“My first rule of investing is to never lose money. My second rule of investing is to never forget the first.”
- Warren Buffett

At Senior Financial, we specialize in what we call “Safe Money Strategies.” We are experts at finding yield in ways that protect your principal, while still providing reasonable interest yield for your retirement savings.  

It is now possible to benefit from the stock market’s advances without losing one’s market-linked interest credits during a subsequent decline. 

These strategies are financially sound and based on actuarial fundamentals.

Safe Money Strategies

What is a Safe Money Strategy? It is protecting market-linked interest credits without the possibility of losing them. Innovation in the financial services industry has made it possible to partially benefit from the stock market’s advances, without losing those credits during a subsequent decline. There is innovation in every industry (think of what cell phones looked like 15 years ago)—and the financial services industry is no different. What was available to you when you began planning for retirement is different from what is available to you today.

One of the most popular savings platforms of the last 17 years are called Fixed Index Annuities or FIAs. Essentially, these vehicles allow you to gain market-linked interest, without exposing yourself to the risk of actually being in the market. This interest is credited once a year, typically on an anniversary date, and can never be lost to a subsequent decline.

Take a look at the chart below. This is an actual client account. The red line shows the change in valuation (dividends excluded) of the S&P 500 index from the FIA owner’s contract inception date of September 30, 1998, through each subsequent contract anniversary date (through September 30, 2011). The blue line represents their actual contract values during the same period.

An Actual Index Annuity Owner

Looking at the past decade, you can see this type of annuity has been a godsend to many people.

Beyond the impressive differential, please note three other points:

1. FIAs are not designed to out-earn long-term bull markets. They will credit a percentage (but never all), of an index’s advance. In exchange, an investor will never lose past interest credits during a subsequent collapsing market. FIAs are a great fit for those looking for steady growth, but also for the security of having assets completely protected against market losses.

2. Owners have the annual option to reallocate some or all of their account to a Fixed Account option within the FIA—not just to index-linked accounts. This option could have yielded around 3 percent simple interest in the chart above, but the client chose to stay linked to the indices. In lieu of the “zero interest credit” they received—one that is certainly preferable to a 30 percent loss—the annuity owner could have grown their account by better-than-CD rates of interest during those decline years, resulting in an even higher ending value than the one shown.

3. The blue line represents a 1998 product that is no longer available in today’s market—a relic by today’s standards. The blue line is an antique, when compared to the state-of-the-art FIAs available today, platforms with as many as seven different market indices to choose from (only one index was available in the 1998 platform.) Today’s indexed annuities offer crediting options that were not available during the period shown above—options that can increase one’s potential for an even greater rate of return.

In addition, there are now at least five different interest-crediting strategies to employ across as many as seven indices, and varying contract terms, some of which include up-front premium bonuses of between 4 and 10 percent. While such bonus products require longer terms, they have been especially popular with retirees fleeing risk-depleted holdings for the stability, guarantees, and safety of FIAs. In exchange, they may use the bonus to recoup some losses from stocks/mutual funds, or even to offset any remaining surrender penalties they might still have getting out of CDs or other lower-yielding annuities.

In short, were today’s highly evolved, state-of-the-art Fixed Index Annuities available back in September of 1998, it is reasonable to conclude that this client’s ending value would have been considerably higher. 

A final point: As we grow older, we prefer simplicity to complexity.

During the past 23 years in private practice, we have observed many couples suffer losses, confusion, and frustration when the “money person” in that marriage suffers a debilitating illness, such as a stroke or sudden-onset dementia. Virtually overnight, the less-involved spouse is now a full-time caregiver, as well as the new “portfolio manager” of the couples’ complex, and still-at-risk holdings.

Unfortunately, what we have seen happen is that spouse—now tasked with the daily care of their loved one, constant interaction with doctors, pharmacists and home health aides, and shopping for assisted living—becomes completely overwhelmed when a thirty page quarterly investment statement arrives in the mail. Even a dutiful and watchful adult child is often too busy with their college-aged children and their careers to oversee the funds with the same vigilance their spouse once did.

At Senior Financial Resources, we have met with countless couples after this scenario has occurred: couples who delayed simplifying their holdings until after either a major life-altering health event, or worse, a loss of their loved one.

If simplifying your holdings makes sense when times are difficult, doesn’t it make even more sense when both spouses are healthy and have the mental capacity to do so together? We believe so, and encourage all retired couples to learn more about Safe Money Management, sooner rather than after a major market decline, or worse, the loss of the "money person" in the marriage. We’re also happy to review your current income needs, especially if you aren’t completely sure that what you’re doing will be sufficient to last your lifetime. Think of it as getting a second opinion at a specialized doctor’s office.

