Thursday, September 7, 2017

Should I Buy An Annuity? 3 Questions To Ask Yourself

When considering purchasing an annuity you should be looking to do so for one (or more) of 3 reasons. Annuities are primarily used for; guaranteed income, accumulation with some form of protection and tax-deferred growth. Think of these as three legs to a stool. While I do not believe that an annuity is right for everyone they can certainly play a vital role in the financial planning process.

Do You Want Guaranteed Income?

To begin, lets look at the guaranteed income leg. Guaranteed income in retirement sounds like utopia, doesn't it?? Well it certainly can be! However, you do have to pay for those guarantees. It's these costs that tend to give all annuities a bad rap. What is every investors number one fear in retirement? RUNNING OUT OF MONEY! This type of annuity can ensure that never happens.

Fortunately for you, not all annuity products come with egregious fees. In fact, in recent years I've seen more annuity companies come out with solutions that are quite competitively priced compared to other traditional investment options. 

Don't let a television commercial or something you overheard at a party ruin your outlook on annuities. Annuities, like investments, are not created equal - there are some great ones and there are some not-so-great ones. As a financial planner, we must look at all the options available and decide which ones are the most suitable for you and the goals you're trying to accomplish.

If you're someone who is worried about the markets and you prefer less volatility in your investment portfolio this may be a solution for you. Not to mention, many annuities allow you to see exactly how much guaranteed income you will receive based on what age you begin your withdrawals. No surprises! 

Curious to see how much guaranteed income you could receive? Click below and I will send you a report letting you know how much lifetime guaranteed income could be waiting for you. We don't need any personal information just answer 3 quick questions!



Would You Like Some Accumulation With The Potential For Downside Protection?

Potential for downside protection, not to be confused with total protection from loss! Another reason someone may consider an annuity is to still have the ability to participate in the market while knowing some of their losses may be covered by the insurance company. What do you need to give up to receive this? You must give up some of your potential upside. 

For example, let's say there's a solution that says, you can select a market index (S&P 500, Dow Jones, NASDAQ) and receive all of the annual returns up to 10% from when you invested. Now, any of the returns over 10% for that year the insurance company keeps. However, for that they agree to cover the first 10% of your losses if the market is negative for your contract year. 

Once again, this an example of the insurance company willing to accept some risk, however, they must be compensated accordingly for doing so. You may be beginning to see that these solutions are not as awful as the mainstream media and financial pundits makes them out to be. There are many cases when an annuity makes a great deal of sense. 

Would You Like Tax Deferred Growth?

Last but not least I'd like to cover annuities that are used for their tax deferred growth benefits. If someone is using an annuity for this benefit they are assuming that they will be in a lower tax bracket when it comes time to take distributions. 

Now, if you're investing with retirement money (think IRA, Roth IRA, 401K) then you would not need to use an annuity for tax-deferred growth because IRA and 401K assets already grow tax-deferred and Roth IRA assets grow tax-free. So, this is only an advantage for what we call "non-qualified money" - think money that has already been taxed (i.e. money in the bank).

Once again, if you're an individual in a relatively high tax bracket and presume it will be much lower in your retirement years then this strategy would make perfect sense for you. One thing to watch though, like IRA's and 401K's if you invest your after-tax dollars into an annuity you will still receive a 10% penalty for withdrawing it before age 59 1/2.

If you are in a situation where you are facing a steep tax bill, using an annuity for some of your investment portfolio could be a great way to help reduce this tax burden. Every case is unique so what works for one person may not work for another but that's why we believe no investment tool should be completely ruled out solely because there are a few bad apples in the bunch.

Annuities are long-term investments suitable for retirement funding and are subject to
market fluctuations and investment risk, including the possibility of loss of principal. Annuities
generally contain fees and charges which include, but are not limited to, mortality and expense risk
charges, sales and surrender charges, administrative fees, charges for optional benefits and riders,
and annual contract fees. Annuity guarantees, including guarantees associated with benefit riders
are subject to the claims-paying ability of the insurance company. Surrender charges may apply if
money is withdrawn before the end of the contract. Additionally, if purchased within a qualified plan,
an annuity will provide no further tax deferral features. The contract, when redeemed, may be worth
more or less than the total amount invested.

