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The Magic of Green Money

Dream Story – Carol Ebert

Carol started her career as a Navy Nurse to help people. When she transitioned to the private sector, she quickly relaized that she was not a bedside nurse, she didn’t want to just treat the problem, but instead focus on wellness and prevenatve healthcare, to keep people out of the hospital.

She spent many years teaching students and also as a wellness coach. She started a blog which turned into a book, “Too Busy For You.”

Carol never wants to retire, she loves what she does, however she decided a few years ago she didn’t want a boss, she wanted to work on her own terms.

So, she started what she refers to as her 3rd act as an independent wellness coach, which also meant learning how to run a business through the help of other wellness coaches. Now, she not only does wellness coaching, but is passionate about helping others who want to start their own wellness coaching business. She believes there is power in community and wants to help other independent coaches find community.

Carol has found a balance working on her terms from home yet connecting to community. Her passion gives her purpose which she believes is important for everyone.

If you want to chat about your own wellness, or if you are interested in helping others with wellness thru coaching, Carol would love to chat. You can learn more and connect with Carol at your3rdact.com.

Market Update

There are several factors affecting the current market environment. Inflation headlines are causing volatility, while January proved to be a stronger month than expected for the economy. Corporate earnings have been solid, although there have been declines in growth rate, particularly in certain sectors. The S&P Shiller P/E is above 30, which historically has not been well-tolerated by Wall Street. To navigate this environment, it’s important to focus on investing in quality to hold up best through continued rate pressures and any potential recession. Additionally, being tactically underweight equity targets with cash can provide opportunities to buy on market dips.

Gold and Silver

Wall Street Silver on Twitter posted a video from an FDIC meeting of bankers talking about the banking system and their lack of faith in it. FDIC as about 125B in assets to insure 9T in deposits.

Buy Gold and Silver to insure your wealth! (about 10% of your overall portfolio) Watch an interview with our Gold and Silver experts here or just schedule a call to talk more about this!

The Magic of Green Money

What is Green Money
Balancing these three goals – safety, liquidity, and growth – is crucial when it comes to investing money.Yellow money is considered safe and liquid, but it provides minimal growth potential.

Red money is usually liquid and provides growth potential, but it carries more significant risks and lacks safety.

Green money provides safety (principal protection) and growth potential but can have limited liquidity, however, generating stable retirement income is a key benefit for many green money options.

The Most Common “Green” Money Vehicle – Index Annuities

Before any biases or reactions to the term annuity kick into gear, let’s talk about the different types of annuities.

There are several different types of annuities, each with their own unique features
  • Immediate annuities provide regular payments to the annuity holder beginning immediately after the annuity is purchased. Pensions use immediate annuities.
  • Fixed annuities provide a guaranteed rate of return for a set period of time, typically ranging from one to 5 years. They function like CDs but with a little longer time period and usually pay a little higher return. There are no fees in fixed annuities.
  • Variable annuities invest in a range of underlying assets, such as stocks or bonds, and the returns (and losses) are based on the performance of those assets. Variable annuities have management fees, M&E fees and often other rider fees.
  • Indexed annuities credit interest based on the performance of a specified stock market index, but with downside protection to limit potential losses. There are no management fees in index annuities, however if riders such as for additional income benefits of death benefits are added, there can be fees associated with those. We typically stay away from added riders unless needed in certain situations.
Wall Street doesn’t like Index Annuities as they cannot charge fees for managing them and billions of dollars every year flows out of Wall Street and into Index Annuities as retirees want the security they offer. (read more about this here)

The Mechanics of Fixed Index Annuities (FIA)

Curtis Eccles joined us from the home office of F&G to share some of the inside secrets of how Index Annuities work.

First, any money invested in an FIA is put into the general account of the company which then utilizes and investment team either internally or through a partnership to purchase bonds from secure companies or institutions ensuring a fixed rate of return.

From those returns, the company takes out their costs and then uses the fixed returns to invest into indexes through options in order to provide the policy holders with index-linked returns.

Cap Rates

Cap rates are a common feature for calculating returns in an index. A cap rate establishes a maximum limit on the amount of interest that can be credited to the annuity during the annuity term, which typically lasts for one year.

