Alpha Power Investing NewsletterSeptember 1, 2010
6% A Year - Worst Case Scenario
Annuity companies are constantly coming up with "living benefit" innovations. Over the past decade, this trend has created a complex variety of benefit features, some of which are, in my opinion, great deals for the average investor. In particular, these features often can be used to solve very defined investment problems. From time to time, I will focus on some of these innovations and how they can creatively address some typical investment concerns.
This week's case study deals with a fairly common concern - male vs. female longevity and its effect on investment decisions.
How John and Mary guaranteed that their investment portfolio would pass on to Mary at John's death with a growth rate of 6% a year (or more).The Characters:
John - age 69, with health issues serious enough to practically guarantee that he will predecease his wife.
Mary - age 65, in excellent health with longevity in her family history.
Both are aware of higher return long-term investment strategies but are afraid that volatility will go against them when Mary needs the money. So they stay invested in low-returning, guaranteed investments. Their savings are providing no "extras" and they are reluctant to take income from their investments.
Because the investment is an annuity, the death benefit is paid directly to Mary without probating. Mary then pays the ordinary tax rate on the accumulated profits.
Now, knowing that Mary is guaranteed to receive an appreciated value at John's death, the couple chose a riskier strategy which should generate higher returns over time. Since they are really smart, they hire Alpha to manage the account for them using The FormulaTM combined with bond funds. You can read about The FormulaTM and take a look at historical investment results on our Home page at www.alphaim.net.
If, in the future, John and Mary want to cancel the contract, they can do so (after four years) with no penalty. If they need "extras" from the account, they can withdraw funds without undoing the escalating death benefit feature (the death benefit is naturally reduced by the amount withdrawn).
For complete information on the annuity product and the Alpha investment strategy featured in this case study, please call me at
This product is offered by prospectus only and the case study can be properly understood by knowing the details of the offering as explained in the sales literature and the prospectus. The insurance company in the case study is rated AA by Standard and Poor's.Sincerely,
Jerry Minton, Ph.D.
Disclosure: This is not an offering. Guarantees are based on the financial strength of the issuing company.
© 2010 Alpha Investment Management Inc.
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