RJS 7-12-25

Episode Transcript

Speaker 1 (00:00):
Good morning to all. Craig Shillig here and this is
Safe Money. I'm here every Saturday to talk with our
listeners about financial strategies we use to manage and protect
assets safely. I've been an insurance agent for over twenty
four years. During that time, I've learned a few insurance
strategies like using annuities is safe money harbors, or using

(00:23):
cash value life insurance to supplement retirement income. Just a reminder,
you can call our office at five six three three
three two two two zero zero if you'd like to
enroll into one of my virtual Medicare community meetings I
give two every month via zoom, or you can email

(00:45):
me at Craig at Craigshilig dot com and that's my name,
cr Aig at cr AI G S C H I
L l ig dot com. Today I'd like to share
with you an article about Warren Buffett, and then I'll

(01:05):
talk about annuities again. Seven lessons from an iconic investor
At the age of ninety four, Warren Buffett recently announced
his retirement as CEO of Berkshire Hathaway, the massive holding
company he has controlled since nineteen sixty five. Buffett is

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a venerated investor due to his financial success and long
track record of stock market out out performance. The value
of Berkshire Hathaway shares grew by nineteen point nine percent
per year annualized over the six decades from nineteen sixty
five to twenty twenty four, compared with a total return

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of ten point four percent per year for the SMP
Index over the same period. Buffett's investment strategy evolved into
a blend of quality and value, which means he identifies
well run companies with solid balance sheets that are priced
fairly based on their intrinsic value, which is the earnings

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and the cash flow that the underlying business produces for shareholders.
Having bought his first stock at age eleven, he became
known for diligent research and diving deep into the financial
statements of his business and acquisition targets. Nicknamed the Oracle

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of Omaha, Buffett has frequently shared his thoughts on finance
and investing in media interviews, at Berkshire's annual meeting, often
called the Woodstock of Capitalism, and in his widely read
letters to shareholders. As a result, his admirers have access

(02:58):
to a treasure trove of investment fundamentals and words of
wisdom that might help improve their own financial lives. Here
are seven important financial lessons to be gleamed from a
selection of Warren buffett notable quotes. Keep your lifestyle in
check so you can put money to work. Do not

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save what is left after spending, and said spend what
is left after saving. Despite his billionaire status, Buffett lives
in the same modest house in Omaha that he's owned
since nineteen fifty eight. Automatically diverting a set portion of
every paycheck to a savings account, workplace retirement account, or

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an IRA is a convenient way to save money you
might otherwise be tempted to spend on more expensive home
or a new car. These savings could then be invested
to help reach financial goals. Play the long game. Buy

(04:03):
into a company because you want to own it, not
because you want the stock to go up. In Buffett's view,
investors should have an ownership mindset rather than thinking like
a speculator. Speculators take large risks by trying to anticipate
future price movements in hopes of making quick gains. The

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problem with this approach is that few people have the expertise,
time and resources to do this successfully. It's more likely
that by trying to time the market, they will sell
at the bottom and buy at the top. They might
miss some of the best trading days, and their portfolios

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will likely underperform. Long term investors take risks too, but
generally they buy quality assets and strive to build a
balance portfolio that is appropriate for their goals, time frame,
and risk tolerance. Evaluate your exposure to risk. Only when

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the tide goes out do you discover who's been swimming naked.
Market risks refer to the possibility that an investment will
lose value because of a broad decline in the financial
markets caused by unexpected economic or socio political developments. It

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would be prudent for the risk profile of your portfolio
to align with your risk tolerance or your ability to
endure periods of market volatility, both financially and emotionally. This
typically depends on your current financial position, as well as
your age, future earning potential, and time horizon, the length

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of time before you expect to tap your investment assets
for specified financial goals. Be brave when the market is scary,
be fearful when others are greedy and greedy when others
are fearful. The silver lining of a steep market downturn

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is the opportunity to buy quality stocks that you may
have long to own at much lower prices, Just as
Buffett did in the depth of the two thousand and
eight financial crisis, hold on to humility in the business world.
The rear view mirror is always clearer than the windshield.

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Buffett is willing to acknowledge his blind spots and admit
his past missteps. In his latest letter to shareholders, he
pointed out that he used the words mistake or error
sixteen times in his communications during the twenty nineteen and
twenty twenty three period. Some investors, professionals, and amateurs alike

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overestimate their skills, knowledge, and ability to predict probable outcomes.
But there's a danger in over confidence. It may cause
you to trade excessively and or downplay potential risks. Take

(07:27):
care of the people that matter to you. Basically, when
you get to be my age, you'll really measure your
success in life by how many of the people you
want to have love you actually do love you. A
thoughtful estate plan is more than a set of documents
to pass down wealth and help reduce potential estate taxes

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after you die. It can be crafted to reflect your values,
leave a positive legacy through fill and throetpathy, and help
protect your loved ones in your absence. Plus, by clearly
stating your intentions in a will or a trust, you
can help family members prevent disputes during a painful and

(08:16):
stressful time. Buy some life insurance to weather the storm
after a death. Don't go it alone. To invest successfully
over a lifetime does not require a stratospheric IQ, unusual

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business insights, or inside information. What's needed is a sound
intellectual framework for making decisions and the ability to keep
emotion from corroding that framework. You must supply the emotional discipline.
Even the most experienced investors might benefit from an outside perspective.

