The answer always depends on the product you use and on what protections there are for you so you don’t lose your principal. Risks are different depending on the product you use.

What if you could purchase an insurance product that does not invest in the stock market, but may receive gains when the stock market rises, with no stock market losses or risk of the market causing your principal to be less than the original amount invested?

If this type of insurance product were available, would you want to know about it?

Fixed Indexed Annuities

Fixed Indexed Annuities are offered by insurance companies.  They are designed to provide payments to the owner at specific intervals, usually after retirement.  Any guarantee of principle or interest is backed by the financial strength and claims paying ability of the issuing insurance company.

Like all annuities, Fixed Indexed Annuities are tax deferred.  This means that you will not have to pay taxes on your interest until you take it out.  This is similar to how an IRA works.  However, if you have an IRA in an annuity, there are no additional tax benefits.

Each Fixed Indexed Annuity is different.  For example, they may have different rates, caps, participation rates, minimum interest rates or maximum gains in any one year and different time frames.  You must fully understand what this product is before you purchase one.

Some people feel that Fixed Indexed Annuities are too good to be true.   However, they’re not, but there are two catches:

Catch #1
TIME: You must commit to a specific time frame.  It has been stated that the best Fixed Index Annuities are between 5 and 10 years long. You can take out 10% free withdrawals each year so you will have some liquidity, but you need to commit to a time frame. If you surrender the product before the time frame you could lose money and you will suffer a penalty or surrender charge.

Catch #2
CAP:  The “Cap” is the maximum interest you can earn in any one year. Caps depend on the crediting method chosen. As an example let’s use an annual cap of 10%. If the index you choose went up 10% you may earn 10% interest that year. Most people might assume that the market might go up 5% to 8%, which is probably a reasonable assumption. Understand if the market goes up 35%, 45%, 55% or even an unbelievable 105% the most you could ever get is your cap. However, if the index you chose goes down 50%, how much would you lose? That’s right – nothing!

Bottom line is you can only lose money in a Fixed Index Annuity if you take out more than your free withdrawals each year or the whole amount. If you take out more than you are allowed or take out everything before your time frame is up there will be a surrender charge.

Be Careful – Some Fixed Indexed Annuities May be Better For You Than Others

Some Fixed Index Annuities have participation rates. They may only allow you to participate in a limited amount of the gains of a particular index.  All Fixed Index Annuities have minimum interest rates and they vary. Some have minimums of 2% and some have minimums of 3% or even 4%.

It is important to understand all aspects of the Fixed Index Annuity you are considering before you buy it. Do your research and ask questions.  You must also know that if you take withdrawals before the age of 59½ you may be subject to an additional 10% federal tax penalty!

What to Look For When Choosing a Fixed Indexed Annuity

In our opinion, there are things you don’t want in a Fixed Index Annuity and there are things you do want in a fixed index annuity. What you don’t want are hidden fees and long-term surrender charge periods.  We recommend staying at 10 years or less.

Remember, when buying a Fixed Index Annuity, you must commit to a time frame that fits your needs. You must understand that if you take your money out early, you have to pay a surrender charge and you could lose money. You want your principal to be protected as much as possible so remember about the surrender charge.
What many people like about Fixed Index Annuities is that your principal is protected unless you take all your money out early.

Where to Buy Fixed Indexed Annuities

If you feel that a Fixed Index Annuity would be a good addition to your financial strategy, please call us at (928) 636-1717.

At Victory Wealth Management, we’ve been helping people make smart choices about their money.  We service clients all over Arizona and the South West.  From Sedona to Prescott, Flagstaff to Scottsdale, Phoenix and Tucson.

If you want a Fixed Indexed Annuity, or if you just have questions, call us today at (928) 636-1717.

Whether the market is up, down or flat, an FIA gives you protection of principle (minus withdrawals and surrender charges) found with a traditional fixed annuity along with potential for additional interest credit linked, in part, to the performance of a market index.

You can protect your retirement savings from future market dips. An annuity can help. With fixed indexed annuities, an unpredictable market isn’t so intimidating.

