Cynthia de Fazio 00:00
Welcome to Retire Smart Austin. My name is Cynthia DeFazio, joined today by Phil Capriotti, Sr. and Phil Capriotti, Jr. of Empower Wealth and Tax and to our viewers at home. Are you asking yourself, what are annuities and is it possible? Are they better today than they were 10 years ago? 20 years ago? Well, we’re going to do a deep dive into the world of annuities on today’s show. So, stay with us, Phil, how are you today?
Philip Capriotti 00:52
I am wonderful Cynthia, and I want to introduce my son, Philip. I know the viewing audience talks to me. You know that they hear us talk about my sons are involved. Our family’s involved. He’s going to be doing a lot more shows with me. This is Philip Capriotti, Jr. folks, and he runs out of the Cedar Park office. He’ll be running that soon as we get more acclimated and dig into our Horseshoe Bay office. But he’s going to be joining us over the next few weeks and doing some shows and testing his field, his pool of knowledge, which is vast. So, looking forward to it.
Cynthia de Fazio 01:29
It’s been a while, Philip, since you’ve been on the show. I’m so excited to have you back. I can’t remember the last time, but yes, I’m excited to welcome you back. And I know the viewers are like, yes, we get the sun this time too. We get dad and the son. So, wow, the world of annuities, and let’s talk a little bit about it, because people are very curious about these products right now. They’re in all of the news. They’re kind of a buzzword, annuity, annuity. So, let’s talk a little bit about why they are better now than perhaps 10 or 20 years ago, Phil, may I start with you please?
Philip Capriotti 02:02
Yeah, sure. You know. The funny thing is, we have folks now that call in from both TV and radio and Philip tells me he goes, Yeah, these folks come in are like, Well, tell me all about these annuities. Yes, yes. A lot of folks, I would say, many do not have pensions. Like years ago, you would retire and your company would give you a pension, and you’d have social security, so you’d have two forms of income. About 30 or so years ago, a little further back than that, companies realized we don’t want to finance pensions. We have a great idea, and they kind of collude it with the government. And that collude might not be the right word. Let’s see coordinated. Okay? And they said, You know what, we really don’t have to fund these pensions. Let’s get folks to save for their own retirement, and we’ll just throw them a match at 3%, a 4, or 5% match. So, what’s happened is most folks are concerned about Social Security running out of money. It’s not going to happen, not for those of us who are baby boomers. We’re never going to lose Social Security for a number of reasons, which we won’t get into. But folks want to get a portion of that 401(k), and turn it into mailbox money. There’s a right way and a wrong way to do it. So, starting about 20 years ago, annuities, you know, was the famous dirty word, okay, a lot of financial advisors, oh, don’t buy an annuity. And really, I really erred on the side of those advisors. Back then, the product designs really were less than adequate. In my professional opinion, they didn’t allow the client or the annuity beneficiary or the annuitant to get enough return in the market. So, they were one dimensional. The other thing is, the annuities of yesteryear did not allow you to convert it to a Roth tax free income. And we’re going to talk about that now. We want to put, we may want to put 235, 100,000 into it, and then convert it into a Roth, and then turn on tax free income. Wow. Years ago, you weren’t allowed to do that. It was unheard of. Also, many companies wouldn’t even allow you to do Roth conversions. Internal Roth conversions, we’re going to talk about that. And quite frankly, you couldn’t make more than about two or 3% 4% at max. So, all of that has changed, and it’s changed significantly. And so, with that being said, we decided, let’s do a show, because many folks had the stigmatism of these older annuities. Annuities are no good, my advisor told me not to buy one. Well, that might not be very good advice. I would say only buy an annuity from a fiduciary. Okay? I. Who’s not only a registered investment advisor, but also holds dual licenses as generalized license, because that annuity, they’re obligated to act in your best interest. We are obligated. So, you want to make sure, if you want to purchase an annuity, it’s not only the right one for you, okay, but it’s one that actually looks out and looks after your best interest.
Cynthia de Fazio 05:25
Okay, Phil, thank you so much, Philip. Are you finding that the products today, do they have better transparency, like the clouds have kind of cleared and now you can just understand them better for people that are coming into the office.
