FIA's: Single Premium Taxed Deferred Fixed Indexed Multi Strategy Accumulation Annuities
Robert Fulton, CLU, ChFC NMLS LO #117411 Insurance Agent Lic WA: 14244 OR: 667744Fulton Financial Consultants, Inc NMLS Corp: #116234 Insurance Agency: 142413790 Shorewood AveGreenbank, WA 98253So. Whidbey Island phone number 360-222-3236 Email: email@example.comWebsite: www.fultonfinancial.com
For the clients in my profile the invention of the modern FIA (Fixed Indexed Annuity) is the "Greatest thing since sliced bread!"
In my opinion for our future economy it was the best financial innovation development.
This program and strategy offers potential for good returns, flexibility and protection compared to other alternatives of what to do with your money.
Thank you for visiting my website and for the opportunity for me to present my ideas (strategies and product) to enhance and improve the outcome of your financial goals. As part of that to help provide for improvement in your portfolio, for generating future profits and hedging yourself against market downturns. This information is written generically, all about my selected FIA product/program and called my description summary guide. The hope is it will explain the features, benefits and contract provisions and some comments that maybe related to you. All referances to Participation Rates, CAPs, specific strategies and so on are subject to change without notice and were only considered exact at the time of writing this narrative, provided for a general education.
Generic PRODUCT / PROGRAM EXPANDED SUMMARY AND DESCRIPTION
(Designed to Support Verbal Presentation of each feature and benefit)
The narrative is supported by enclosed visual references PS-VAR#1 -#10?
(Not complete without Verbal Presentation)
By Robert Fulton not product vendor
Disclaimer: On a best efforts basis this document has been specifically written for one of my main product lines, which when suitable I promote to many clients but this narrative has not been review or approved by any specific financial product vendor. My complete disclaimer/ disclosure /caveat, etc. is at the end of this document.
Section A: What in a name?
Complete Product / Program Name/Description expanded with all supplemental adjectives as shown in the header at the top of this page:
Single PremiumTaxed DeferredFixedIndexedMulti StrategyAccumulation Annuity.
Each underlined word group in the name above tells you something and I will try to explain each and then expand on them and fill in the gabs verbally. See the “Larger Bold font” to find each word group in the sections below.
Institution Vendor: See the specific Company Ledger Illustrations, disclosures and literature for this information.
Issue ages: 0 to 80 years old.
Section B: Types offered Re: Taxation Scenarios:
This program, my favorite product for capital accumulation with my client profile can be used to fund most types of IRA’s and NQ regular long term savings (which I call wealth) for making the account tax deferred to grow the asset quicker. So below I will first cover NQ in two paragraphs, then move on to IRA’s.
NQ: (Non-Qualified- meaning non-IRA): Allows growth from Interest credits to accumulate tax deferred providing more productive results for wealth accumulating for long term savings. You pay taxes on interest only when you take the money out.
Qualified: Types of IRA accounts allowed and supported:
Traditional IRA: Rollover, Transfer and or new deposit to an IRA with application, as a new account for you.
SEP IRA: Transfer (via signed authorizations) or deposit with application.
ROTH IRA: Transfer (via signed authorizations) or deposit with application.
Section C: Key Word in name above: “Taxed Deferred” growth is a dynamic feature for NQ accounts and one of the major benefits of this program being used to fund long term savings. While IRA accounts already by design enjoy tax deferral, when this product is use to hold regular NQ savings, taxed deferred growth really enhances wealth buildup, without the nuisance of compliance with RMD withdrawals, (again when NQ’d). In other words you earn interest profit gains on money still in your account over the years that you have not “yet” shared with the government. Then you pay taxes when you take it out on “LIFO” basis. Account holders (Annuitants), who make withdrawals of their deferred profits before age 59.5% pay taxes on their gain along with a 10% penalty on the profits. This program is designed to hold long term wealth and age 59.5 comes pretty quick. But works far better when withdrawals are post turning age 59.5.
Key Word in name above: “Accumulation Annuity” to explain this one needs to first review the definition of the word “annuity.” The most sophisticated definition is the simplest which is:
“A contract issued by an issued and administered by an insurance company” and really not more complicated than that. (Of course insurance companies issue many types of contracts which I am not explaining here such as Life Insurance).
