taken, some of which might affect policies. In rare cases, the problems cannot be worked out and the court decides the company should be liquidated. This means that the receiver now becomes a liquidator who is charged with selling off the company assets for the benefit of policyholders and creditors. At the point of liquidation, FLAHIGA takes on the obligation of protecting Florida policyholders. We obtain the policy records and history from the liquidator, collect premiums that become due, administer the policies and pay all valid claims. FLAHIGA will normally continue coverage as long as premiums are paid or cash value exists. We may do this directly, or through service agents. Since FLAHIGA is a safety net but not an insurance company, we will seek to transfer policies to a sound insurer as soon as it is practical to do so. When possible under the terms of the policy, FLAHIGA may also elect to cancel policies after notice is given to you and after all valid claims have been paid.

How is policy coverage determined?

Coverage is determined by Florida law, policy language and other circumstances at the time FLAHIGA is activated (when the member insurer is found to be insolvent and ordered liquidated by a court). Any coverage is subject to the legal limits set forth in the FLAHIGA Act.

What is the Florida Life & Health Insurance Guaranty Association and what does it do?

In the 1970s many state legislatures worked with the insurance industry to form guaranty associations to protect life, health and annuity policyholders. In Florida, this happened in 1979 with the creation of FLAHIGA. All insurance companies (with limited exceptions) licensed to write life and health insurance or annuities in Florida were required, as a condition of doing business in the state, to be members of FLAHIGA. Nine insurance companies make up the FLAHIGA Board of Directors. FLAHIGA’s office is located in Jacksonville.

If a member company becomes insolvent, a receiver is appointed by a state court to wind up the company and the policy obligations pass over to FLAHIGA. We collect the records and files of the company where possible and as soon as we can identify valid claims, we pay them. We also collect premiums and administer the policies, including providing payments if a policyholder surrenders a policy. We may select servicing agents to help with these functions. Generally we also work to find another sound insurance company to take over the policies; when this happens, we also transfer enough money to the new company to keep the policies on a firm footing. Sometimes, if the insolvent insurer had the power to cancel policies, we may also do that, provided that we pay all valid claims first. Whatever we do, it will be with full notice to you and you will be given a reasonable time to seek insurance elsewhere if you desire. All 50 states, the District of Columbia, and Puerto Rico have life and health insurance guaranty associations. We all work together to provide a nationwide system for policyholder protection.

Who is protected?

Life and health insurance guaranty associations cover individual policyholders and their beneficiaries; typically, persons protected by certificates of insurance issued under policies of group life or group health insurance are also covered. Annuities that are directly issued to and owned by individuals, or annuities that directly guarantee benefits to individuals by the insurer are generally covered. What are known as “unallocated” annuities are not covered. Limits on benefits and coverage are established by the FLAHIGA Act. For more information about coverage, see the questions below.

If I move to another state after purchasing a policy, will I still have guaranty association coverage? If so, who will provide it?

If you purchased a policy from a company that is a member insurer of the state guaranty association where you reside, you will have coverage. Guaranty association protection is generally provided by the association in your state of residence at the date of the liquidation order regardless of where your policy was purchased. Policyholders who reside in states where the insolvent insurer was not licensed are covered, in most cases, by the guaranty association of the state where the failed company was domiciled.

What contracts are covered?

Generally, direct individual or direct group life and health insurance policies as well as individual and allocated annuity contracts issued by FLAHIGA’s member insurers are covered by the association. Such coverage is limited by the terms of the FLAHIGA Act.

Are all policies fully protected?

There are limits to FLAHIGA coverage set by the Florida Legislature through the FLAHIGA Act. A policy must meet coverage requirements, and there are limits to the amounts FLAHIGA pays as a maximum. If your insurance company fails, the maximum amount of protection provided by FLAHIGA for any one person is:

Life Insurance Death Benefit: $300,000 per insured life
Life Insurance Cash Surrender: $100,000 per insured life
Health Insurance Claims: $300,000 per insured life
Annuity Cash Surrender: $250,000 for deferred annuity contracts per contract owner
Annuity in Benefit: $300,000 per contract owner

(All the above limits assume the policy or contract is covered)

For example, if I own three deferred annuities and each has a cash surrender value of $100,000, and my insurance company fails, how much will FLAHIGA pay if I want to cash surrender my deferred annuities?