Philip Capriotti, Jr. 05:39
Absolutely, you know, the ability to meet with clients online and show them their accounts has really made things extra transparent, still confusing, because there are so many different facets to having the right annuity for you. You know, sometimes when you purchase an annuity years and years and years ago, your financial goals change. Maybe your income changed. Maybe your income need changed. So, it’s important that we keep you in the right type of products, because, because newer annuities that have come out more recently or been issued more recently, have much better growth potential, I would say a lot of them actually can beat out other income paying annuities as well that were written years ago. So, we have to make sure we have the right goals. Once we do that, we basically determine what the best product is available and show them a couple of options.
Cynthia de Fazio 06:33
Sure, because I’m sure, Philip that so many people that are coming in, they don’t even know what they have, if they currently have an annuity. It’s kind of a mystery, like, I don’t know what I have here. Take a look. Would you find that to be true?
Philip Capriotti, Jr. 06:43
Oh yes, absolutely. A lot of folks come in and have no clue what the product is. So, it’s very helpful to go through each individual product. There’s been so many different products over the years. So, it’s very important that we study what we have and make sure we can make an improvement to the financial plan.
Cynthia de Fazio 07:01
Philip, thank you so much. Phil, are you also finding that there’s more indexing options overall?
Philip Capriotti 07:07
Well, not only are there so many more index crediting options available, I would say for folks who bought an annuity 15, 10, five years ago, even up as far as 2022, here’s how the basic annuity structure works. The insurance company is going to make $1 one way or another. So, the goal has to be mutually beneficial. The insurance company- and is based on what I’ve noticed the 10-year treasury. So, the higher the return for the 10-year treasury is, in all probability, the better the annuity product is going to be. Let me explain why. Let’s assume for a moment, the 10-year treasury is paying out 4.4-4.5%. The insurance company has to make a buck. They have to keep the money safe. So, they’re going to take 1%, 1.1, a certain percentage off the top of that 10-year treasury, the higher the Treasury yield. Okay, the company isn’t really making more per se, but they have more additional guaranteed revenue to buy higher participation rates, larger caps and additional indexes. So, for instance, this is why that- one of the reasons they’re so much better. When you bought an annuity and a 10-year treasury was a 2.2, 2.3% insurance companies still taking one, 1.1 1.2 an arbitrary number. They’re taking something off the top. Okay, now what’s left over in that 10-year treasury? It might be 1% well that might only be able to buy 30% growth in the s and p or a cap where they can only make 3% or 4% now that we have treasury yields at 4.4, 4.5% the insurance company is still going to take 1% 1.1% but now they have much more, many more dollars in that guaranteed pool of money, three or so percent now they’ll get participation of, say, 80% growth in the index, 90% growth, and then multiple indexes. We can get the S&P, we can get the NASDAQ. We can use a lot of different indexes with no spread, no fee and no cap. So, what we’ve- in fact, I even have a billboard that says, refin- Do you own a bad annuity or an old annuity? Refinance your retirement. Call us today to see if you’re getting the best value for your dollar.
Cynthia de Fazio 09:34
Phil, thank you so much. And Philip, thank you so much. On that note, we’re going to take our very short commercial break. Are you in the viewing audience today asking yourself, do I have annuities that I don’t understand? Am I in the right product for my current situation? Perhaps I’ve had one for 10 or 15 years, but I haven’t even really looked at it. Well, this is the perfect opportunity for you to call in today and to book your complimentary consultation with Phil and Phillip. The number is 888-818-6557, 888-818-6557, or if you’re rushing out the door, you can grab your smartphone, click on the QR code at the bottom corner of your screen. Schedule your time accordingly with Phil and Philip, let them know what your goals, your dreams and your hopes are for retirement, and make sure that you’re in the right annuity product for your present situation. Today’s show is all about annuities. We have so much more on Retire Smart Austin when we return.