Fixed index annuities allow you to manage risk while you take advantage of opportunities. With a fixed index annuity, you can:

• Protect your principle from market fluctuations
• Take Advantage of potential growth from indexed interest
• Benefit from tax deferral

Call us today and ask for more information on Fixed Indexed Annuities: (928) 636-1717

NOTE:
This information is provided for informational purposes only. The information is intended to be generic in nature and should not be applied or relied upon in any particular situation without the advice of your tax, legal and/or financial services professional. The views expressed may not be suitable for every situation.

Annuities are issued by insurance companies. Products/features not available in all states and are subject to change. Withdrawals may be subject to Federal/State income tax and, if taken prior to age 591/2, an additional 10% Federal penalty tax. Neither Victory Wealth Management, Inc. or its affiliates or representatives offer legal or tax advice. Consult with your tax and legal advisors regarding your individual situation. All guarantees are based on the financial strength and claims paying ability of the issuing insurance company, who are solely responsible for all obligations under its policies. IRA and other qualified plans already provide tax deferral like that provided by an annuity. Additional features and benefits such as contract guarantees, death benefits and the ability to receive a lifetime income are contained within the annuity for a cost. Please be sure the features and cost of the annuity are right for you when when considering the purchase of an annuity.

The following is an expert from the book:
Values-Based Financial Planning™
The Art of Creating an Inspiring Financial Strategy.
- by Bill Bachrach

There are 168 hours in every week, the way you spend your time directly affects your quality of life. The exercise you’re about to do is designed to focus you on what’s most important in your life, and help you further discern what activities will contribute the most to your quality of life. “The Quality of Life Enhancer™ Worksheet” is based on two principles:

1. The more you can align your behavior with your core values (what’s most important to you), the happier, more satisfied, and fulfilled you’ll be; and
2. The more you delegate what’s less important, the more time you have for what’s more important.

These principles follow two basic facts of life:

1. There are only 168 hours in a week, no matter your age, how much money you make, what you’ve invested, how attractive you are, or how much information you can access on the Internet. No Exemptions. Your quality of life is a function of how you choose to spend that time.
2. Some things cannot be delegated, and some things can. Question: Is delegation a privilege reserved for the elite? Answer: Hardly! Did you or your friends ever receive an allowance for doing chores around the house? That’s “parental delegation.” I learned the power of delegation from my parents, who were not wealthy or elite. Did you notice your dad never paid you to go fishing or to play golf for him? Everyone can learn to delegate to one degree or another.

The Quality of Life Enhancer™ is designed to help you keep financial management in perspective. In the example you see six categories down the left side of the grid. Feel free to customize these for yourself they’re not set in stone. Yet I’ve chosen them because in workshops on this subject, I’ve discovered that people can usually agree that these six are more important than money. The rest of the grid is pretty self-explanatory.

Roy Disney once said, “When your values are clear, your decisions are easy.” I’d have to add that when your values are clear and you know what you need to do to experience them – and you realize there are only a finite number of hours in a day – the decision to delegate what you can is easy. Nobody wastes a life days, weeks, months, or years at a time. It’s fifteen minutes here. a half-hour there. a few hours occasionally. that are easily wasted. I strongly encourage you to consider delegating what you can and focusing your time and energy on what’s important to you. Maybe you can find time for some of the activities you include on your Quality of Life Enhancer™ Worksheet by delegating your financial affairs.

To complete your own worksheet, either using the same “Life Qualities” as I’ve provided or substituting your own list, fill in the left column first. Then check yes or no under the “Delegatable?” column, determine how many hours a week you’d like to spend on these qualities, and choose a few activities you’d do. So often we make choices about how we’ll spend our time unconsciously, and this worksheet is designed to help you make conscious choices.

Author Wayne Dyer is famous for writing about his work with people with terminal illnesses. Perhaps his most quotable remark has been that none of those people, confronted with their final days, said they wished they’d spent more time in the office. It’s hard to imagine that they would have said they wished they’d spent more time reading financial magazines, surfing financial Web sites, and checking their stock performance, either.