There are two general categories of Annuity contract designs so to speak, which are “ deferred” and “ Income.”
Deferred = Accumulation Annuity used to hold money for future withdraw as lump sum or in the form of a regular stream of systematic flexible withdrawals that you control the amount and frequency; or some option of annuitization which I am not too keen on.
Income = Immediate Annuity which provides non modifiable monthly income you cannot outlive.
There are three general quality groups of Annuities, “Total Junk” and “Just Ok” and “Extremely Good” and most are in the first group. I have found it extremely challenging to find the extremely good ones. I used the words “wealth buildup” in one of my paragraphs above and underlined it which was indicating that the type of annuity (in this product description) is a “deferred” which holds money (sort of like a savings account) and grows money, through interest credits (if any) and in the future allows you to simply withdrawal your money, all meaning that this is in the category of a “Deferred” (Accumulation) Annuity. This is not an “Immediate Annuity” which is a totally different animal (sort of a gift of your nest egg to an insurance company), justified as a premium. I my career I have sold over 2000 Annuities and to put this in prospective I have only sold four (4) “Immediate Annuities” in all this time (43 years). Immediate Annuities are to provide guaranteed lifetime income with certain provisions after the insurance company takes your money in the form of a “premium.” Again there have been these few times I felt one was in the best interest of the client for me to install one.
Key Word in name above: “Single Premium” is the wording needing to address next because I just used the word “premium” above in a different context and therefore need to review the definition of this. But first in a nutshell the FIA products I recommend normally just allow money to be put in once in the beginning. The ones (contracts) that allow money to be added anytime in the future, or even monthly are called "Flexible Premium" and the administration cost are higher with those. Some more detail: Since insurance companies collect and keep money from policy holders, for policies, this evolved to be called “Premium” for which they unilaterally provide benefits and that wording carried over to all contracts which they administered (the consideration paid for a contract of insurance or anytype of account they administer ). When it comes to “Immediate Annuities the word “premium” to me means that same thing since they collect and keep the customer money forever for providing non modifiable income forever but really for only one human life span (plus the balance of a certain period) is not forever, considering all of this, and to help put this in perspective, I have only sold four.
While it is the best level income you can count on you have just learned about some major trade-offs of Immediate Annuities. However this narrative promotes a different type of annuity (FIA's) and I am only trying to teach you the differences for your reference. When a client comes to me thinking about purchasing an Immediate annuity for income I share that every year you wait to purchase one the better your level lifetime income will be. This is because the older you are the closer to death you are and since the payout is actuarially calcuated, the better the payout monthly. To me the payout for those in my model client profile are too young to get a high enough pay-out to make the trade off worth while compared to the higher historic average annual returns of the FIA's I promote. The interest credits on FYI historically have been great and average out well as I can demonstrate but they will never be as level nor receive the level perfect monthly income that you could set your watch to as the income out of an Immediate annuity. But when you purchase an Immediate Annuity you literally pay a premium for that benefit, and the traditional difinition of "Premium" that you loose control of and the insurance company keeps. With the FIA concept account you can access the principal of your money as needed to supplement your income.
So as I started to explain above, with “Deferred” Accumulation type Annuities the word “Premium” more resembles what I think of as a deposit since there are withdrawal features and in the future you can get 100% of that money back into your checking account again in the future if you want. To expand on something I wrote about above, there are generally two categories “Flexible” and “Single Premium” Deferred Annuities.
Flexible Premium = Feature that allows the Annuitant customer to send in more money in future years with each premium track separately in a sub-account. The insurance company has cost associated with the administration, servicing and accounting of these so called future premium deposits which hinders or dampens all results associated with return or yield.
Single Premium = As the name implies only allows one for the collection of one deposit. However often when the account is open multiple IRA accounts are all transferred into one of these single premium contracts. The streamlined concept without the extra costs to the product vendor for administering future premiums, is more ideal especially when no future premiums are anticipated or planned can in itself result in a major improvement in return.
