St. Augustine's Press
When you take a historical view of the stock market (over the past 100 years), you can see that it has produced the highest returns over all other traditional passive investments.
So why doesn’t everyone put all his or her money in the stock market? Why would a person take out a CD paying 2%, or a bond paying 4%, when stock market returns have averaged more than 12% in annual returns over the past 20 years and more than 10% since 1926?
The answer is simple. Tracking the stock market’s history, wise investors know that the market can lose close to 90%. And what kind of return do you need to recover a 90% loss? Once you’ve lost 90%, a 100% return the next year will take you only a tenth of the way back. If you started with $100,000 and it is now worth $10,000, a 100% return will put you at $20,000. You would need a 900% return to bring you back to even. And how long does it take to get a 900% return on your money? Probably more time than you may have during retirement.
What if you were told that you can be in the stock market and have your principal guaranteed by a financial/insurance company? That would get your attention, wouldn’t it? What if you knew that the three largest financial companies in the world offer this kind of protection? Wouldn’t that drastically affect the way you look at investing?
Well, such a thing exists today. This type of guarantee is provided through variable annuities, called Living Benefits. It was created because people began to ask, “What good does a death benefit do me when I’m dead? I want my money to benefit me in retirement, while I‘m alive!” Living Benefits are simply guarantees that are backed by the claims-paying ability of the issuing insurance company. There are presently four kinds of Living Benefits:
1. GAV (Guaranteed Account Value)
GAVs are also known as GMABs (Guaranteed Minimum Accumulation Benefit). This type of Living Benefit will restore your account to the original amount if after so many years (usually five to 10) the account is below the amount invested. Some companies offer this feature with the ability to lock in gains in a rising market.
2. GWB (Guaranteed Withdrawal Benefit)
GWBs are also known as GMWBs (Guaranteed Minimum Withdrawal Benefit). A GWB allows you to begin withdrawing money from the account now with the assurance that, regardless of market performance, you will receive at least the original amount invested as long as a certain percentage is not exceeded (range is usually 5 to 12 percent annually).
3. GMIB (Guaranteed Minimum Income Benefit)
The GMIB protects the annuitization value of the contract by beginning with the amount invested and assigning a guaranteed growth rate to that amount (usually 5 to 7 percent). GMIB is sometimes most effectively used for its withdrawal feature. If the company allows dollar-for-dollar withdrawals, you can withdraw the guaranteed growth rate based on the original amount even if the account is losing money due to poor market performance. If after doing this for so many years you find there is little to nothing left in the account, the principal can be restored and annuitized as an income for life.
4. GLB (Guaranteed Lifetime Benefit)
The GLB is the latest Living Benefit to emerge. It guarantees that a percentage can be withdrawn from the account and will continue for life even if the account runs out of money.
This creates a paradigm shift from traditional investing, the most common in use today being Modern Portfolio Theory (MPT), introduced by Harry Markowitz in “Portfolio Selection,” in the 1952 Journal of Finance. Basically, MPT means not putting all your eggs in one basket, but the problem with MPT is that if the market continues to follow its historical trend, only one asset class will produce double-digit returns, and that is stocks. With Living Benefits, you can remain in equities, historical-ly the most wealth-producing asset class, because the company you’re buying your plan from is guaranteeing your investment.
The Guaranteed Investor gives a step-by-step guide to this new way of investing from one of the most knowledgeable financial planners in the country on Living Benefits. Edward F. Camp has been in Financial services since January of 1990. His primary market has been the senior market., so he has looked for investments that could produce the highest returns safely due to the fact that the majority of his clients were through their working years and couldn't afford to lose the nest egg. Because of this, as Living Benefits began to emerge, Camp became an immediate student of them. He currently has the only website on line dedicated to the sole purpose of explaining Living Benefits, which can be accessed by either going to VALivingbenefits.com or Livingbenefits.info or, finally, guaranteedinvestor.com.
High Opportunity, Low Risk “Living Benefits”
224 pages, 6” x 9”, jacketed clothbound, $22.00
ISBN: 1-58731-353-7
preface, introduction, illustrated,
notes, bibliography, glossary, index
world rights