Fred Goldenberg: It's all about peace of mind
Jan. 23—I've been involved in the investment arena for a long time. Over the last couple of decades I've concentrated on helping people utilize "safe" money places. Making sure that the nest egg they have is safe and secure.
But time in and time out, I meet that independent investor who insists that they have a sure-fire system that beats the market. They show me their spreadsheets, their Excel files and, like a guy handicapping the horses at the race track, their list of sure-fire winners.
As they explain their system, I can see how excited they are and how it is an addiction that almost becomes a full-time job just to maintain. To them it all makes sense.
You know who it doesn't make sense to? Their spouse.
To a market junkie, spending countless hours analyzing companies that look ripe for growth is exhilarating. They understand how their system works and can tweak it on the fly. What they fail to understand is that it's their system. For the most part, if they were to predecease their spouse, the system would be pure gibberish and indiscernible.
When I point out this fact, I am met with responses like "It's not that hard, he'll/she'll figure it out" — while the spouse just sits there shaking his or her head.
That's why when I read the interview with Jim Cramer, host of CNBC's "Mad Money with Jim Cramer," in the December 2021 AARP Bulletin, I felt vindicated in my crusade to help people adjust their investment outlooks to a more understandable and transportable option.
When asked about his current personal investment portfolio, Cramer talked about his past investment strategies — and then his current investment path: "But when I turned 65, I cut that in half. Before I had almost no money in cash. So now I have 40 percent in U.S. stock index funds, 5 percent in international, 5 percent split between gold and cryptocurrency. The other half of my money is in cash."
Why this sudden change of heart? Because his wife said, "What happens if I outlive you? I don't want to feel that I am in trouble — that I had a lot of money, and that somehow, because my crazy husband decided to let it all roll, I don't." And she went on, "Jim, what I'm really talking about is peace of mind, and I thank you so much for letting me have peace of mind."
Although Mr. Cramer didn't elaborate on where he stashed his cash, we can speculate that it isn't sitting in a passbook savings account earning 0.06 percent — which is the current national average return.
I'm going to guess it's in a Fixed Indexed Annuity. FIA's share features with fixed deferred annuities, but the annual growth is benchmarked to a stock market index (e.g., NASDAQ, S&P, Dow) rather then a fixed interest rate.
That gives Mr. Cramer the ability to research the indexes and allocate to his heart's content. Mrs. Cramer is content knowing that, with this type of annuity, the insurance company bears the risk of a sharp stock market decline. You cannot lose any of your principal with a fixed index annuity. Hence peace of mind.
Beyond peace of mind, there are several reasons why you should consider a Fixed Index Annuity:
* Gain compound earnings while deferring income tax
* Earn higher interest rates than bank CD's
* Make contributions to your tax-deferred account
* Protect your principal from downturns in credit markets
* Retire early without penalty
* Satisfy Required Minimum Distributions (RMD's)
* Retire with Lifetime Income
* Create probate-free inheritance
I know right now every market junkie reading this is clutching his or her chest and saying "Annuities? Never." They're sputtering all the anti-annuity cliches that every stock broker has ever uttered.
Yet here is your guru — the man himself, Jim Cramer — saying cash is king.
Yes, I'm the one suggesting that it is sound strategy to utilize FIA's to accomplish this goal. I honestly can't think of anything else that fits the bill.
The fact is that FIA's give you the ability to satisfy your craving to control the investment — and give your spouse the peace of mind know that, no matter what tomorrow brings, the money still will be there.
Fred L. Goldenberg is a Certified Senior Advisor (CSA) and the owner of Senior Benefit Solutions, LLC, a financial services, and certified health insurance organization, now affiliated with Michigan Planners, in Traverse City. Questions or comments about this column or interest in our monthly Medicare classes can be directed to (231) 944-1400 (option #1, option #5) or fred@srbenefitsolutions.com.