The total annuity cash surrender protection per owner per member company is $250,000. That per person limit is a maximum that applies without regard to the number of annuity contracts. As a result, if an individual owned three deferred $100,000 annuities with the same insolvent insurance company, FLAHIGA would pay a maximum total of $250,000 in cash surrender values. The value in excess of this statutory coverage limit can be submitted as a claim by you for $50,000 against the estate of the failed insurer. The receiver will furnish claim forms and set a bar date for filing during the course of the receiver’s administration of the estate.

What will happen to my insurance coverage if the guaranty association becomes liable for my policy?

In general, your policy will be continued under its terms and conditions while FLAHIGA determines its course of action. Valid claims will be paid, premiums will be collected and your policy will continue under FLAHIGA administration. However, since FLAHIGA is not an insurance company, efforts will be made to find another viable insurance company that wants to acquire the policies. If this happens, you will be notified in advance and FLAHIGA will fund the transfer process. If no viable market exists for the policies of the liquidated insurer, FLAHIGA may cancel the policies but only if that right was available to the insurer had a liquidation not occurred. Depending on the type of policy, state or federal law may impose extensions of the time for which you are covered even after a cancellation. FLAHIGA also has the authority under the FLAHIGA Act to offer substitute policies of substantially the same type.

In most insolvency situations, FLAHIGA works with other state guaranty associations to develop an overall plan to provide protection for the failed insurer’s policyholders. The amount of protection provided, and when you receive it, may depend on the particular arrangement worked out but you will be entitled to the benefits of FLAHIGA protection and coverage to its limits.

If my insurer just went under, when will FLAHIGA start providing benefits?

Insurance company operations are very involved and many companies operate in different ways. Some companies handle everything from premium collection, policyholder record development, claims handling and policy administration and retention, and they do it all in one location. Other companies farm almost everything out so that work is done in multiple locations, sometimes dozens of locations, some of which may be thousands of miles from the home office. FLAHIGA may have to search across the country to piece together all the parts necessary to make sense out of what a liquidated company was doing with records and claims. Moreover, companies that fail tend to be poor at record keeping and lack modern methods of processing data. The process of putting everything back together right is sometimes very difficult.

FLAHIGA has joined with the other guaranty associations throughout the country in an effort to work with departments of insurance and receivers on ways to improve insolvency administration. Our first priority is to identify policyholders and pay their valid claims as rapidly as possible.

What products are not protected by FLAHIGA?

The FLAHIGA Act specifies that policies and contracts from non-licensed insurers are not covered. Beyond that, the FLAHIGA Act excludes all of the following:

a) any portion or part of a variable life insurance contract or a variable annuity contract that is not guaranteed by a licensed insurer;
b) any portion or part of any policy or contract under which the risk is borne by the policyholder;
c) any policy or contract or part thereof assumed by the failed insurer under a contract of reinsurance, unless assumption certificates were issued;
d) fraternal benefit society products;
e) health maintenance insurance;
f) dental service plan insurance;
g) pharmaceutical service plan insurance;
h) optometric service plan insurance;
i) ambulance service association insurance;
j) preneed funeral merchandise or service contract insurance;
k) prepaid health clinic insurance;
l) certain federal employees group policies;
m)any annuity contract or group annuity contract that is not issued to and owned by an individual, except to the extent of any annuity benefits guaranteed directly and not through an intermediary to an individual by an insurer under such contract or certificate.

How will I know if my life or health insurance company has failed or is unable to fulfill its obligations to its policyholders?

You will receive a notification from the receiver and/or FLAHIGA if your insurance company is found to be insolvent and ordered liquidated.You will receive a notification from the receiver and/or the Florida Life & Health Insurance Guaranty Association if your insurance company is found to be insolvent and ordered liquidated.

How can I find out if my company is licensed in Florida?

Call the Consumer Helpline provided by the Florida Department of Financial Services. The number is 800.342.2762. The Department maintains complete and current records of all insurance companies licensed to do business in Florida. Additionally, the Department’s Web site has information “For the Consumer” which will lead to a listing of all licensed insurers doing business in Florida.

Why hasn’t my agent or company told me more about the Florida Life & Health Insurance Guaranty Association?

The law prohibits insurance agents and companies from using the existence of FLAHIGA for the purpose of sales, solicitation or inducement to purchase any form of insurance covered by FLAHIGA. The guaranty association is not and should not be a substitute for your prudent selection of an insurance company that is well managed and financially stable. Agents are prohibited by statute from using this Web site or the existence of the guaranty association as an inducement to purchase insurance.