Philip Capriotti 10:33
Do you own an annuity? Are you aware of what type of annuity you own? For years, annuities have been a cornerstone of a comprehensive retirement income plan. But they’re not all created equal, and your current annuity might not be serving your retirement income goals with rising interest rates, that could mean better guarantees and better benefits for you. In short, potentially more income is your annuity obsolete. See if your old annuity measures up to the new and improved benefits and features of today’s cutting-edge annuity products. Call us now for a complimentary annuity review. Thank you very much, and God bless you.
Cynthia de Fazio 11:19
Welcome back to Retire Smart Austin. My name is Cynthia DeFazio, joined today by Phil Capriotti, Sr. and Phil Capriotti, Jr. of Empower Wealth and Tax. And if you’re just joining us, we’re talking all about annuities and how you can understand what type of annuity you have and how it fits into your overall retirement plan. That’s what today’s show is all about. Phil, I want to ask you a very important question, Junior, more growth potential? Are a lot of people coming in today and sitting down with you and asking, you know, Phil, the annuities of today? I mean, is there more growth potential than in years past?
Philip Capriotti, Jr. 11:53
Absolutely, yeah, absolutely. A lot of clients are very interested in the accumulation or the growth potential and accumulation annuity products, specifically the fixed index accumulation products, there’s definitely a lot more growth potential with different indexes, different index crediting strategies and interest rates being higher, the bonuses are bigger. There’s a lot. There’s a lot to benefit from that.
Cynthia de Fazio 12:21
Most definitely. And I know that you’re so passionate about making sure that people have the right product for their current situation. So that’s always so important. Phil, I know you want to say something. I can see it.
Philip Capriotti 12:33
Well, the thing is, one of the disadvantages of the older products, back when we had lower 10-year yields on the Treasury and investment grade corporate bonds is the most you can make of these annuity products if they weren’t designed specifically for income. I like the income and accumulation. I like the, you know, kind of have two values there, one of the one of the one of the disadvantages of the older annuities, they only made an average of two or 3% a year. These newer products have no cap. They have no spread. They take nothing off the top. They have no fee. Many of these older annuities had a 1% fee, or even higher, they had caps of two 3% so we’re seeing now with the newer products, they have no fee, many times, they’ll have a bonus of up to 14 15% that’s designed to help folks get out of older products that may have high surrender values or market value adjustments. And the other thing is, some of the indexes, we can get like, 80% growth in the NASDAQ or the S&P with 0% downside. Wow. And folks are like that. They’re like, I don’t need 100% growth in the NASDAQ. 80% is fine, as long as I don’t have any negatives. A lot of the newer products are actually the first rate. Products also have what we call high watermark lock ins or so. What that allows is I may have five different indexes. I might be using the NASDAQ, the S&P500, Morgan Stanley, Pimco, to name it, Bloomberg, just to name a few. And I can lock in the interest on each index separately each year. So, in other words, give an example. Back in like February, March, our PIMCO indexes, some of them were up, 22, 23, 24% and when the market started to drop, we saw these indexes drop. You know, in one day it would drop to 17, 15, and so forth. So, we were able to lock in that index. So even though the so we’re able to lock the interest rate in before the anniversary date, the older products, you had to wait for the anniversary date before you could lock in your interest. Now that’s a game changer. So- and we don’t have to lock them all in at once. So, each year, we get a high watermark Lock in on each individual index that we choose for the client. Again, you have to have one of about. 2% of the annuity products. There’s over 2,000 different annuity products, and they’re not all built that way. I would say there’s about a dozen out of 2,000 that I would own myself, which means that I would recommend to clients.
Cynthia de Fazio 15:15
Okay, okay. And I love that, because I think that people, for the longest time, were unsure and nervous about annuities. Obviously, there was a commercial that was on that said, I hate annuities, and you should too. We’ve talked about this, but wow, they have come a long way. Philip, correct, absolutely, yeah, and people are using them now for security.
