“The 10 Most Common Mistakes People Make With Their Money…” By: Alan Haft (Part Two)

Phil Wasserman’s partner, Alan Haft announced “The 10 Most Common Mistakes People Make With Their Money.” We are going to reveal a brief preview of the second  mistake.

In its most simplistic form, “re-balancing” a portfolio simply means maintaining its original balance when the portfolio was first established.
Let’s take a closer look at what this really means…Failing to re-balance a diversified portfolio is like forgetting to cook that pizza mentioned in the last common mistake. Without this critical step, what would typically be my personal all-time favorite food could easily turn out to be the worst meal ever.

Here’s why:

Suppose we turn back the clock to the late ‘90s. For sheer simplicity, suppose I listened to prudent advice and diversified my investment portfolio into five sectors of the market, dividing my money up equally amongst them:

• US Stocks: 20%
• International Stocks: 20%
• Technology: 20%
• Real Estate: 20%
• Flavors of the Day: 20%

Given the gains and losses of various market sectors, suppose a year later the value of my diversified portfolio (in percentages) winds up looking like this:

• US Stocks (up in value): 30%
• International Stocks (down in value): 10%,
• Technology (surged in value): 40%,
• Real Estate (down in value): 5%,
• Flavors of the Day (down in value): 15%.

True, I may have been diversified but do I just end the process there? Not if I want to give myself the best possible chances for sustained and consistent investment success. If I just held my portfolio above without re-balancing it, as the market later went down, I would have very likely lost the gains I made within the US Stocks and Technology sectors.

“The 10 Most Common Mistakes People Make With Their Money…” By: Alan Haft (Part One)

common-money-mistakes Alan Haft


Phil Wasserman’s partner, Alan Haft announces “The 10 Most Common Mistakes People Make With Their Money.” We are going to reveal a brief preview of the first mistake.

Mistake Number one: Too Many Eggs in One Basket

When it comes to giving yourself the best possible chance for continued and sustained investment success, the timeless laws of diversification is an extremely efficient place to begin. Many people think their portfolios are diversified simply because they have a lot of investments. But that’s not always the case. As odd as it may sound, when it comes to your investments, think of a diversified investment portfolio as a Domino’s pizza. A properly diversified portfolio includes many slices divided up into neat little segments that shouldn’t overlap each other and whereby each slice represents a particular sector of the market such as:

o Domestic stocks
o Large Companies (“Large Caps”)
o Medium Sized Companies (“Mid Caps”)
o Small Sized Companies (“Small Caps”)
• International stocks
• Emerging Market stocks (India, China, Latin America, etc.)
• Bonds
• Commodities
• Real Estate
• Technology
• Natural Resources
• Health Care
• Cash
• Etc.


Reasons for Purchasing Life Insurance

As far as we’re concerned, an investment into a life insurance policy is often a more prudent choice than an investment into its somewhat close cousin, an annuity.

Here are a few reasons why:

  • They both offer tax-deferred growth.
  • The cash value in a life insurance policy is almost always far more “liquid”
    (accessible) than annuities that often have limited penalty-free access to the
    cash value during the term of the contract.
  • Earnings in a life insurance policy could potentially be withdrawn tax-free
    whereas earnings in an annuity are taxable as ordinary income, the highest
    of all possible taxes.
  • The potential for earnings within a life insurance policy is typically
    comparable to earnings potential within an annuity (if not better).
  • When a life insurance policy is passed to your heirs, not only is the amount
    passed tax-free, but the amount is almost always far greater than the cash
    value due to the death benefit.

Phil Wasserman – “Reasons for Purchasing Life Insurance.”

Income Riders and How They Work

Phillip Wasserman on “income riders.”

October 23rd, 2014

When an annuity is annuitized the money is given to the insurance company, which then returns it back to the client based on a contractual obligation. The client can receive their money as an income stream for life or over a predetermined number of years, or a combination of both. Regardless of which payout option is selected, the client has no control of their money. In recent years, annuities have added an income rider to their menu of options. This rider allows the owner of the annuity to receive guaranteed lifetime income from an annuity without annuitizing it and therefore retain full control of their money.

These riders are offering the best of both worlds: guaranteed income and availability of the lump sum of money if an unexpected need arises. The riders have various forms but some common features. They all have a payout factor based on the age of the annuitant. Many have guaranteed growth rates that apply to a special “Income Account Value.” All of the riders guarantee an income stream that can go up but will never go down as long as the owner does not take additional withdrawals from the annuity. Most of the riders allow the owner to turn the income on and off as they choose.