My experience has observed without exception that Single Premium products have performed much better than the Flexible premium products due to the increased costs of administration of the extra sub-accounts and many other reasons. So if you do not need the “Flexible Premium” feature you maybe losing a little ground owning one. The biggest disavantage of this is you need to save up a little money in the bank then open this acount since the miniuim deposit maybe about $25,000.00, generally less when it is IRA money. Many of my clients purchase a new account once a year.
Key Word in name above: “Multi Strategy” once your money is in the account there is a 30 day window every year just before your anniversary date when you will receive a letter discussing the different strategies which are there in your account and you receive quotes for them, so theoretically you could change to in order be consistent with your philosophy in different economic cycles. This can of course be used to make an adjustment to deal with a change in philosophy “so to speak.” The choice of Strategy and consequences are always ultimately the choice of the account holder. I am here to guide you and help match your philosophies to the product. Currently, I (Robert Fulton) only promote one of the strategies called the “1 Year Point to Point with 50% Performance Participation in the gains of the S&P 500 Index with CAP. (However there is another I really like which has a slightly lower Participation Rate but no CAP. The operative words in this paragraph above, not to have missed are those of “ 1 Yr Pt to Pt,” “ 50%,” “ S&P 500”, “ gains,” “ CAP” and implied absence of the word “loses or downturns.” So this means when the market goes up you get about half of the increase during that specific one year period you just finished, (converted to an interest credit to your account) and the term “Point” mean points in time period, with the first being, that of your contract issue date to your 1 st anniversary date, (a year after the contract was issued) then after date from then to your next anniversary date, then to the one that follows that and so on, thus the words “Point to Point.” So obviously the word “gain” means experiencing an increase in index value between your initial contract date, compared to the next “point” in time of your 1 st anniversary date and each one after that. On this date the value of your current principal receives the new deposit of this interest (50% of the gain in the market) and that locks in on your anniversary date(s) and then, that amount of total accumulated money (prior principle and new interest) is never subjected to being reduced from a down turn in the market. Again, the market refers to the “S&P 500 Index” and you can sit at your computer and Google “S&P 500 Index” at the end of any business day and see the index value for that day. I printed an example which is the first attachment page PS-VAR#1 ( Product Summary Visual Reference) in this sample you see the index value was 2,614.45 on April 3, 2018. So this index value is established at contract issue and on the Anniversary date then they are compared to each other to establish the gain (if any) of which you will receive 50% of up to the CAP, but no adjustment downward is made in years when the index value has declined when compared to the prior year. In other word your account value just remains the same as what it was on your last annual statement.
The word or acronym CAP means “CAP Rate”, which is the “highest” return rate you could earn, set as a limitation (cap on) your earnings in the program for the next period set each anniversary date. So my words, absence of the words of “loses or downturns” are actually more than implied. This is the core of the this strategy, we (us account holder-Annuitants) do not participate in market loses or down turns!
So you have just learned the general strategy be what may not be apparent is the gains seen in these accounts are much more that 50% of total market return. This is because you do not have to pay "catch up" before you start earning money, since each year stands on its own. I will get into more detail on how that works soon.
My computer illustrations using historical returns call it the "Capture Rate of Profits" and generally show capturing between 75 to 90% of the overall market gains over time but without the exposure to capital risk of the stock market. This is very impressive and a key thing to the strategy.
Section D: Relax and enjoy the peace of mind that comes with knowing your money is protected from a loss in value if the index declines.
So when the comparison of the index value on your anniversary date compared to the previous period or point (your last anniversary date), or the issue date on a one year old account, if the index goes up you have a gain equity position improvement in the period (I call this “in the money”) and this locks in and is held for you, and this increases your total account value. Thus, this is where the key wording came from in the name of the product/program/contract, “Indexed.”But if the index has the declined since the last comparison, (where and when normal direct investor would have lost money) your account value remains the same. So when you receive your annual statement the asset amount (account value) will be the exact same as it was the year before to the penny. I am just trying to teach you the mathematics or mechanics of the strategy. Needless to say, if you took some money out of the account during the year for any reason then of course the account balance would be adjusted downward by the withdrawn about; but could not be because of a market decline.
The concept here since you do not have to play catch up to get even again on your account balance before you can start enjoying a period of positive earnings. This is why over time historical returns of the better FIA's gain capture of the market gains than the 50% Particapation Rate of the basic strategey.