Thursday, August 17, 2017

2 Things Buffet & Gates Know That You Don't

If you're friends with me, or even an acquaintance you've probably heard me talk about a regular investment account at one time or another. Some of you who are close to me may have heard me reference it a few hundred times at this point - and for that I do not apologize ;) 

Rest assured, I do this out of love because I believe so strongly in this strategy. To clear up any confusion, these accounts go by different names; brokerage accounts, after-tax investment account, individual investment account so on and so forth. Much of what is going to be discussed in the 2 points below will focus on this type of account so I wanted to give a brief preface on them. 

I'm giving an exclusive offer to my blog readers for FREE access to my guide for building a million-dollar retirement account. If interested, click below:


So, what's the first thing that Warren Buffet and Bill Gates know and you don't?

#1 You're not getting anything for keeping your money in the bank. IN FACT, YOU'RE LOSING MONEY TO INFLATION! 

Banks make money from us loaning them our hard-earned dollars so they can loan it for mortgages, business loans and a plethora of other reasons. They then charge some hefty interest on those loans and essentially cut us out of the deal even though they're loaning out our money! 

You see, IRA's, Roth IRA's, 401k's and other retirement accounts are controlled by the government because they tell you how much you may contribute each year. What's the one account that you may invest as much money in as you'd like to and never need to worry about 10% early withdrawal penalties? Yep, you guessed it - regular investment accounts. 

Now, I know what you're thinking; "Yeah Michael, I know I'm not earning any money by leaving my cash in the bank, that's not news". To which I would response something like, "Well then why is most, if not all of your money sitting there...?" 

Oh, one more thing before I tell you what number two is, if I may? Would anyone care to guess what industry has created more of the world's billionaires than any other? No, it's not real estate. Technology? Nope. Oh, I know it must be fashion! Sorry, nope. However, this question is the perfect segue into our next point...

#2 Investing Has Created More Billionaire's Than Any Other Industry, EVER!

Alright, there's a chance you may have known this one beforehand but I'd venture to guess that many of you went through a similar conversation in your head as the fictional one above. 

Prior to reading that statistic I would have guessed that real estate or oil produced the most billionaires but Forbes said otherwise. Fortunately for you though it was investing and everyone is more than capable of investing on some scale. 

Therefore, as I mentioned above I think regular investment accounts are just as important of a tool as any retirement account. Because it allows you to invest the money that you'd otherwise let sit in a bank account earning you next-to-nothing and make some investment returns on it. 

Regardless of what industry any billionaire made their fortune in, THEY ARE ALL INVESTORS. This is because when you look at historical returns in the markets the data shows you that this is where you should be putting excess money that isn't immediately needed. 


So, make sure you're making it a habit from a young age to pay yourself first in the form of investments. These are gifts to yourself that can pay you for the rest of your life. In the words of Warren Buffet:
"If you don't find a way to make money while you sleep, you will work until you die"


Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future results. Please note that individual situations can vary.  Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.

Monday, July 17, 2017

3 Investments Ideas For The Second Half of 2017

Wow, hard to believe we're already half way through 2017! I'd venture to guess that very few of you would have expected the markets to be up 9% already this year. I vaguely remember most analyst expectations saying the markets won't return more than mid-single digits for 2017.

The words of Warren Buffet are ringing ever true right now, "We've long felt that the only value of stock forecasters is to make fortune tellers look good". Remember these guys are paid to have differing opinions and they tend to fixate their predictions on short-term mattes - ones of little relevance to you because you're playing the long game!

First and foremost, if you haven't gotten your free copy of 5 Point Financial Plan click the button below and request a copy - you'll thank me later. 



#1 Mid-Cap Value

This is one area I've been liking more and more lately and it's because the passive investing revolution has been dominating this 8 year bull market and what that's done is pumped a lot of capital into large cap index funds (S&P 500 index funds/ETF's). Allowing many great companies that fall in this market capitalization to fly under the radar.

Remember publicly traded companies will fall into one of three market capitalization groupings. Small, mid and large caps. All this does is define them based on their total market capitalization or their total value as a company.

Mid-cap companies range between $2 billion and $10 billion in total market capitalization. I think with the recent phenomena of index investing everyone and their mother are blindly dumping money into the S&P 500 index which is comprised mostly of large cap stocks.

Opening the door for many opportunities in the mid-cap space. We are looking for strong companies with nice balance sheets and plenty of free cash flow. Making this one area that we believe every investor should be paying attention to.

#2 Developed International

Here's another area of the market that we have liked and will continue to like for some time. Developed European markets are in much earlier stages of their growth cycle than the United States is. Not to say I don't like the opportunities that the US markets present, I just happen to like the European markets a bit more for the time being.

