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This Chart Blew My Mind

Sorry that was a little clickbaity, but now that I’ve got you here, I’ve got a few nice charts for you. 

First, most of you reading this use a fair amount of annuities and know what they can do for clients in terms of risk mitigation. That being said, many times clients don’t quite understand the big picture, thinking in smaller time frames. Mostly because of the 24/7 news cycle. It’s either fear or greed. 

Well, this chart is the “Big Picture”, in regards to the Dow. It goes back to 1896. It’s amazing to see how far the market has come. But what’s really interesting to me, and I’m sure for those of you who use annuities, are how long certain recovery times were during bear markets. 

Click here to download the chart

The problem for retirees is they don’t know what type of market cycle they’ll end up retiring in. 

This is a great lead in to discuss sequence of returns risk to clients. My favorite, non insurance company piece, is here from Blackrock. It’s two pages, with two pictures. I love pictures, your clients probably do too.

Page one shows three separate portfolios averaging 7% return, but in different sequences. Every five years, the returns are repeated. As you can see, all the portfolios have the same amount of money at age 65. This page has no withdrawals being taken, showing average return matters more than sequence during accumulation phase.  

Page two is where the tears come for Portfolio C. In this page, Blackrock shows $60,000 inflation-adjusted annual withdrawals off of a $1 million dollar starting point. As you can see, Portfolio C runs out of money far before portfolio B and C, ultimately showing that the sequence in which you get your returns makes a huge difference in retirement.

With the S&P hovering at about -20% for the year, anyone retiring now or soon should understand the implications of sequence risk. Therefore, clients must have a strategy to face sequence of returns risk in retirement. 

Even batman knows what sequence of returns risk is. 

Hope this gave you some ideas for the field. If you want to talk about our top products right now or dive deeper into the sequence of returns conversation please give us a call. 

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A fixed annuity is intended for retirement or other long-term needs. It is intended for a person who has sufficient cash or other liquid assets for living expenses and other unexpected emergencies, such as medical expenses. A fixed annuity is not a registered security or stock market investment and does not directly participate in any stock or equity investments or index.

Indexed annuities are insurance contracts that, depending on the contract, may offer a guaranteed annual interest rate and some participation growth, if any, of a stock market index. Such contracts have substantial variation in terms, costs of guarantees and features and may cap participation or returns in significant ways. Any guarantees offered are backed by the financial strength of the insurance company, not an outside entity. Investors are cautioned to carefully review an indexed annuity for its features, costs, risks, and how the variables are calculated.

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