(09:00):
A trusted financial professional can help you develop an investment
strategy that's tailored to your specific situation, while providing ongoing
support that may help keep you from making costly, mutual
driven mistakes. Although there is no assurance that working with

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a financial professional will improve investment results, a financial professional
can provide education, identify strategies, and help you consider options
that could have a substantial effect on your long term
financial prospects. You don't have to know everything, lean on

(09:42):
their professionals to guide you through the maze of life.
Death and taxes are your only certainties. Let's talk about
as speA from PEN mutual the SPIA advantage. SPIA means
single PREMIUMI annuity. It means certainty right now. Today's higher

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interest rates create an ideal environment for spias. They provide
immediate income for an individual or a couple, either for
life or a set period of time, and are especially
attractive to those approaching retirement without a pension. Here's a

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real world example. A client retires at age sixty five
with six hundred thousand dollars in savings, no pension, and
any annual income need of ninety two thousand dollars a year.
Social Security will cover roughly forty six thousand. That leaves
a forty six thousand dollars gap from the ninety two thousand.

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Their risk averse and one predictability A life installment refund
SPIA based on PEN mutuals one May one to fifteen
rates can generate forty six, nine hundred and twenty dollars annually,
covering the shortfall which would give them peace of mind,

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a speA issues. Let's see so some of the numbers
from pen Mutual. From twenty twenty one to twenty twenty three,
SPIA sales grew by over three hundred and forty percent,
followed by an additional seventeen percent increase in twenty twenty four.

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Pen Mutual ranked the top three SPIA carriers nationwide in
twenty twenty four. Finding certainty and uncertain times income with
market participation. These are known as variable annuities. These are
for clients who still want to stay invested. Variable nuities

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with living benefits offer a compelling balance. These solutions allow
clients to participate in market upside while limiting downside risk
to their future income without any investment restrictions. In twenty
twenty three, they add a new product with a higher
guarantee and opportunities for a market roll up with a

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higher lifetime income withdrawal rate. Their variable Annuities with Living
Benefits gave clients access to low cost Vanguard funds, allowing
them to stay invested with discretionary authority while they followed
a discipline strategy suited to their risk tolerance. Why does

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this matter because market timing is very costly. A long
term buy and hold strategy has historically delivered an eight
percent return in the S and P since nineteen twenty eight,
but missing just the top ten market days in any

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given year can slash that return to negative thirteen percent.
Annuities help clients stay the course even though the market storms,
a timeless solution for timely risks. Whether you prefer a
fixed product like a single premium and media annuity or

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a variable product with living benefits, their core needs remain
the same income they can outlive. Market volatility may drive urgency,
but the risk of outliving one's money is always present,
and it always and always needs a solution for that problem.

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An annuity can offer can often be a great addition
to your retirement portfolio. Here are some reasons to consider
investing in an annuity. Your investment earnings or tax deferred.
As long as you remain in the annuity, you don't
pay income tax on those earnings until they're paid out
to you. An annuity may be free from claims of

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your creditors. In most states, if you die within annuity,
the annuity's death benefit will pass to your beneficiary without
having to go through probate. Your annuity can be a
reliable source of retirement income, and you have some freedom
to decide how you'll receive that income. You don't have

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to meet income tests or other criteria to invest in
an annuity. You're not subject to an annual contribution limit.
Unlike iras and employer sponsored plans. You can contribute as
much or as little as you like in any given year.
You're not required to start taking distributions from an annuity

(15:09):
at age seventy two. Uh that's when rmds start for
most people. You can typically postpone payments until you need
the income, whether it be immediately, immediately, or later in life.

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If you think that an annuity is right for you, your
next step is to decide which type of annuity. Overwhelmed
by all the annuity of products on the market today,
don't be. In fact, most annuities fit into a small
handful of categories. Your choices basically revolve around two key questions.
How soon would you like the annuity of payments to begin.

(15:55):
That probably depends on how close you ared or retiring.
If you're near retirement or already retired, and immediate annuity
may be your best bet. This type of annuity starts
making payments to you shortly after you buy the annuity,
typically within a year. Some go as far as thirteen months.

