By Lawrence Castillo
From 2005-2019, one of the most popular programs on television was Deal or No
Deal, hosted by comedian Howie Mandel. In this program, a contestant would choose
one of 26 numbered briefcases at the start of the game. An identically-clad, glamorous
model carried a briefcase filled with cash ranging from one cent to $1,000,000.
Throughout the game, the player was periodically offered a deal from a shadowy
figure known as “The Banker.” They could choose to take the sure thing- a cash
amount- and quit the game. Or, they could gamble it all on the possibility that there was
more money inside the briefcase than The Banker offered them. While the amount The
Banker offered was probably much more cash than any of these contestants had ever
had at one time, it was not enough to keep most of them from yelling, “No deal!”
Episode after episode, I watched as contestants chose risk over certainty, motivated by
the slim chance that their briefcase contained a million dollars. It rarely, if ever, did, and
many contestants went home with nothing but empty pockets and devastated dreams.
As a retirement income strategist, I see the same scenario in people’s daily finances.
Too many people too close to retirement choose risky investments over safe and sound
products designed to provide lifetime income.
Sometimes these folks chase after returns because they believe they haven’t saved
enough. Or, they may feel that exposing their savings to riskier assets can make up for
growth lost after more than a decade of low interest rates. Often, it is a poor decision
made simply because they have inherent biases and misconceptions about the
retirement planning process. They see others losing money but never believe it could
happen to them.
So, let me ask you a question. How much money do you think you can afford to lose if
you are in retirement or very close to retirement age?
When I ask prospective clients this question, they often respond very strongly.
“Nothing! I can’t afford to lose a single penny.”
Bu then, I look at their portfolios and am astonished to see that many of these people who
are so adamant about not losing money have 60, 70, or even 80% of their money in the
stock market or in 401ks or IRAs. The remaining funds are typically parked in cash or
CDs, earning them little to nothing.
The saddest thing is when I hear of 70-year-old retirees who have lost 40% of their life
savings in a market downturn. They probably will not have enough time to recover from
such devastating losses and will experience a more stressful and less fulfilling
The product I recommend most to my clients for use as a financial cornerstone is the
fixed index annuity or FIA. FIAs are tax-advantaged, long-term vehicles that protect your
initial investment and give you a chance to participate in market gains. FIAs can provide
a solution to the "deal or no deal" dilemma nearly every retiree and pre-retiree will face.
Returns in a FIA are predicated on the performance of an underlying index, such as the
S&P500®. Your FIA’s benchmark index follows the market, but your money is never
directly exposed to its ups and downs. FIAs may give you more growth than a CD or
savings account, with less risk.
Fixed indexed annuities are not for everyone, though. For example, if you are a day
trader in your 40s who loves the thrill of risking it all, you probably won’t want a FIA. You
may also not need a fixed indexed annuity in your portfolio if you don’t care about
having a lifetime income stream to supplement Social Security or your pension.
However, if you like the idea of guaranteed income that you won’t outlive, you want the
opportunity to create a legacy for your spouse or other loved ones, or you are
concerned that you might outlive your savings, then you should contact me. I’ll be happy
to answer your questions honestly and thoroughly and provide everything you need to
make the right decisions with your money.
Is that DEAL?