Income Account Value – The Income account value is only a number that is used to calculate income at the time the client wishes to activate the rider. The income account value is NOT the same as the account value. The account value is the client’s money and grows based on the crediting method that is selected every year during the annual review. Many clients confuse their Account Value (their actual money) with their Income Account Value (a value which is used to calculate a guaranteed income stream). Most income riders have a guaranteed growth factor that creates a separate income bucket (Income Account Value), which then grows at a guaranteed rate. You must carefully read the fine print on these riders to determine what will keep you from receiving these guaranteed growth rates. Many riders do not give the guaranteed growth rate if a withdrawal is made in the year. This means that if the annuity is in a qualified account, and the client is over 70 ½ years of age, the required minimum distribution, which must be taken by law, will nullify the guaranteed growth. This is particularly true in the larger growth rates.

Payout Factor – All Income Riders have a payout factor. This factor is a percentage that is based on the age of the annuitant when they first wish to receive a guaranteed income. These factors are almost always the same:

5% at age 60, 6% at age 70, 7% at age 80 and above. However, in different insurance products, the factor changes every 10 years, every 5 years, or every year.

Product A – Payout factor = 5% at age 60, 6% at age 70, 7% at age 80 and above.

Product B – Payout factor = 5% at age 60, 5.5% at age 65, 6% at age 70, 6.5% at age 75, 7% at age 80, 7.5% at age 85 and above.

Product C – Payout factor = 5% at age 60, 5.1% at age 61, 5.2% at age 63, 5.3% at age 64, up to 8% at age 90.

All income riders have a fee associated with them. These fees are usually within a 35 to 50 basis point range. Some of the fees are taken only from gain (e.g. no gain = no fee) and others are taken regardless of the performance of the annuity.

By: Phil Wasserman

Retirement is a Gift of Time

“Aging is humanity’s greatest, most important, and most enduring discovery. The discovery and exploitation of human longevity is what has led to the globe-dominating species we have become.”
– Dr. William Thomas, M.D.

  • We have the most awesome resource in our retirees to help solve society’s most difficult problems.
  • Retirees can give of their time, skills, wisdom, and shared experiences.
  • This legacy will make for better individuals and communities.
  • To do this, retirees must have a safe, sustainable retirement income.

-Phil Wasserman

General Thoughts on Insurance Companies

Life insurance allows you to guarantee tax-free money or replace income to those you love. Life insurance can be used with annuities to generate more income and wealth (income maximization), to offset huge IRA taxes, and to offset eventual estate taxes. Policies can be financed with no out-of-pocket costs. Term insurance can be bought with return of premium riders. Indexed Universal life can be used for investment purposes. Whole life can pay for itself with minimum deposit or vanishing premium.
Accelerated benefits are available for nursing home, terminal illness, or critical illness. And now, companies will refund your premiums if the estate tax is replaced or limits are raised. Life insurance is the best way to transfer wealth tax-free. The major advantage of life insurance is that, if titled properly, the death benefit is tax-free. Today life insurance can even be written to people in their 80’s and to people with various kinds of health conditions. An expert can advise you properly. There are all kinds of ways to pay for large amounts of life insurance needed for estate taxes, including company-approved financing, in which the policy is the collateral and no money out of pocket is required.

By: Phil Wasserman

What to ask if purchasing an annuity

1. What type of annuity is it?

2. What is the length?

3. What are the surrender penalties?

4. Are there any riders?

5. What are the specific fees?

6. If it is a variable, who is responsible for managing it?

7. If it is a fixed annuity, is the interest rate adjustable?

8. What is the company rated?

By: Phil Wasserman

What is an Index Annuity?

A type of fixed annuity that offers the potential to capture some of the gains in the stock market without the risk of loss.

Returns are determined by the performance of an index such as the S&P 500

  • also known as Equity Index Annuities (EIA)

  • other indices can be selected: DJIA, NASDAQ, Russell 2000, Nikkei 225, Hang Seng, EURO STOXX 50

Investors’ returns are usually calculated as a percentage of the index performance.

An Index Annuity was designed to be a fixed annuity, one in which the principal was safe, with an interest rate determined by tracking a stock market index. originally, the idea was to receive some of the market gain without risk to the principal. Companies often compared it to going to a casino wit $10,000 and getting to keep the $10,000 no matter how you played. Even if you lost, you would get to keep your money. If you won, you would keep a small chunk of your winnings and give up some of the gain.

By: Phil Wasserman