Section E: Fear of Loss, Hope of Gain and matching client suitability
This is perfect management strategy for people seeking to avoid having their nest egg’s asset value shrink for entering a negative economic cycle in the economy. It is hard to predict these cycles, and my brief we are at the top or near the top of a high now, and normally these are followed by the ones to avoid.
This is the perfect management strategy for people who can allow their money to grow seeking the highest likelihood of doubling their money over the next ten or eleven years without the traditional exposure to capital risk.
Section F: This program and strategy offers the potential for good returns, flexibility and protection compared to other alternatives of what to do with your money.
While during periods involving a downward adjustment in the market this program has been outstanding, knocking the sock off the competition, referring to the competing alternatives, (like earning twice as much over three years) since the money does not go down like mutual funds and stocks experienced in 2008 and then having to first bounce back to start the earnings process. Then in comparison during short period bull markets with occasional dips has been still more than respectable in comparison to the performance of investments with risk. During what I call the “overall normal periods” the performance results are excellent, meaning that this money management strategy generated a return of 7.009% asshow on the 12 year period as calculated on my “Internal Rate of Return (IRR) calculator’s printout, PS-VAR#3.
Above I used the term “respectable” but there then I was referring to shorter increasing market during periods starting with a period of recovery which display well in the mutual fund company’s sale brochures; but here 7.009% considering the safety of the account this is a fantastic return beating most of the highest performing Growth Funds over the same period.
Section G: Hope Plan for the Best but Prepare (Hedge) for the worst / all accomplished by this money strategy. That is a big improvement on "Hope" for the best, as you must have a plan to capture profits, not just think about that.
The definition of Hedge uses words like, to limit, confine, restrict, hinder, obstruct, impede, constrain and trap.
The strategy within my product will likely provide a way for you to limit and confine your investment loses to zero by hindering, obstructing and impeding your participation in market down turns, but generously share profits with you (productive and favorable results) when they occur, then trap, confine and keep safe those profits for the benefit of you and your heirs in the future all with favorable control of income taxes.
Section H: Increasing your situational awareness of the economic environment and showing what I mean by “productive and favorable” results and more on how this strategy works.
Compared to many periods of the past 44 years of my career which started at age 25, we are now in what I call, “a lower earning period” and time to plan for the best but prepare for the worst.
My optimistic or best case projections of our (the) future period we are now entering in our economy is that of “a normal period.” Let me further define that as an “overall” normal period, which I will give the example of covering a 12 year period including a market down turn and period of recovery which lots of investors think is economic prosperity. I have marked this period on PS-VAR#2 which I will refer a lot to.
So such an “overall normal period” is very well displayed for the first 12 years on the attached generic hypothetical illustration based on actual historic results if you have own this account. See that same, PS-VAR #2. The generic aspect is no specific client’s name (just “Valued Client” for the name) and using the date of birth of 01/02/1948 to result in the fake age of 70 for illustration purposes in order to get a full thirty 30 display displayed. This is because the computer illustration software only generates it out to the longer of 30 years or age 100 . This generic illustration supports or emulates a Qualified account contract issued on 4-26-2018 for which the CAP rate that month was 9.30% as of 4-1-2018. This means that if the market in one year (between the point to point of anniversary dates) went up as high as 18.60% you would enjoy having shared 50% of those profits (without the traditional downside like investors subject themselves to with mutual funds and stocks) but your earnings would be capped out at a 9.30% return to you, which I think of as the cost to you for avoidance of a great deal downside risk exposure.
The initial deposit selected to illustrate was $100.000.00 in order to show numbers that one may be able to related to using math in one’s head. (The next step will be for personal specific proposals for the amounts meaningful for you). The generic illustration is being shown for educational purposes and does not show the impact of withdrawals out of the account for any reason including RMD’s (when applicable those will be addressed on the personal custom tailored actual proposals). Also PS-VAR#2 is just one page, not a whole and complete proposal like I give to a client, as it is just the key page, (the seventh page) what I call the “Ledger Illustration” of the numbers. It is the perfect reflection of the impact of contact provisions and market. I will be referring to this page throughout.