Can FLAHIGA advise me what to do?

The purpose of FLAHIGA is to provide underlying protection to policyholders in the event of a liquidation. We will do the best we can to help you understand your options, but we cannot give legal advice or advice on what course of action to follow. In important matters, you should seek professional assistance from legal counsel or your insurance agent. In many areas the public library system has a wealth of information on insurance matters and the library may be able to recommend other resources.

Where can I find a copy of the FLAHIGA Act?

The FLAHIGA Act, known in legal circles as Florida Statutes Chapter 631 Part III, is contained in a multi-volume set of law books entitled “The Florida Statutes.” A new set is published every year after the legislature ends. The volumes contain all state laws. Every public library will have a current set in its resource section. Ask for assistance in finding the FLAHIGA Act at Chapter 631 Part III.

The FLAHIGA Act is also available on line at a site sponsored by the Florida Senate. Go to On the Home Page, look for the section titled Laws. Find the Florida Statutes and scan down to Chapter 631 Part III.

Where can I get advice on purchasing life, health, or annuity products?

The guaranty association does not provide financial advice or comment on the financial condition of any particular company. You can obtain advice from captive insurance agents, independent insurance brokers, and rating agencies. Generally, captive agents sell products from a single insurer. Brokers usually can sell the products of multiple insurers.

Rating agencies assign comparative ratings to insurers based on various criteria. Most rating agencies are paid by the insurer to do an assessment examination and to issue a rating. This is the case with the largest and most well-known agencies, such as Standard and Poor’s, A. M. Best, Moodys, and Fitch Ratings. Since the companies pay to have themselves rated, those ratings are generally available to the public without charge. One rating agency does not accept payment from the insurer being rated— You must pay to obtain its rating results.
You may also wish to contact your state insurance department regarding information on a particular company.

Are you a State agency?

No. The guaranty association is a private entity, with its membership made up of all the life and health insurers licensed in the state (in fact, under state law an insurer must be a member of the association to be licensed to do business). The association was created by the legislature to serve as a safety net (subject to statutory limits) for residents should their life or health insurer fail. By creating the association, the legislature was able to ensure continued coverage to residents affected by their insurer’s failure. The association does work in cooperation with the Insurance Department in fulfilling its role of protecting residents whose insurance company is being liquidated.

How can I determine the financial soundness of my insurance company?

Consumers can contact the Office of Insurance Regulation (850-413-3140) to determine if an insurance company is licensed to write business in Florida. Consumers can also check the financial strength ratings of the company, which are issued by various ratings agencies (see “Where can I get advice on purchasing life, health, or annuity products?” above).

If my company is in the process of rehabilitation/conservation and I have an emergency and need to withdraw monies from my annuity, what is the process?

Surrenders and loans may be allowed on a case-by-case basis for genuine hardship situations upon written application to the Receiver. Hardship circumstances and procedures will differ from company to company and (after liquidation) from guaranty association to guaranty association. Examples of hardship cases may include (1) terminal illness or permanent disability; (2) substantial medical expenses not covered by medical insurance; (3) financial difficulties resulting in inability to pay for essential life support needs like food and shelter; (4) imminent removal from a hospital, nursing home, or other medical care facility due to inability to pay; (5) imminent bankruptcy; and (6) immediate need for college tuition payments for a dependent child.

Is long-term-care insurance covered by the guaranty association?

Yes, long-term-care insurance is typically considered health insurance and covered by the guaranty association.

Are variable annuities covered by the guaranty association?

Generally speaking, a variable annuity contract with general account guarantees will be eligible for guaranty association coverage, subject to applicable limits and exclusions on coverage. However, specific questions regarding coverage will be determined by the applicable guaranty association based on the terms of the contract, other relevant facts, and the guaranty association law in effect at the time of liquidation.

If my company is liquidated, do I have to file a claim with the association?

If your insurance company is liquidated, you will receive a notice from the court-appointed Receiver (typically the Insurance Commissioner of the company’s state of domicile), who will oversee the liquidation of the company and inform you of any new claims procedures. There may be no change in the claims submission process—guaranty associations, working with the Receiver, sometimes continue processing claims using the liquidated company’s existing claims staff if that will maximize the speed and efficiency with which claims are processed. In other cases, the associations process the claims themselves or use an independent processing company, known as a third-party administrator, to process claims. In any event, you will be notified of the ongoing claims process. If you wish to continue coverage, you must continue to pay the premium required by your policy.

Should I continue to pay my premiums?