Stop the Losses. An Educational Resource.  

Wealth Transfer Strategies

“If we could show you a way to double, triple, perhaps even quadruple the money you now have earmarked for your childrenright away, without market risk, income tax-free to your childrenis that something you’d like us to include in our recommendations at our next meeting?”

We’ve asked this question of new clients hundreds of times since 1989, and we are still waiting for someone to say “no.”

Having implemented many such innovative life insurance strategies on behalf of our clients, we have provided them and their heirs with financial choices, generous endowments, and peace of mind. These sums are used for more than just income, though that is a noble use in itself. Here is just some of what these funds have been used for:

  • College funding;
  • Charitable bequests and legacies
  • Paying for estate taxes
  • Avoiding the liquidation of assets

At Senior Financial Resources, we believe retirees and their heirs should have every choice, every benefit, every tax advantage, and every cutting-edge strategy available to them.


Lower Your Taxable Interest - Updated in 2014 for Your 2013 Taxes


Long-Term Care Planning 

The Problem: The wave of baby-boomers that began receiving entitlements in the last year is an unprecedented number in American history. As medical advances keep our bodies alive longer than ever, advances in treating dementia, stroke, Alzheimer’s disease, and other mentally degenerative illnesses have been slower in coming. It is now commonplace for a man or woman to suffer a debilitating stroke at 68, and then live into their 80s. This situation requires full-time supervision and medical care.

A circumstance such as this can deplete an entire lifetime of savings, leaving the healthy surviving spouse dependent on Medicaid in that person’s later years. Any inheritance that couple may have planned on leaving their adult children will have been spent by necessity.

Statistically, Americans have only 1 out of 240 (0.4 percent) chance of needing to file an auto-insurance claim, and even more remote 1 out of 1,200 (0.08 percent) chance of filing a homeowner’s insurance claim. However, we pay these insurance premiums as an accepted part of our everyday lives.

Now, think about the odds a person will need a form of long-term care after the age of 65. The odds are an astounding 68 percent! However, some couples still hesitate to purchase this important coverage.

Why waiting is a mistake: you must “health qualify” for long term-care insurance (LTCI) protection. When your health changes, you will pay more or be unable to qualify entirely. The percentage of applicants that are “Health Declined” increases as you age. After age 60, it is 23 percent; after age 70, it is 45 percent.

There is a new reality in need of acceptance and planning for long-term care; it is an expense that many are reluctant to add to their retirement budget. In context, however, embracing this critical coverage usually amounts to devoting less than 0.5 percent of one’s net worth annually, to ensure that the other 99.5 percent of their assets do not get spent down caring for a spouse after an illness.

First, LTCI is asset insurance—no longer “nursing home insurance”—since it insures assets and provides care options elsewhere, such as home care and assisted living. The LTCI you may have understood 10 years ago is markedly different from the varied options available today. LTCI provides for care in the home, both long- and short-term, as well as assisted living and similar options. An uninsured couple at the mercy of Medicaid—which will only cover them after they have spent their own funds down to the poverty level—is highly unlikely to have such care choices.

Policy Features: Today’s policies include features that didn’t exist even a few years ago:

• Family caregiver training allowance;

• Return-of-premium rider;

• Third-party pending lapse notification; and

• Home-modification benefits (coverage for the installation of handicapped toilets, ramps, and remodeled/widened doorways)

The items above are just a few of the features. Today’s long-term care policies have evolved to accommodate today’s growing need for flexibility. There are new asset-based policies that not only protect you like a traditional long-term care policy would, but they also have a return of premium option and a tax-free death benefit to your heirs. This addresses the concern of paying for something you may never use.

At Senior Financial Resources, any long-term policy must meet three benchmarks:

• It should be designed, not sold;

• It must contain relevant benefits that a couple will actually use; and

• The premium must be affordable well into the future.

What good does it serve to “pile on” benefits, only to have the client lapse a policy they cannot afford three years later?

Simply put, it is always better to solve some of a problem than none of it. The best coverage includes the features a couple is most likely to use.

We look forward to assisting you in the important decision that will insure your retirement against the single biggest threat it faces: impoverishment due to a combination of sudden and devastating illness, and an ever-longer life expectancy. Give us a call today!

Learn how to protect your future with a long-term-care policy