So as shown on the PS-VAR#2 during this 12 year period of time for the illustrated savings to go from $100,000.00 and grow to that $225,489.00 at the end of the period demonstrates an interest earnings rate of return averaging that of 7.009% which in my opinion is very favorable. This is displayed on PS-VAR#3 an IRR Calculator print- out behind PS-VAR#2.
Section I: My concern for using apples to oranges regarding time periods of historic performance can become distorted for comparison therefore I am sharing PS-VAR#4.
This will confirm the use of accurate and conservative data for true prospective reviewing a much longer period of time, that of 30 years with PS-VAR#4.
So far I have shown examples of all but the one I called “Productive” results. There is no better proof in the pudding than looking over the full 3O year period of time as seen on the illustration ledger PS-VAR#4 showing the deposit of $100,000.00 growing to $466,184.00 at the end of the period and to accomplish that you would have needed an interest earnings rate of return averaging that of 5.265% which is very “productive” and because of this long 30 year period.
Section J: Unusual opportunity from Strategy Design understood by few that helps enhances your yield or return on your money, from each year of profits stands on its own. Each year is isolated and you do not need to play catch up to make profit and have a positive yield over relatively short periods of time.
Comparison of Direct market investment to the Index Annuity which I am promoting.
Direct Investment: Each year stands on its own in the Annuity. In comparison if you purchased a mutual fund (that mirrored the S&P 500) which (I will refer to as “the market” ) if the share value dropped 12% per year for the first three years in a row and then bounce back 18% in the forth year, such a year (that forth year) I call “a period of recovery not investment return”). The experience you would have just had was three years of loss totaling over 36% and then a short period of recovery recovering you to less than 50% of your initial position. When you look at your results using simple math, over the four year period your total return over the full four years was that of -18%. Please do not “miss” seeing the little “minus” sign meaning, “negative,” is in a negative yield or return over four years and thus an annualize yield of less than -4.5% a year for four years and that of a negative return or negative yield.
Index Annuity: So in my product (with or in this Indexed Annuity), your experience would have been zero gain and zero losses over those first three years. Then came the fourth year the “market” now finally realized a gain of 18% in the fourth year, which means since you receive per agreement each year 50% of the gains in the index you would enjoy and interest credit of half of the gain or in this case 9% for that fourth year. The experience you would have just had was three years of boredom (and no panicking or worry about losses) caused by no gains and no loses. Then you did not have to play catch to start earning money. Then finally you entered your fourth year and enjoyed what investor will learn to call “a short period of recovery” earning you 9% profit credited as interest in just that year. When you look at your results using simple math, over the four year period your total return over the full four years was that of +9%. Please do not miss seeing the little plus mark sign meaning, “positive,” is in a positive yield or return over four years and thus an annualize yield of about + 2.25% and a positive return. This is a lot better than one would earn in the bank in this low yielding world and 6.75% better annualized yield than the investment did in this comparison (-4.50% plus +2.25% = 6.75%).
Results of Comparison for time period: The Indexed Annuity performed with a return 6.75% higher than the Direct Investment over the four year period.
Section K: This product (Indexed Annuity) from my selected product vendor is 100% clean of Administrative expenses, management fees and annual asset fees.
This totally expense free product, because of these lack of expenses enhances yield or one could say does not drag down the return. A growth mutual fund average over 1% per year in expenses and this has a negative impact in Bear markets. But I always say, “there is no free lunch so what is the catch?” That cost one could say is in the trade-off of the fact you are sharing some of the upside potential in the good growth years for the not having to assume the loss of your asset in the down turn years. Sharing is to give something up to someone else, and giving something up is a cost and therefore that is "the" cost.
Section L: The return of your money is more important than the return on your money. Product Design itself even brings a lot of safety, protection.
Key Word in name above: “Fixed” comes in, so once your learn about his you will understand all the Key words in the name and know more about this subject than 99% of the people on the planet. Those are the small group who makes decisions on the actual current facts (taking up to 35 pages) and not hearsay.
Again as I said above, there are two general categories of Annuities, which are, Deferred (Accumulation) and Income (or immediate) Annuities.
But, then in addition, there are two general classes of Annuities within them, which are, Fixed and Variable.