To put it into perspective you can look at it like this; the US equity markets are in the 9th inning of their growth cycle but the developed European markets are still in the 5th inning giving them far more time to grow.

One precaution though, the European markets can be a bit trickier than our domestic markets so make sure you're working with someone who understands these overseas markets and can help you put your money to work in the best areas. Buying a developed European index fund may not be your best choice in a situation like this. I want to emphasize quality over quantity here.

#3 Emerging Markets

For anyone who knows emerging markets you'll know that this option is by and large the most aggressive. Which isn't a bad thing, aggressive investing done at the right time can yield excellent results. When you hear "emerging" think countries such as; China & Hong Kong, India, Taiwan, Brazil and others. 

Again, this is a play based on the idea that our domestic markets have seen a healthy run up since bottoming out in 2009 - a run up that many of these overseas markets haven't had much participation in. Thus presenting the opportunity to take some of the profits made in the US equity markets and diversify them into other areas who potentially have more room for growth. 

Advances in technology could very well allow these emerging countries to grow at a much faster pace than what we're used to.  A great example of this is India's immediate installation of a smart grid instead of installing an archaic system such as the one we have in the US. 

The views expressed are not necessarily the opinion of Woodbury Financial Services, Inc., and should not be construed directly or indirectly, as an offer to buy or sell any securities mentioned herein. Individual circumstances vary. Investing is subject to risks including loss of principal invested. No strategy can assure a profit against loss. Foreign investments involve special risks including greater economic, political, and currency fluctuation risks, which may be even greater in emerging markets. Indices cannot be invested in directly, are unmanaged and do not incur management fees, costs or expenses. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.

Friday, June 30, 2017

4 Things Millennials Need To Know For Retirement

As a financial planner in the Chicago suburbs I work with millennials every day and make sure that they're capitalizing on these important ideas for planning:

Max Out Employer Matches

If someone offers you free money will you slap their hand away and turn it down? Of course, not! So, make sure this isn't what you're doing with your employer match in your 401K. Not everyone has the luxury of a 401K plan that offers a match so if you're someone who does make sure you're contributing enough to take full advantage of the match they offer. If your company doesn't offer any sort of match or retirement plan, then make sure you're utilizing a Roth IRA and maxing it out if possible too ($5500/year). 


Buy When The Markets On Sale!

If you walk into your favorite store and find out they're having a 20% off everything sale what are you likely to do? Pick up all your favorite items at the bargain price! Now, why is it that when the stock market goes on sale we all have the reverse instinct? Instead of buying while many great companies are selling for a discount we tend to panic and consider selling the great companies we already own. Don't be that person! When there's a correction or even a bear market look at it as opportunity knocking at your door. Smart investors know this may be their chance to buy some great companies at a steep discount. Investors who are nearing retirement have a much shorter investment horizon and therefore will be affected more significantly by a bear market. If they are in that category, then their portfolio should have already been adjusted so that they are taking on far less risk. Being that millennials are much further away from retirement we should salivate at the first sign of a market correction because it could be a great opportunity for us to buy.


Use Monthly Deposits

I wish I could sit down with every millennial investor and talk to them about monthly deposits. I feel many millennials don't realize they can contribute to a Roth IRA the same way that they contribute to a 401K. You can set up a monthly deposit from your bank account directly into your Roth or regular investment account on the day you get paid. The reason I love monthly purchases is because it allows you to buy pieces of the market at several different prices. It's certainly easier to make one annual Roth IRA contribution right in the beginning of the year (according to Morningstar you'll end up with more by investing an annual lump sum as opposed to monthly deposits) but not everyone can afford to do that which makes this an excellent alternative strategy.


Invest For Other Reasons Than Retirement

Remember, investing is not for retirement only. The smartest investors know that any major purchase or expense they have 5 years or more down the road may be reached far quicker through investing. Home purchases, vacations and college are all common investing goals that may be reached through investing instead of holding the money in a savings account that earns you nothing. Establish different buckets of money such as; short, intermediate and long-term buckets and adjust the risk on each bucket of investments to your comfort. As your goal nears you can adjust the risk and begin implementing more conservative investments to prepare for that major purchase or expense. 


I'm giving my blog readers exclusive access to my 5 Point Financial Plan completely FREE. The concepts in this plan are one's that I utilize in every new client meeting and set the foundation for proper financial planning. It's loaded with value and not something you'll want to pass up on. Click below to get  your own PDF version!



