Index Annuity For Guaranteed Income???(2018)

Dividends historically have accounted for nearly 40% of a portfolio value’s growth.

Even with the low dividend yields today, dividends still play a HUGE role in growing the net worth for investors.

In this video I show you exactly how dividends improved the performance of the Vanguard S&P 500 fund (VFINX) by 50% from 2003 until March 2018.

I compare the PRICE ONLY performance of the VFINX to the price + dividend performance.

Price only performance increased an initial $100k investment to $297k. Yet, dividend reinvestment increased that $100k to $406k at then end of those 15 years time.

Don’t forget this is in a low dividend yield environment too. In fact, after 2008 many of the higher dividend paying companies, banks come to mind, STOPPED even paying dividends.

Yet, the numbers speak for themselves; Dividends added 50% more growth than just price.

The interesting thing is that if you look at index annuities, they don’t use dividends in the returns investors get! Add on the hefty fees and it’s next to impossible for an investor to get anywhere near a market like return. Just can’t happen.

No dividends PLUS high fees = VAST under performance. Which is why I recommend staying away from these types of “investments”.

If you want “safety” there are better alternatives.

If you want “growth” there are better alternatives.

If you want a combination of some safety and some growth there are better alternatives. In future video’s I’ll discuss the alternatives.

But for now, just watch this video and allow me to show you EXACTLY how dividends are just so important to your financial well-being.

In part 2 of my video series on Index Annuities, we tackle the guaranteed income options a specific annuity provides.

I’ll just cut to the chase, this doesn’t impress me. In the least.

Why?

Index Annuity Increasing Base Isn’t All It Seems

Because in this case, while they offer a 7.2% annual increase in the income base for the first 10 yeas, your income does not adjust with inflation after that!

What pays $10,800 in year 10 will pay $10,800 in year 30 PLUS you have no money left over to leave to your heirs.

“Walk Away” Money Vs. Income Base – a HUGE Difference!

You have got to understand the difference between the Account Value, what us professionals call your “walk-away money”, and your income benefit account.

They are TWO completely different things. And I don’t believe many investors are aware of the significant difference between them.

Your income base is solely the amount you can draw on each year for the rest of your life. You can NOT get a lump sum from this amount.

Your “walk-away money” is the amount the insurance company will cut a check to you for.

How Much Is Your Single-Life Income?

To determine your income amount off your income base, you need to know your age too and if you’re going to have a Single-Life income stream or a joint and survivor life income stream.

In the example this insurance company provides, a 69 year old, SINGLE life recipient will receive 5.4% a year off her income base account, thus the $10,800 previously referenced.

However, because she is taking well more out of the account than the annuity is growing, she has exhausted the cash value by year 11.

Now, she will continue to receive the $10,800 annually, but she has NO money left in the account!

Is that made clear to the potential purchasers of these products? I don’t think it is.

And it should be.

Look, I’m not saying you should NEVER buy one of these things.

I’m just saying you need to understand what you’re getting into.

 

 

 

 

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