Fixed Annuities: Have the attribute of guarantees based on the design of the product reflect that the account balance and interest are associated with guarantees and safety of principle, but I a little too tame to generate any respectable, productive, favorable, fantastic or knocking the socks off returns or yield. The cool new is that with the Fixed Annuity contact the Capital Risk is borne by the insurance company who underwrote the contract and insures or backs that account with it’s full faith, promises and in addition is backed by the General asset of that insurance company not the Annuitant. Then the Annuitant is further protected in the State of Washington for up to $500,000.00 per individual for their deposits in Fixed Annuities including the hybrid spinoff cousin the “Fixed Indexed Annuity”. You can do a Google search of “Washington Life & Disability Insurance Guaranty Association. All states have these funds and Washington has one of the best. See PS-VAR#5 through PS-VAR#12 for a head start seeing some “public accessible information that anyone can get) printout (out of my presentation show book), on the subject going back to 1992 to show it has been around for a while.
Variable Annuities: Have the attributes of the underlying investments in the Variable Annuity called sub accounts, like clones of mutual funds each designed to go up and down. Of course like Mutual funds we “hope” they all go up. They (the Mutual fund like sub accounts) are inside the annuity so they get the advantage of the same tax deferred build up but they will not build in value unless there is growth in the stock market. Again we hope the market will go up for these products. That growth does not lock in at each anniversary date and there are huge administrative expenses in addition to the fund manager’s fees in this type of annuity which in down turn markets weigh heavy on the yields, especially in Bear markets. With these Variable Annuities, like with a group of mutual funds it is not likely you would lose all your money but the value can go way down and be down when you need your money. Often the market has the end result of just being flat, not having even the grown as good as a bank account would have had, nor keep up with inflation. ALL the investment risk in Variable Annuities like Mutual Funds and stocks, is borne by the annuitant as an individual like investing directly in the market. So these products are designed to go up and down, no insurance company stands, backing up the asset and no organization stands ready to protect the individual investor annuitant (investor) from the insurance company’s insolvency like with a Fixed Annuity, as explained above.
Indexed Annuities: Then there is a hybrid class or type, the Indexed Annuity, which one could say in many ways, is a combination of a Fixed and Variable Annuity. These were previously called Equity-Indexed Annuities. The word “Equity” not too long ago was actually officially deleted or removed from its name to avoid a misunderstood assumption that stock market investing was present in these products. This type of tax-deferred annuity is not a direct investment in the market which by its core design, which is what, in part, does not expose you to the capital losses from the downturns of market swings. This is the best way to protect your assets, while getting the best yield possible eliminating the need for diversification allocating a large portion in low yielding instrument for capital preservation. This increases the overall return of the account. Since there are not administrative expense, or management fees those are not present to reduce yield.
This product is not designed to go up and down like a mutual fund.
This product is backed up by the general assets of the insurance company like fixed annuities.
This product’s asset account balance is protected under the state fund for Insurance company insolvency up to $500,000.00 per individual. You can read about it on their website for more details.
Section U: My Selection Criteria for Product Vendor Financial Institution
This information will be added in the near future but will include:
Part of the criteria for my product selection and financial product vendor is they must offer one to the most generous CAP formulas in the industry.
Section V: The Importance of Tax Deferral for Accumulation
Tax-deferred status refers to investment earnings such as interest, dividends or capital gains that accumulate tax free until the investor (annuitant) takes constructive receipt of the gains by exercising one of the withdrawal options such as lump sum, systematic withdraw or one of the annuitization options. Of course IRAs have this feature but normal NQ (Non-Qualified) savings and investment portfolios do not, and putting your money in a program (Taxed Deferred Indexed Annuity) like this, makes the growth become taxed deferred. I feel that risk management is the most important benefit of these plans but the second item is the benefit of tax deferred wealth build up. No matter what your age, income or financial goals if you can isolate out the portion of your money which is long term and stash it away in one of these accounts it will not only perform better but you will avoid taxes taking a bite out of your long-term savings. So you can postpone taxes on any earnings you make on the money in your taxed deferred accounts and then make money on that money before ultimately settle up with the IRS. Tax deferral is a powerful way to increase your retirement income in the future. While tax deferral does help you grow your assets quicker, that is not the main point. Of course having a bunch of money is nice, but the goal is having significantly higher retirement income in the future is really what this is all about and this program will do that. That will help you deal with future inflation and long term care expenses. I am able to support these statements as fact.