Yes. If you are paying premiums to your company and wish to keep your coverage in place, you must continue to do so—those premiums go to the guaranty association providing you continuing coverage. If you stop paying premiums, your insurance coverage may be terminated.

Is my company covered by the guaranty association?

The guaranty association provides coverage to owners of covered policies issued by member insurers (life, health, and annuity insurers licensed to write business in the state). To determine if a company is licensed to write business in Florida, you may call the Office of Insurance Regulation at 850-413-3140. The Office maintains complete and current records of all insurance companies licensed to do business in Florida. Information about companies licensed to write insurance in Florida may also be obtained from the Office’s Web site.

What happens if the benefits promised in my policy are greater than the coverage limits provided by the guaranty association?

Guaranty associations, in conjunction with the Receiver, may be able to negotiate a transfer of a company’s policies, up to the amount of the guaranty association benefit limits, to a financially sound insurer. If an association administers claims against the policy and the benefit limits are reached, any claim in excess of that limit may be submitted as a policyholder-level claim against the estate of the failed insurance company, and the contract holder may receive distributions as the company’s assets are liquidated by the Receiver. / 352.340.2942

Erick ArnettWhat happens when my insurance company goes out of business?
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A Unique Retirement Approach Using “Buckets” of Annuities

In Fortune Magazine, Erick Arnett recommends that those of us looking to protect our retirement nest eggs should err on the side of caution.  His article is called “Stop Drinking the Fed’s Kool-Aid – Invest In Your Retirement.”  This financial expert is constantly asked by consumers how they can protect their retirement savings and what they should do about buying and selling stocks and bonds.  He believes that the markets are nearing a sell-off and says that we are following the typical cycle of a massive correction every 3-5 years.  Mr. Arnett says that it would be wise for consumers to err on the side of caution in order to protect their retirement savings.  You can be cautious and keep your money safe, but still receive a nice return on your money.

The article details this financial expert’s strategy for keeping retirement money safe.  It is called the “Three Buckets Method” where you put money in one or more of three different places that have different individual goals.  The first bucket is called the Guarantee Bucket and includes financial products that offer guaranteed returns around 1-3%.  Fixed annuities, CDs, treasuries and money markets are examples of products that would be included in this bucket.  This money is illiquid for a certain time frame, typically at least five years, so that is something to keep in mind when planning out your finances.  Since a 1-3% return is not even always enough to combat inflation these days, you really don’t want to keep all of your money in the Guarantee Bucket.

In the second bucket, riskier products that can offer high returns are used.  The products in this Risk Bucket include variable annuities, stocks, bonds and mutual funds.  You can get returns as high as 40% but you run the risk of losing just as much money as you have the potential to gain.  I don’t think anyone wants to to put their entire retirement nest egg into a financial product that doesn’t protect it from loss.  These types of products have their place in financial planning, but should be used wisely.

Mr. Arnett calls his third bucket the Hybrid Bucket, which includes fixed indexed annuity products.  He says that these annuities offer consumers the benefits of the first two buckets without the drawbacks.  Returns on these products are typically around 3-6%.  The returns match those of some stocks and are greater than inflation increases.  They also offer guarantees so that you know that your retirement savings will be protected in the future.  The article’s author is a big proponent of fixed indexed annuity products.  They guarantee principal protection and offer you the potential for stock market returns by exposing your money to the markets.  Many financial experts say that it is more important to protect your money as you spend it than it is to grow your money in the first place.  Fixed indexed annuities offer you a guaranteed lifetime income stream, while giving you the potential to earn money in the markets.

Your personal goals and financial plan will dictate which bucket, or combination of buckets is best for your future finances.  This strategy is just one way that annuity products can be used in retirement planning.  Speak with an expert before making an annuity decision. / 352.340.2942


Erick ArnettA Unique Retirement Approach Using “Buckets” of Annuities
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A Look Inside Wall Street

So consider this source: I am an independent advisor, and I have been in the industry for 15 years. I have worked for big banks, small banks, a retail brokerage, fledgling hedge fund managers, registered investment advisory firms, and now I am completely independent and objective. I have seen it all and have had exposure to almost every tool or investment product that exists out there. I don’t say this to brag by any means. There are probably far smarter and better experts (as they say) out there. I just want you to consider the source!