The views expressed are not necessarily the opinion of Woodbury Financial Services, Inc., and should not be construed directly or indirectly, as an offer to buy or sell any securities mentioned herein. Individual circumstances vary. Investing is subject to risks including loss of principal invested. A Roth IRA is not appropriate for every investor. Distributions made prior to age 59 1/2 may be subject to a federal income tax penalty. If converting a traditional IRA to a Roth IRA, you will owe ordinary income taxes on any previously deducted traditional IRA contributions and on all earnings. We suggest that you discuss tax issues with a qualified tax advisor.


Friday, June 9, 2017

How To Turn $50 A Week Into $500K

Earlier this afternoon I sat down for the first time with a client who was just beginning her investment journey. She, like many that I've sat down with before, came in full of questions and eager to learn more about investing and our strategy to ensure that she can reach all her goals and enjoy a comfortable life.

Before we go further - take a second and grab my 5 Point Financial Plan completely free for being a blog reader. Trust me, you'll thank me after you do. It's loaded with useful information to make sure you have all the best tools for planning your future!


After listening intently to all the goals and plans that she had for herself I asked this simple question, "Are you able to commit $50 a week to aid you in reaching these goals?". She of course responded with a quick "Yes", going on to say $50 a week would be no problem at all. The reason I asked for $50 a week is because that $50 is what we will use to build you a half million-dollar retirement account. Yes, that's all it takes is $50 a week placed into an account earning an average return of 7% a year. In other words, $200 a month for 40 years at a rate of 7% would leave you with just a touch under $500K. I'll illustrate this below:


As you can see, the beginning balance is zero, being that she was 25 years old we set the years to save at 40, we assumed a 7% annual rate of return on her investments and last we set the monthly contributions at $200.

I also asked her to make me one more promise, to promise me that when she gets that annual raise or a bonus check that we'll sit down again just like this and increase these monthly contributions so that as she climbs her way up the corporate ladder her investment accounts climb with her. For example, let's assume that in 15 years she is now making considerably more money than she was when we began her investment journey. She is now making right around $100K per year and we'll assume that after a 20% tax rate her take home pay is about $80K per year or a little more than $3K a month. That being the case, I would then say to her let's kick this retirement savings into overdrive and start contributing $100 per week now. All other things equal, for the last 20 years leading into her retirement she'll continue to contribute the $100 a week. Bumping that up for those last 20 years now gives her an additional $100K bringing her to a retirement account of about $600K. Couple that money with her employer sponsored plan, add in any other money she may have in the bank and suddenly she's put together a pretty nice retirement number.

I tell this story because these results are far from unrealistic and can be duplicated by anyone. If you have the discipline to set money aside each month and pay yourself first you will be rewarded handsomely later in life. So please use her story as a blueprint to write your own story because there are very few things about the future that we can control but this we can control and the smart investors are doing just that.


Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future results. Please note that individual situations can vary.

Friday, May 19, 2017

Remember 2008? Use This Strategy To Help Protect Your Money

Our financial markets have made a gargantuan move higher since the presidential election results back in November. If you have an IRA, 401K or other investment account you've more than likely heeded some substantial gains over the past 7 months. President Trump, like him or not, has made some bold claims for boosting our economy and up until now that has all seemed to have gone quite well. Unfortunately, as we've seen of late, he's having a difficult time adjusting to this new position thus making the markets increasingly weary of the future. 

Where do investors turn for help with their investments in times like this? My team went to the drawing board and asked a handful of our clients what type of option they would need to feel confident and put them in a position to succeed given the current state of the market. 

Here's what we were told:
  • They wanted the ability to participate in a market rally if it continued to rise from here
  • They wanted a downside buffer to protect them against some losses if the market slips
  • And lastly, they wanted it to be a low cost, affordable option
  • Basically, they wanted all the good of the market while having some protection against the bad
We worked with our partners and established a new investment strategy that provided our clients with the solutions they desired.   

This new solution allows our investors to:
  • Participate in a rally if the market continues higher.
  • Have the ability to chose what level of protection or how much of a buffer they would like against a downturn in the market.
  • As for cost, how much does this solution set them back? This solution has NO fees. 



Over the past 30 years, the S&P 500 has seen a total of 7 negative return years. We wanted to find a solution to help with the downside of the market. 

Upon seeing seeing the reaction from our clients, I knew this was the right solution for many of our clients both large and small. If you would like to take advantage of this opportunity please feel free to reach out to me so we can determine how to incorporate this into your current investment strategy.