Section W: Disadvantages of this program
Surrender charge which causes a partial liquidity issue which can be worked around with a little planning. First in the first year you may earn (including the 1% bonus) enough to fund this contingent expense if it ever comes into play, or can avoid it with the 10% surrender free annual withdrawal. Then if you really need it because you are confined in a nursing home or die it is 100% waived with certain criteria, namely you would not about to enter one when you were issued the contract.
You have CAP Rate associated with you possible outcome, a CAP”ed” Rate. This acronym does not mean Capitalized Rate like real estate appraisers and investors use to calculate investment return and cash flow to establish property valuation. This “CAP” means limitation of your earning. The concept is good overall since you limit your upside potential a little in some future years which may never come for the 100% limitation of losses I know are coming in the market. That is the nature of the market. We make our money on its volatility. Thus you CAP your loses at zero. That is the nature of the market. We make our money on its volatility. FYI, part of the criteria for my product selection and financial product venders is they must offer one to the most generous CAP’s in the industry. So as an example, if the market when up 30% in one year you would receive a gain of the 9.30% which is the current CAP offered to new customers as of 4-1-2018. The CAP changes every year are renewal. On the other side of the coin if the market tanks in one year by 30% your loss would be zero.
Non Qualified accounts (Non-IRAs): Withdrawals prior to age 59.5 are subject to a 10% tax penalty any gains, (profits) and of course subject to ordinary income tax.
IRA accounts: Withdrawal from IRA’s prior to age 59.5 are subject to a 10% tax penalty and of course subject to ordinary income tax.
The profit and the loss activity in the S&P 500 index is always fun to watch during the year between contract anniversary date to contract anniversary date which is called “Point to Point” as explained above, but it is not until the end of the day of the contract anniversary date the profits lock in and become earned. Once earned they are your and not subject to any market down swing negative adjustments like direct normal investment subject you to. However during the year from Point to Point the Profit and Loss (limited to zero) one would have if hypothetically the year was over at not realized or vested in your account, “so to speak” until the end of the business date of your anniversary date. So in the worst case scenario, while you are never exposed to loss in the index, the gains in the index you saw in the middle of year between your anniversary dates may go away completely by your anniversary date. But the other side of the coin you would be starting your new contract year out with a good low positioning in the index.
Last when you go to a party the club and everyone is gathered around talking about their investment you may be the money boring person in the group if you take my recommendations.
Section X: Conclusion
When I was younger in the business I had access to catalogs of hundred of investment products that had records of huge returns and all supported by beautiful glossy brochures. I will show you one see PS-VAR#4 printed representing a common family of mutual fund’s performance through September 30 th of my 25 th year in this business. The will help show you my definition of “huge returns.” The environment changed to a “low yield world” and as my experience grew I learned to change my objectives to seek “respectable, productive and favorable results” all with favorable tax treatment and without the capital risk of traditional investments that hurt lots of people when the time went wrong. This product as worked well for me and my clients and has protected us from many other types of other risk too.
When I first learned about this concept in the beginning of 2005 when I just finish about 20 year selling traditional investments which were designed to go up and down and we hoped they would go up but could clean your clock when we were wrong. I sent most of my time moving my key clients (the one who would listen to me) to this concept by the end of 2007. I really stopped believing in the traditional type investments and started realizing that the traditional gains were not worth the traditional risk and you may know what happened in 2008! I was excited when I learned about the concept, it changed my life and by the when the down turn came I was very good to have the validation of my methods.
Section Y: Thank you very much for the time you have invested in reading my letter.
Robert R. Fulton CLU ChFC
SECTION Z: Disclaimer / Disclosure / Caveat / Hold Harmless / Implied Agreements with you the reader. (Hold on to this so I do not need to ever send it again, it goes with all past & future presentation letters like this).