(16:19):
But if you're younger and retirement is still a long
term goal, then you're probably better off with a deferred annuity.
As the name suggests, this type of annuity lets you
postpone payments until a later time, even if that's many
years down the road. Second, how would you like your

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money invested with a fixed annuity? The annuity issuer determines
an interest rate to credit to your investment account. An
immediate fixed annuity guarantees a particular rate and your payment
amount never varies. A deferred fixtenuity guarantees your rate for

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a certain number of years. Your rate then fluctuates from
year to year as market interest rates change. A variable annuity,
whether immediate or deferred, gives you more control and the
chance to earn a better rate of return, although with
a greater potential for gain comes a greater pretension for

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loss of principle. Remember, in a variable annuity, those can
go down unless you have a guaranteed floor built in.
Sometimes those guaranteed floors cost a writer fee or a charge,
but it's usually worth it just to make sure you
have a guaranteed floor, but I do have clients who

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have both variable and fias or fixed index annuities. To
hedge that possibility, you select your own investment from the
sub accounts that your annuity issue would offer. Your payment
amount would vary based on how your investment performs under

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a variable annuity. Please note, a variable annuity is a
long term investment vehicle designed for retirement purposes. Generally, annuity
contracts have limitations, exclusions, holding periods, termination provisions, terms for
keeping the annuity enforce, and fees and charges, which can

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include mortality and expense charges, account fees, sales and surrender charges,
investment management fees, administrative fees, and charges for optional benefits.
Withdrawals will reduce annuity contract living and death benefits and values.

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Variable annuities are not guaranteed by the FDIC or any
other government agency. They are not deposits of, nor are
they guaranteed or endorsed by any bank or savings association. Remember,
variable annuities are manufactured by insurance companies, any guarantees or

(19:23):
contingent on the claims, pain ability and financial strength of
that issuing insurance company. The investment return and principal value
of an investment option are not guaranteed. Because variable annuity
investment options fluctuate with change in the market conditions, the
principle may be worth more or less than the original

(19:44):
amount invested when the annuity is surrendered. That's why again
i'd encourage you to get a guaranteed floor. Variable annuities
are sold by prospectus. You should consider the investment objectives,
risk charges and expenses, and under line investment options carefully
before investing. The perspectus which contains this and other information

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about the variable a nuity can be obtained from the
insurance company issuing the variable annuity contract or from your
financial professional. Please read their perspectives carefully before you decide
to invest. That's on a pen mutual annuity. Another company

(20:29):
I'll talk about briefly known as Athene Athenes in West
des Moines. They were the number one annuity seller in
twenty twenty four for given that ralorties halfway through the year. Currently,

(20:51):
they're the biggest annuity company for this calendar year as well,
reason being they offer different types of on tracks from
the ultra conservative stingy side of the annuity world, where
they're offering more benefits such as a greater withdrawal amount,

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giving certain conditions ability to capture more money that's put
into an annuity under certain provisions, such as if you
were to be confined or go into a nursing home
facility situation. Now you do have to meet the definitions

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of those contracts. But those are just a couple of
the examples of why Athene has become very big in
the annuity space. Both twenty twenty three and twenty four
and this year. Prior to twenty twenty two, you never

(22:00):
heard of a company that would allow you did take
more than a ten percent draw on your money after
twelve or thirteen months. Some of Theme's contracts will allow
you to take up to twenty percent if you don't
take it in the first year. So if you take
it in year two, now in year three, then that

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means you only have a ten percent right withdrawal. But
then in year four you could also have the option
to take twenty percent if you did not in year three,
So that is it's kind of a look back provision
where most current companies will only allow you ten percent
a year, and that's their that's as high as they'll go.

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The other thing on a theme that's also very advantageous
is they do have some set it and forget it programs.
You can pick a conservative balance or growth potential, but
the funds are invested by artificial intelligence, and it's just
kind of a set in, forget it scenario. They have

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contracts that go seven years, ten years, and fifteen years. Now,
a lot of people don't like ten or fifteen year contracts,
but if you're in your early late fifties or early sixties,
you probably could afford to take the hedge because you
might live another forty five or fifty years. So a

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fifteen would pay more than a seven would, especially given
the fact that then you wouldn't touch the asset, or
you'd touch very little of it. If you're in your
early fifties, you're not going to touch it until at
least age fifty nine and a half due to annuity
fifty nine and a half age rules. You can't withdraw

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prior to that, or you've taken a ten percent early
withdraw a penalty. Please keep some of that in mind,
But again, annuities work, and back to both ideas is
a long term contract you'd put the money in now

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and maybe not touch it for ten, fifteen years or
age eighty eighty five. Several companies do those very advantageous,
but you do have to qualify financially for some of
those contracts due to the long hold period that they offer,
so keep that in mind. Don't forget. I give monthly

(24:38):
virtual meetings regarding Medicare. I give two different companies. I
cover two different companies every month, and one meeting I
cover Medicare supplement plans with a standalone drug plan. That
meeting sponsored by Wellmark United Healthcare as a sponsor. For
my other virtual meeting, I focus on Medicare advantage plans

(25:00):
known as Medicare Parts C, and then I cover the
four parts of Medicare and the benefits of that platform.
You can call our office at five six three three
three two two two zero zero for the Zoom meeting
codes and additional dates and times. You're also welcome to
email me at Craig at Craigshellig dot com and that's

(25:22):
c r a I G at c R A I
G s c h I L l I G dot com.
I'd be happy to send you the virtual Zoom link
meeting codes. This is Craig Shelly with safe money.