I Only Keep A Portion Of Returns With An Annuity

April 26, 2021

I often hear from potential client’s that their advisors have told them not to transfer money into an annuity because you only get to keep a portion of the growth. 

Is that really true? More importantly, does it matter?

Today we’ll be running some calculations on how an annuity grows your wealth, and how you can actually come out ahead by earning a higher return once you cut out the unnecessary fees and the losses from a down market.  The biggest problem investors have with protecting their retirement money is they do not know what the market will do tomorrow, much less 20 years from now.  And they do not know exactly how much they will have when they actually need it, which can cause a great deal of anxiety for those who are trying to plan for the next 30 years of their lives while no longer receiving a paycheck. 

To look at an example we will have to use a simple growth rate to demonstrate not participating in losses and fees, even though you may not be getting full value of the interest growth.  I know the market is all over the place and does not return a simple round number every year, but this example will work with any interest rate.

Depending on you, your financial standing, and your desired outcome, that will determine which annuity is recommended.  There are over 200 different annuity companies, and each company offers anywhere from 10-20 different products and variations within those products.  On the low end, that is over 2,000 different annuities to choose from.  Some of these annuities are awesome, and some are not even worth your time to read the brochure.  That is one of many reasons to work with a non-captive producer, such as myself.  You could spend the rest of your life calling and meeting with individual companies and agents, and at the end you would be confused and exhausted.  Fortunately, at Atlas we use the latest technology, along with my personal expertise to choose the absolute best annuity for your situation. 

The following case study will be based on a Fixed Indexed Annuity solely designed to grow and protect your wealth and offers an 80% Participation Rate.  There are many indexes available along with many crediting rates to choose from.  If you are not familiar with how a Fixed Indexed Annuity grows, please check out my Free Annuity Report.  It will teach you about the different annuity options and crediting strategies that are available, such as Caps, Spreads, and Participation Rates.

We will take a Risk-Money scenario where an investor is completely exposed to the market.  They get to keep 100% of the growth, but he also incurs 100% of the losses when market crashes.  Historically, we know that since 1929 the S&P 500 has had an average decline of 39% every 5 years.  I realize that most investors have their money diversified in a 60/40 or 50/50 portfolio of stocks, bonds, and mutual funds, so for that reason I’m going to use a loss of only 20%, and I’m only going to demonstrate a single downturn in a ten-year period just to prove a point.  When you take out the possibility of losing money, you do not need to capture all of the gains to get ahead in the money game. 

As you can see, if you started with $100,000 and let it grow at 10% for ten years, with only one downturn, you would end up with $188,636.


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What happens when we add a 1% management fee and a 1% fund fee?


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 One thing that drives me nuts about the financial industry is that you still pay a fee even though someone LOST your money.  Just look at year 5 in the example above.  YOU lost money, but your advisor STILL got paid!  We will save that discussion for a future newsletter.

Now, lets look at the Fixed Indexed Annuity with an 80% Participation Rate.  Side note:  At the time of this writing, there are Participation Rates of 200% being offered, but I am using a modest rate to make a point.


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Just by eliminating a single downturn you came out ahead!  And you came out WAY ahead if you are paying an average of 2% in fees, which is not uncommon once you add up your management fee and one of the other 16 fees that have been found in managed money products.  

How many more downturns do you think you will see between now and the time you walk out of this life?  What are the long-term consequences of endless money printing by our government and artificially pumping up the markets?  Do you think those action will cause more, or less volatility with your investments?  Are you tired of that sinking feeling in your gut every time the market has a blip, and you ask yourself, “is this the beginning of the end?”  Did you want to be a financial expert in your retirement, and learn to analyze charts and have endless meetings with your advisor to figure out if you will have enough money to take that vacation, or finish that remodel if the market takes a dive?  

Let me help you take back control!  What would be the worst that could happen if you decided to protect a portion of your money from market volatility?  Seriously, ask yourself?  The answer is, nothing!  Maybe you will make 7% like in the example above.  Maybe you will make 3%.  Maybe you will make zero.  But you will know beyond the shadow of a doubt that you will not lose a single penny due to market volatility when you work with Atlas.  Let’s talk so we can find the purpose of your money and the perfect solution to get you where you want to be for the rest of your life.


Watch this short video series to learn which annuities I use and how I use them to get an average of 20% more spendable retirement income than any other advisor plans you've seen.

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