Why am I writing this article? After 15 years, I am fed up. I am fed up with all the crap that exists out there to confuse you. I am fed up with my clients’ lack of education, I am fed up with the way they have been treated, and I am fed up with the fact that the industry is stacked against them now. I want to help the little guy! So I intend on being in your face, and I intend on giving it to you straight! These are my opinions based on my experiences. I want to help create, build and preserve a better retirement for people. Many think they have a handle on it, but they really don’t.

So let’s start with this big money expert: the banks! So how do you feel about the banks these days? What do you like about the banks? Do you like the fact that they are paying below 1% on your deposits? Do you like the fact that they are safe? Do your research on FDIC insurance. How safe are the banks? Do you know what the banks really do with your money? Whatever they want! It’s your money right? Or is it? I believe in 2009 the FDIC was actually broke. There are trillions in bank deposits, and I know for sure there are not trillions in the FDIC! Isn’t it interesting that the federal regulators allow banks to widely advertise and promote the FDIC? If they didn’t, you would put very little of your money in the bank. But the investment and insurance industries are heavily regulated, hardly allowed to advertise at all, and if they are, they have to have every little word checked for compliance. For instance, we are not allowed to say to a client that annuities have a dollar-for-dollar reserve; we are not allowed to say that most states guarantee annuity premiums up to $300,000. Sounds better than the FDIC to me, but the industry is not allowed to boast like the banks are? I wonder why that is? I will let you come to that conclusion on your own. Remember, I worked in the banks, and I understand and know what is going on there. Basically, the bank takes your money and gives you a paltry rate to park it with them. They then take it and lend it out to others, they invest it as they wish, and they reap the high returns. That seems like a great deal? Current rates, I would say, are criminal. Don’t forget the Fed let’s them basically borrow money from them for free too.

Of course we need money in the banks for liquidity, we need an emergency fund, and we need to pay our bills and such, but I would never keep large amounts of your wealth in the bank. Yet every day I meet with people that do and have had the majority of their wealth sitting in the banks, and they don’t know or understand that their wealth and purchasing power is eroding daily. They are there for one reason and one reason only – fear!

That brings us to the real and most important reason why your money should not be in the banks: INFLATION! It is amazing to me that throughout my years of experience, almost every person, client or even advisor who I have run into does not factor this or even consider it. This is the No. 1 silent killer of people’s wealth today. When you factor inflation, taxes and fees into your equation, I can show most that their deposits sitting in the bank are eroding. They are actually losing money! Even after you put it all down for them, some are still reluctant to move large sums out of the bank because of fear! The fear does several things: It puts them in a mode of indecision so they actually do nothing and prevents them from listening to advisors. Some think we are all Madoffs or sharks, but if you think that, at least take control of your own money! Take control of your own destiny! At least put your money into an investment that will keep pace with inflation!

Do you know how the CPI numbers are calculated? You would be surprised, did you know that the government changed the way they calculate it in 1983, and low and behold that method lowered the number. Why did they do this? So they didn’t have to increase COLA of course. Ask yourself how much a gallon of milk cost you five years ago and how much it is now; ask yourself how much a gallon of gas cost! Then tell me that getting less than 1% on your money is a good thing. Others tell me, “well I like my money in the bank because I know where it is, and I can control that.” Once again, where is your money really?

Over 6000 banks collapsed in 2009 alone. Was your money safe? All the FDIC does is act as a bully. They come in to a well-run, healthy bank that made good decisions and tell them, “hey you need to take over that failing bank across the street.”

I am sorry, but the No. 1 fear you should have is running out of money in retirement.

There are many tools to combat inflation, but let’s first talk about why we really need to combat inflation! Then we will talk about some of the tools. We need to combat and plan against inflation for one reason and one reason only! RETIREMENT! Retirement planning is the No. 1 reason clients come to me, and I would venture that most advisors would say the same. What do we need in retirement? We need income, right?

In retirement planning, we need to find what I call your FINANCIAL SPEED! Your speed is your velocity of money, how much do you need to put away, at what rate of return over what timeframe do you need to get you to your goal, and what is your goal? A good retirement is one with income to accommodate your lifestyle throughout your entire retirement – not just the first few years, but 20 to 30 years! So what are all those figures? Those comprise your FINANCIAL SPEED! I think it is simple, but it really isn’t! There are many forces and variables that can break your stride! The guidance and the help of a planner can help. I like to put several scenarios in front of my clients to show them what they could expect.