For example, if an annuity has a cap rate of 9%, and the underlying index generates a 12% return during the annuity term, the annuity will still only earn a 9% return. However, if the index performs at 7%, the annuity will receive a 7% return, and if the index yields -10%, the return will be 0%.

Participation Rates

Insurance companies use participation rates to determine the amount of interest they can credit to an annuity based on the performance of the underlying stock market index. A participation rate is a percentage that specifies how much of the index’s gains will be credited to the annuity.

For instance, if an annuity has a participation rate of 80%, and the index it relies on achieves a 10% return during the annuity term, the annuity will receive an 8% return (80% of the 10% index performance). Volatility-controlled indexes commonly employ participation rates. These indexes represent more of a hybrid approach, aiming to adapt their exposure to stocks in response to market volatility.

The goal of volatility-controlled indexes is to provide investors with a more consistent and less volatile investment experience, particularly during periods of market turbulence. By adjusting exposure to stocks based on market volatility, these indexes seek to mitigate the impact of market downturns while still capturing the benefits of long-term stock market growth.Spreads

A spread subtracts a percentage from the return credited to the annuity based on the performance of the underlying stock market index. It isn’t a fee, as it applies only to gains. If there are no index gains for the year, it doesn’t incur any charges.

For instance, if the underlying index yields a 10% return during the annuity term, and the spread is set at 2%, the annuity holder receives an 8% return (10% – 2%).

Factors that Affect Rates

Interest rates heavily influence the cap rates of FIAs (Fixed Indexed Annuities) since insurance companies employ long-term bonds to secure these accounts and leverage the interest they generate to design index strategies. When interest rates rise, cap rates typically also increase. Presently, FIAs offer annual cap rates of approximately 9-10%, with participation rates being even higher. This implies that if the market experiences a 12% increase, investors can secure up to 10%, which remains locked in and cannot be lost, even in the event of a 20% market decline the following year.

Overall, Green Money such as FIAs can be an attractive option for retirees who want to protect against market losses while still receiving potential upside based on market performance.

Estate Planning Spotlight with Nels Donovan – 5 Components of Estate Planning

1. Wills and Trusts

A common misconception is that only wealthy people need wills or trusts. In fact, a will or a trust is a crucial part of any estate plan, whether you are wealthy or of modest means. A will or a trust will direct the distribution of your estate (all of your property and assets) after your death, according to your wishes. A will can also name a guardian for any child you have who is not at least age 18 at the time of your death.

2. Durable Power of Attorney

Each of us has a complicated web of financial and legal responsibilities to take care of from day to day. We pay bills, manage bank accounts, sign documents, and perform any number of other ordinary, yet important, tasks. Should we become unable to perform these tasks due to illness, injury, or death, chaos can ensue.  A durable power of attorney, however, allows you to name a trusted individual to handle your financial and legal affairs should you be unable to manage them yourself, whether temporarily or permanently.

3. Medical or Healthcare Power of Attorney

Like the durable power of attorney, a medical power of attorney, sometimes called a healthcare power of attorney, allows you to authorize a trusted individual to make decisions about your medical care if you are unable to make those decisions for yourself.

4. Living Wills and Health Care Powers of Attorney for Medical Decisions

Living wills and Health Care Powers of Attorney are legal documents that specify your preferences for medical care if you are unable to make decisions for yourself and are terminally ill, seriously injured, in a coma, with late-stage dementia, or near death.  It can also relieve your family members of decision-making in a time of crisis and minimize confusion or disagreement about what you would choose if you were able.

5. Beneficiary Designations

While you are creating your estate plan, you should also ensure that you have named beneficiaries and that your beneficiary designations are up to date.
We serve clients in Mineral Point WI, Dodgeville WI, Platteville WI, Lancaster WI, Fennimore WI, Boscobel WI, Richland Center WI, Muscoda WI, Spring Green WI, Mazomanie WI, Sauk City WI, Middleton WI, Madison WI, Fitchburg WI, Verona WI, Mount Horeb WI, Barneveld WI, New Glarus WI, Monroe WI, Belleville WI, Oregon WI, Stoughton WI, Darlington WI, Cuba City WI, Hazel Green WI, Belmont WI, Dubuque IA, Freeport IL

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