Please understand I am not a lawyer so I do not practice law or give legal advice. I am not a CPA so I do not give tax advice. Any Financial advice can at times be good for less than 20 minutes and some of my letter take 20 hours over a week’s period to write, said to put things in prospective. But I believe the strategies I will share will work for you far longer than ten years. In this complicated world with the products and programs, themselves getting more and more complex I find the best way to teach clients about them is a combination of actual visits in person, conversations on the phone, emails, and long winded letter like this one. This is in part because I live on Whidbey Island and the ferry commute cuts into my days and this method reduces my time traveling to appointment by having less “in person” appointments. My quick draft- like style writing and ongoing editing which generally has many parts totally current not yet even proofread, gives me cause to worry about misunderstandings. Please try to find the value in them for what they can teach you. I always find it amazing how an important sentence in the English language can mean something so different than its intention, with just one letter being typed wrong. While my financial ideas have helped thousands of people the skill level in my writing skills leaves a lot to be desired. I secretly find it ironic that I have had more than thirty college professors as long-term clients over the years when I could hardly get through high school English class. All this can easily lead to a misunderstanding about something, especially with extremely complex subjects. I do not want any misunderstanding leading to incorrect decisions. So I ask and you to agree to share with me any decisions to do something or not do something financially based on my letter’s content, so I can clear it for misunderstands before you rely on that which you read before it leads to any liabilities. This will also allow me to point to specific company’s published product brochures, disclosures, illustrations and contract provisions, for the specific product or program. It is these documents you need to technically relay on when making decisions not my letters. To me normally the main purpose of my letters is to provide details I missed covering when I visited in person and to trigger questions which I can answer on the phone or in our next meeting, for wish I can follow-up with specific supporting document from the product vendor. In the past I often found embarrassment from what I write from a grammar and spelling point of view. At this point that ship has sailed. I work under time pressures and need to make deadlines. Often if I slow down to do a neater job on a letter for one client then another will be harmed by me not being available in time for them. I never have held out I was a writer or could spell well or use grammar properly. If you need perfect spelling, and everything written perfectly you would be better served elsewhere, that is not who I am. Then while on that subject hopefully you are comfortable with the implied agreements in this disclaimer after you read it if not again, the same thing applies. Next, please understand my letters are my letters, my thoughts and my actions (and not from the product provider company). Few Financial professionals put their recommendations in writing because they work for someone, when their work for a firm which they do not own, the firm controls what they write because the firm cannot handle the liabilities of their Financial Planner sale people doing that. For me it has been a long road but, I am the President and Designated broker of my own company incorporated in 1980 (kind of learn as you go thing) and am under no form of employment, so I can write freely, so I do. It has served many people well once they understand my style. I am will to invest the time to teach and I have a lot of information to share. However having said that I need to also say anything I write has not been pre-approved for use with the public by any financial product vendor or lender. I am an independent contractor with many companies, as a broker that is my nature. So just like you hear on TV when listening to different advertisement or political statements often have a disclaim statement that these opinions are not necessary the opinions or values of insurance company, network or of its affiliates. The letters I provide are considered sales literature for Fulton Financial Consultants, Inc. only. One of the main reasons for my letter to be long is because I feel if I bring something up I must do so in a totally compete way. My letters are written on a best efforts basis to be accurate and teach you about the facts, advantages and disadvantages in a way that will coincide and match the product companies supporting documentation. Please feel free to ask me any clarification questions about this disclaimer/disclosure. Thanks, and I hope you find my letters informative and help you make decisions.
Thank you very much for the time you have invested in reading my letter.
Robert R. Fulton CLU ChFC
This Site is Not Tax or Legal Advice. Always consult Legal Counsel and Your Tax Advisor. Content of website are the sole opinions of Robert Fulton & does not necessarily reflect those of Fulton Financial Consultants, Inc.'s Investor/Lenders or insurance companies or other product vendors. Because one of my product lines is that of Reverse Mortgages I must state the following: If the borrower does not meet loan obligations such as taxes and insurance, then the reverse mortgage will have to be repaid." The Terms, benefits and features shared as accurately as possible on best efforts basis and subject to change without notice. Therefore please discuss any decision making specifics with Robert Fulton 360-222-3236. "This material is not from HUD or FHA and has not been approved by HUD or any government agency."