What about you? Dyer’s point was that if you wouldn’t choose to squander your last week, why would you throw away any of your time? Financial wisdom could be defined as being able to distinguish between what the media, financial companies, and economic information sources try to convince us is absolutely critical from what actually contributes to having a great life.

Here are some things to consider:

• Do you know what a P/E ratio is but not an HDL/LDL ratio?
• Do you know many stars your mutual fund has, but have no idea about your body fat percentage?
• Are you more likely to read Money magazine this week than the Bible, Koran, or some other great text?
• Will you spend more time this week watching financial shows on TV than meditating or praying?
• Did you using more proxy cards for your stock and mutual funds than birthday cards for your friends and family?
• Will you spend more time connected to the Internet than to your friends, children spouse, or parents?
• Do you check your investments daily but not floss daily? (I know that seems silly, but I recently read that if you floss every day, you can add 6.5 years to your life.)

Since we don’t know what we don’t know, it’s possible that you’re not even aware of how much better life would be with a shift in how you spend your time. If there’s one thing I absolutely want to get across to you in this chapter, it is that if spending time on your finances is drawing you away from what’s really important, seek help. In the next few chapters you will learn how to discern the difference between legitimate financial advisors and those who are just product salespeople. So don’t allow any uncertainty you may have about where or how to find an advisor get in the way of a healthy assessment of whether you ought to seek one.

What’s next?

Look again at your Financial Road Map®. If it’s still blank, you probably need some help. If your Financial Road Map® is complete you may want help creating and implementing a strategy. If you’ve decided you are a Do-it-yourselfer, you must begin educating yourself. Start by reviewing the Web site summarized in the sidebar on pages 66-69 to get a complete picture of all the subjects you need to master. Then I suggest you begin to methodically check each of them off your list. Attend seminars, read books, amass a list of reliable online sources. Basically, it’s off to school for you to become a truly competent Do-it-yourselfer.

If, on the other hand, you are a Collaborator or Delegator, you have a different kind of research to conduct. It will be less time consuming by far, but no less important. You must find for yourself a Trusted Advisor.

Every time I venture past the news stand at the grocery store, I can’t help but notice financial magazines which sport articles such as titles as these. Who hasn’t been bombarded by flyers, either in the mail or newspaper, luring us to a financial workshop coming to our area? You know the kind, a flyer that contains some really scary phrases such as:

• “What if Everything You Knew About Living Trust is Dead Wrong?”
• “Educational Safe Money Workshop”
• “Safe Solutions for Uncertain Times”
• Or my personal favorite: “Bulletproof Your Finances.”

No matter what form it’s in, this is known as “Financial Pornography”. So what is Financial Pornography and why should we avoid it like the plague?

What is Financial Pornography?

Let’s start with the basics: Webster’s defines pornography as: “The depiction of acts in a sensational manner so as to arouse a quick intense emotional reaction.”

Is that not the same response so‐called financial professionals and others want from us? When we hear statements such as: Three Ways to Double Your Money or Ten Hot Stock Picks for 2009, or when we see a flyer in the newspaper for a free senior workshop, do they “arouse a quick intense emotional reaction” in us?

Columnist Humberto Cruz summarizes it well.

“I call it financial pornography. It titillates and excites but gives no lasting pleasure. Succumb to it, and it could actually be hazardous to your financial health. I am talking about all those alluring cover headlines from financial magazines, all the “hot tips” from the supposed market experts dispensing their eagerly sought but often contradictory advice all day long on cable TV. Not to mention the thinly disguised infomercial, in which some financial planner buys air time from a radio or television station, then spends half the show asking listeners and viewers to call his office for an appointment.”

If we tweak Webster’s definition of pornography just a bit, we can offer the following definition. Financial Pornography: “The depiction of investment and/or financial information in a sensational manner so as to titillate or arouse a quick intense emotional reaction.” So what’s the big deal about Financial Pornography? Why should we avoid it like the plague – even if we get a free lunch out of the deal?