I'm giving my blog readers exclusive access to my 5 Point Financial Plan completely FREE. The concepts in this plan are one's that I utilize in every new client meeting and set the foundation for proper financial planning. It's loaded with value and not something you'll want to pass up on. Click below to get  your own PDF version!



*The views expressed are not necessarily the opinion of Woodbury Financial Services, Inc., and should not be construed directly or indirectly, as n offer to buy or sell any securities mentioned herein. Individual circumstances vary. Investing is subject to risks including loss of principal invested. No strategy can assure a profit against loss. Indexes cannot be invested in directly, are unmanaged and do not incur management fees, costs and expenses. 

Tuesday, May 9, 2017

The Real Cost of Index Funds: 3 Ways You've Been Fooled

It's truly fascinating to see what a multi-million dollar budget can do.  The large low cost providers have used their war chests of money to manipulate and brainwash an entire generation. Before we get into that I want to start by saying I have nothing against index funds and I do use them when appropriate. I believe that index funds have a place in a portfolio, however, I do not believe they should comprise the entire portfolio. 

By only investing in index funds you're saying that you are satisfied with average. You would never like the opportunity to do better than the general market nor are you interested in having a manager who can make adjustments to hedge some of the downside risk in a correction or bear market.


Word Manipulation

I can already hear the objections now, "But XYZ low-cost provider says that the average mutual fund doesn't beat the benchmark 80% of the time, so why use them?". To which I always reply, "Can you please define the term 'average' for me?" and I ask this because no one knows what they're comparing their low-cost funds against. 

I can tell you one thing for certain, there is a large number of actively managed mutual funds out there that are poor, with unacceptable performance. So, when you include these funds in the comparison, suddenly these providers are able to paint the precise picture they need to convince the investing public their method is superior. 

Here's the catch, my clients are not investing in the "average" actively managed mutual fund. If we decide that an active manager is the right fit then we are using funds with long track records of stellar performance. Of course, any fund will have a few years that this doesn't occur but this doesn't mean the strategy should be abandoned.


One-Sided Comparisons

One thing you will never see the low-cost providers do is make comparisons in real dollar figures. Meaning, they focus on the year-to-year returns when what truly matters is how much money did you start with and how much money did you end with over a period of time. 

They won't show you these statistics because in doing so their strategy suddenly looks far less appealing. For example, I have an actively managed mutual fund that I've been recommending to clients for years now. 

When you look at a $10K investment over a 10-year time span my fund appreciated to $21,570 (NET OF FEES). Meanwhile an S&P 500 ETF from one of the leading low cost providers has only grown to $19,600. So regardless of what the funds expenses are all that it comes down to is; which pile of cash would you prefer? 

Once a client sees that our active managers have returned more real dollars, net of fees, to it's investors over a given time frame the decision becomes obvious. Now you understand why they will never make comparisons in real dollars even though this type of analysis is far more relevant than what an active fund did in one specific year.


Hidden Agendas

Once again, the goal of this blog was not to beat up on these low cost providers but instead  it was to give the other side of the story. Hearing both sides makes you a more informed investor and prevents you from relying on the headlines that these huge marketing budgets can afford to put in your face.

 They trick you into believing they are doing you a service by giving you a fund that costs less, when as you can see from my previous examples, this isn't true whatsoever. Remember, all these low-cost providers have a hidden agenda, they aren't trying to cut your fees because they're your friend. They make their money similar to how a bank does, by having your money in their accounts and being able to do other things with it. These companies spend BIG dollars to make sure their ads are seen all over google and other places that investors frequent and there's a reason for it.

One thing I hope you all take away from this, regardless of your age or investment experience, is that what truly matters is how much money you end up with in the long run. Year-to-year calendar returns are meaningless if these low-cost funds aren't making you as much money over time as the active funds are net of their fees. Fees are only an issue in the absence of value, so long as your advisor is using active funds that bring real value the fees associated with them are an irrelevant issue. 


 The views expressed are not necessarily the opinion of Woodbury Financial Services, Inc., and should not be construed directly or indirectly, as an offer to buy or sell any securities mentioned herein. Individual circumstances vary. Investing in mutual funds involves risk, including the potential loss of principal invested.  Risks vary depending upon the strategy used by the fund as well as the sectors in which the fund invests.  When redeemed, shares may be worth more or less than the original amount invested.