“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  • Earnings in a life insurance policy could potentially be withdrawn tax-free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

Annuity Basics

What is an Annuity?

An Annuity is a contract between you and an insurance company. There are four types of annuities that you can purchase:

  1. Variable
  2. Fixed
  3. Immediate
  4. Index

These annuities are purchased through; a one-time, lump-sum payment, or a series of on-going payments over time. The main purpose of an annuity is income, which can be regular, or a periodic payment. The amount of what you can invest relies on a few factors such as your short and long term goals, composition of current portfolio and your tax situation. With Annuities your investment grows tax deferred, is creditor proof and avoids probate.


Annuity Terms:

Annuity: A guaranteed investment contract with an insurance company

Owner: The owner of annuity contract (can be a trust or the annuitant or a third party)

Beneficiary: To whom the money goes upon the annuitants death (can be the owner)

Annuitant: Person on whom the annuity is based (does not have to be owner). All annuities have annuitants (some annuities allow joint annuitants).


By: Phil Wasserman


Annuities offer amazing features and can protect you against:

  1. Outliving your savings
  2. Risking your principal
  3. Inflation
  4. Taxes

Bonus – Many annuities offer up-front bonuses that add even more to your savings.

Riders – Offer guaranteed income for life and even enhanced income when you become impaired and can’t perform some activities of daily living.


Accelerated Benefits:

Today it is common for annuities to allow for accelerated benefits to pay for:

  • Terminal illness
  • Long term nursing care and home
  • Critical illness (such as cancer, stroke or heart attack)

These powerful benefits are usually included at no cost, although not all annuities have them. Knowing the Riders and Features of your current annuity or annuities you are looking to purchase, can be extremely important.


By: Phil Wasserman

Can You Live on Your Stock Earnings?

planningWhen the economy tanked in 2008, people lost over 40% of their retirement portfolio within a matter of hours. To add insult to injury, those who were already retired suddenly found themselves virtually penniless and with no way to recapture their losses.

Sadly, many people today continue to believe that they can live off any profit they may make from stock investments. Aside from endangering your ability to pay the bills, this type of planning can actually destroy your portfolio.

What Potential Growth Means To You?

Consider a situation where you get a job in which you are promised a promotion within 6 months. If you are creating a yearly and 5 year income plans, you may decide to do your projections, based on the expected raise.

If you get sick, lose your job, or someone else gets the promotion, your income projections will be off by a significant amount. In a similar way, it is never a viable option to base your future living allowance based on potential growth of your investment portfolio. While you can always be aware of potential growth, it is best to wait for that money to be in hand before you actually decide to use it for daily living needs.

Are There Suitable Guaranteed Growth Investments?

Today, many people invest in the stock market because they believe they will never make enough money on CDs, bonds, and annuities. That said, if you are looking for a stable yearly spending allowance, these guaranteed growth instruments can easily meet your needs.

Here are just a few options that should form a major part of every investment portfolio:

* Real Estate Investment Trusts
* Preferred Stocks
* CDs
* Tax free municipal bonds
* Corporate bonds
* Immediate annuities

How to Balance Potential vs. Guaranteed Growth Investments?

It is very important to realize that no investment portfolio is complete without some type of rapid wealth generator. In this case, you will be using indexed stocks to create rapid growth, and then put a significant portion of your profit into guaranteed growth instruments.

Even though it may take a few years before your CDs and other investments give you enough to live on, you will never need to touch the money from your stock investments. At the very least, if the cost of living goes higher than expected, or you need large amounts of cash for some other reason, guaranteed growth investments will make it easier to re-generate and protect your other investments.

There is no question that people of all ages are still reeling from the economic crash of 2008. While some people are desperately trying to work their way out of the chaos, others are doing even more damage to their portfolio by making withdrawals from stock dividends.

Rather than continue making this mistake, you will be better served by moving some of your investments into guaranteed growth structures that will give you some spending money while your stocks can be left alone to generate income faster.

Don’t Let Failure Destroy Your Investment Portfolio

diceIt is very important to realize that your investment portfolio is a dynamic, living thing that needs attention on a regular basis. This includes acquiring new investing skills as well as making sure that you understand the economy that underpins all of your investments.

Overall, the single most dangerous mistake you can make is to live in a world of complacency. When you aren’t looking for ways to grow and develop as an investor you will lose your chances of making money. Perhaps even worse, when you aren’t paying attention to your portfolio, you could lose everything you have because you didn’t act quickly enough to protect your money and assets.

Information is Useless Without Action

Consider a situation where you picked a series of blue stock companies to invest in, and then found a really exciting book that described Formula 1 investing. From there on out, perhaps you also learned about the benefits of indexed stocks vs managed mutual funds.

Even if you become very knowledgeable about how stock investment works, that information will do no good if you don’t apply it. For example, if your portfolio still contains many mutual funds that are taking a loss, you will be well served by converting to indexed stocks.

Never Stop Acquiring Information

When Benjamin Graham essentially pulled the United States out of the Great Depression, hundreds of students, including Warren Buffet sought to improve upon his initial design. Chances are, you already know that Buffet and other investment gurus are constantly on the lookout for new investment strategies.

No matter whether they decide to work with trade signals, options, or some other means to protect their investment, they are in a constant state of acquiring new knowledge.

If You See Value, Act On It With Prudence

It is very important to realize that not all information is useful. For example, if you read a stock investing guide from the 1980‘s, it will say nothing about investing in web based IT. On the other hand, if you miss out on this ever expanding industrial sector, you will be losing out on many chances to make money.

That said, just because you see some valuable advice, it does not make much sense to sacrifice everything and then lose. In the arena of stock investing there is truly a thin line between the power of discernment, excessive complacency, and taking foolish risks.

As you learn more about the art and science of stock investing, you will soon realize that it takes years to become proficient. While you may have a gift for spotting winning stocks, it will truly take time to hone your skills and acquire enough experience to understand how corporations and investor actions impact your ability to make a profit.

If you feel yourself becoming too complacent, start looking for new information and seeing how you can use it. Typically, as long as you are still asking question and moving forward, you have the chance to make money and enjoy more of it during your retirement years.