What are the Dangers?

Individuals or companies that resort to tactics such as Financial Pornography, use it to make their victims feel guilty about failing their families if they don’t buy their products, or scare them with bleak stories about how bad their future would be if they didn’t take action right now.

You know the drill: If they can make us feel scared enough, guilty enough, or stupid enough, chances are – we’ll buy whatever they’re selling.

The danger lies in what we do with this pseudo‐financial advice. Not only can it distract us from achieving our financial goals, it can overwhelm us with negative feelings which can cause us to “shutdown” to any advice from a competent professional. Or worse yet, we may give in to our intense emotions and buy a product or service that may not necessarily be suitable. The emotional / physical impact on a person can be significant too.

Recently, I met such an individual. He was telling me that he was a former Day‐Trader. (Day‐Traders often live on Financial Pornography.) I asked him, “How’s your heart?” He looked at me with wide eyes as if he’d seen a ghost. Instantly, he lifted up his shirt to reveal a 12 inch scar running the length of his torso! As it turns out, he had major heart problems. When asked when he had the surgery, he mentioned that it was around the same time he was a Day‐Trader. He readily admitted to the huge amount of stress he endured as a Day‐Trader, glued to the television and internet, ready to jump from one investment to the next. Now, I’m not a doctor. But do you think that all of this was a coincidence? Hmmm…

How can I protect myself?

What’s the best way to protect ourselves from Financial Pornography? The same way a person might avoid literal pornography: look away! Make a conscious effort to divert your eyes and ears. This is not always easy. We are surrounded by advertising on a daily basis. We hear it on the radio, we see it on television, and our well meaning friends and loved ones may unwittingly disperse it as well. It’s as if the air around us is permeated with it.

If you’re a financial Do‐it‐yourselfer, it’s imperative that you recognize Financial Pornography for what it truly is. How can you do that?

About a hundred years ago when I worked at a bank, we were trained to spot counterfeit money. Did the training involve handling phony bills to learn how to detect them? No – we worked with the real deal. By doing so we could rapidly count large sums of money, and if a counterfeit bill was inside the bundle, we could pick it out by just by the way it felt. That’s how well we knew money!

Likewise, we need to know the “real‐deal” when it comes to the financial information and advice we choose to pay attention to. Better yet…

If you do have questions and really need help, why not find someone you trust to get your financial advice from? If we trust a competent professional we will follow their advice without them having to resort to these tactics.

How can you find a true Trusted Advisor?

In his book, “Values‐Based Financial Planning – The Art of Creating an Inspiring Financial Strategy” author Bill Bachrach offers this advice: “…being a Trusted Advisor… means that the advisor has to actually earn and maintain the trust of the client. In your search for the right person, you may encounter three types of individuals: the “scientific” salesperson, the so‐called consultant (who is actually a salesperson pretending to be a financial planner), and the genuine article: the trustworthy and competent advisor.

It’s unfortunate that they don’t hang out a shingle to let us know which group they fall into. Their titles are no indication, either. Stockbroker, insurance agent, financial planner, financial advisor, financial consultant, estate counselor, CFP, CFS, CIMU, CLU, ChFU: none of these labels is a clue. Neither is the big‐name company they might represent. So you must assess each individual based on a set of characteristics and, ideally, recommendations from a friend, family member, or another advisor. The Trusted Advisor rarely advertises, makes cold calls, or direct markets, so you are most likely to find one by referral.”

The Bottom Line

Financial Pornography is vile and dangerous. It distracts us from reaching our goals. It wastes time that should be spent doing things we care about. Things such as: nurturing our relationships with loved ones, pursuing personal interest, and enriching our health. Train yourself to avoid it altogether. If it’s a good fit for you, find a true Trusted Advisor. Implementing these simple suggestions will greatly improve your quality of life.

P.S. My overly‐zealous attorney insists that I tell you: “No portion of this article shall be construed as investment advice.” Enjoy! JH