What I see so often is that people think they really have a handle on things based on some simple calculations they make. They often use some retirement calculator on a website, and within five minutes, they are safe! There is so much more to it than that. But the common mistake I see is the lack of planning to bridge that income gap! What is the income gap? Most will say, “ok, when I retire at age 62 or 66, I will need amount x, and that amount at a certain rate of return will provide x amount of monthly income, and that monthly income plus my Social Security will provide enough income to take care of my current monthly expenses.” Keep in mind this calculation is usually based on current needs. How do we really know what our future needs will be? We may need $5000 in today’s dollars to provide for us, but what does that need to be in 20 or 30 years? It may need to be more like $8000, and that $3000 dollars a month is the income gap, so how do we fill that? That is where true planning comes in. To accomplish that, you will need investment expertise. Go ahead and try it on your own if you want, but I don’t suggest it. So often, I hear people bragging about their returns on or yields on an investment, and I have to say I don’t really care what that is. I care about what you kept in your pocket after taxes, fees and inflation because that’s your real return, and most of the time that isn’t so exciting is it? It is also dragging your FINANCIAL SPEED!

So let’s look at some tools that may help you get to retirement and sustain it. In fact, some tools that you are probably already using or have used. The No. 1 tool we are all relying on is Social Security, right? That brings some questions to mind: How many of your advisors or brokers are talking to you about Social Security planning? How many use it in their planning? When was the last time your advisor asked to see your Social Security statement, and when was the last time your broker asked to see your tax return for that matter? Too many times, Social Security is one of the largest investments people have contributed to and accumulated during their working years. They say the average worker has worked 90,000 hours by the time we retire. This is a simple tool that we will use to do one thing and one thing only in retirement, and that is to GENERATE INCOME!

There are other tools that we can invest our money in to potentially generate income, right? These tools are CDs, annuities, stocks, bonds or mutual funds, gold, real estate, and ETFs to name a few. These are great tools, but be mindful of what I discussed earlier: taxes, fees and inflation. From these tools, we would expect different results. CDs for instance, they are paying a whopping .5 or .6% these days. Again, why have your money here? Yet there is over $10 trillion sitting in banks. Stocks and bonds may provide growth and gains, which we need to fuel our financial speed, right? But once again, I am only concerned when I am planning on the after-tax return of these.

What about annuities? Annuities can provide lifetime income, growth and tax deferral. They may also by-pass probate, in some states they are creditor proof, they provide a competitive rate of return, they can provide liquidity, typically 10%, and they have provisions to allow full liquidity for nursing home or terminal illness care. The disadvantage is that you have to hold them for a while, and some don’t get you the full market. Did you know that there are some annuities that will pay you monthly income for the rest of your life even if you run out of money? Will the bank do that for you? Most people don’t understand how annuities work, and even worse, I think there are some advisors who don’t either.

All of these tools can provide a combination of results like growth, income, diversification, safety and taxes. What we may or may not know is that all these tools and results are useless if we don’t have life! If we don’t have our health, relationships, faith, etc., none of these tools mean a thing! You may want to travel, you many want to play golf in retirement, no matter what you want to do, none of the planning or tools and results matter if you don’t have life, health and faith. What is most important in your life? Very few say their mutual funds, and why is that? Because we all know that these tools are just a means to an end, and they are tools we use to accomplish these things we talked about to ultimately give us one thing!

Don’t ever fall in love with your investments; fall in love with the end results. IF we have millions in the right tools, but we lose our health, does it really matter if we have millions in our investments? Nope, it won’t extend our life one single breath. So if your tools are not accomplishing what you bought them for, we need to reconsider if it is time to look at new tools. I believe that the real purpose of money dictates where you put it. All these investments are nothing more than a tool we can use to generate income for our retirement. There is no retirement without income! There is no retirement if you don’t know what your FINANCIAL SPEED is. Without the right tools and the right planning, the No. 1 fear can be realized – RUNNING OUT OF MONEY! I believe all of this comes down you and an advisor putting together a solid retirement income strategy. This will give you the peace of mind you need. DO you have a plan that guarantees you can never run out of money?

It truly isn’t about the tools or the products; it is about the plan, your after-tax returns, fighting inflation, and bridging that income gap so you can create and preserve your retirement.


About the Author:

Erick Jon Arnett is a trusted independent investment advisor who has been helping individuals, families and business owners for over 15 years achieve their financial goals and create financial freedom. Erick has an extensive background in analysis, portfolio management, asset allocation, trust management, and wealth strategies. To contact Erick, / 352.340.2942

Erick ArnettA Look Inside Wall Street
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