Philip Capriotti 15:35
I’ve had I’ve had clients say, I don’t want an annuity. I had an annuities halfway through the year, I was up 9% by the time the anniversary came up, came around, it was at zero. And so, this was a common complaint, one of the major companies we have like a focus group, and they ask advisors who are fiduciaries across the country, what do you want us to do to improve the product for the client. And so, we give these insurance companies, especially the larger ones, basically a laundry list. We need to be able to do Roth conversions. We need to have no cap. We need to be able to have more crediting options. And each year, what’s happened as interest rates have increased, the insurance companies have come along, some of the larger companies, some of the better companies, I would say, some of the companies that we will recommend have listened to the public and they made them more client and user friendly, as opposed to just more company friendly.
Cynthia de Fazio 16:38
That’s amazing. And what about the ability to have improved liquidity if someone needs to pull money out quickly, Philip, has that changed as well?
Philip Capriotti, Jr. 16:47
It has, yes, absolutely. So, it’s very frequent that you’ll find most annuities during their surrender period have a 10% free withdrawal that they’re allowed to take out as a maximum. But some products out there will actually, if you skip one of the years of taking part of the 10% free withdrawal, it will tack on to the next year, so you can take 20% every other year as a free withdrawal. So, the liquidity options have also gotten better.
Cynthia de Fazio 17:16
I love that, because it seems like so often people when they’re looking for just emergency cash, their first reaction is to pull from a retirement account, but you have a penalty, but you can utilize that option with the annuity.
Philip Capriotti 17:29
Yeah, you have a free withdrawal. Normally, it’s either 10, Some of them are up to 20% per year, but you should not put all your money into an annuity anyway. There shouldn’t be more, in my professional opinion, no more than somewhere between 20 and 30, 35% and it should be designed for one of two reasons. Number one, increasing tax free income along with Social Security and or if you don’t need the income, it should be tax deferral, because remember the whole idea behind annuities is your- the earnings that it will retrieve or receive each year are not taxable until you withdraw them. So, it’s tax deferred. And so, for many of our clients, they’ll use an annuity. They’ll average 5, 6, 7, 8% return per year, and they’ll use that annuity while they’re doing Roth conversions, because they don’t want the income in their investment accounts to get in a way of increasing their tax bracket while they’re doing Roth conversions, from their 401(k) into their Roth IRA, or Roth 401(k). We do a lot of that tax planning strategy, so we can use annuities, not just for guaranteed income, like a pension, like folks used to have, but we can also use it for tax deferral and accumulation. I want a good 5, 6, 7 or so percent every year accumulation, but I don’t want to pay taxes on it until I take a withdrawal.
Cynthia de Fazio 18:58
That makes perfect sense. Well, Phil, I know that you have a very special offer to the viewers at home, a message, if you will. Can you spend some time talking about that please, before we take our next commercial break?
Philip Capriotti 19:08
Sure, I will. You know, it’s kind of funny, and by the way, I kind of like the glasses. No, it doesn’t make me look smarter, but it makes me see better. Click the QR code that you see. You know, we’re seeing folks that say: Phil, You know, I had one gentleman come into the Horseshoe Bay office and he said, Look, the only reason I’m here is I got to listen to my wife and watch you and take and take and take detailed notes about everything that you’re saying. She’s been doing this now for four or five years. If you’re one of our viewers that have been watching us for the last 3, 4, 5, going on six years, give us a call for complimentary consultation. If you have an annuity, come on in. We’ll do a comparison analysis to see if this annuity fits into your retirement income. Plan, or maybe it needs to be refinanced, so to speak, if you have an investment portfolio and your current advisor is not talking about tax efficiency in retirement, come in let us run a complimentary Morningstar report and a portfolio observation and Executive Summary by our team of certified financial planners, and let’s see exactly what kind of return, what type of risk and what type of fees you’re paying to that financial advisor that may not be as transparent as you’d like it to be. So, call 888-818-6557, or if you’re shy on the phone, just click the QR code. It’ll take you right to our landing page. If you want to get in quick, do the fast track. Because if you don’t hit the fast track, it may take you three or four weeks to see us. If you want to get in the following week, hit fast track, and we’ll put you in front of, we’ll put you in the fast track. Some folks, you know, they’re not in a hurry. Other folks are like, You know what? I waited long enough, or I procrastinated long enough. Let me do it now. Click the QR code. You can hit empowertaxbill.com we also, now, if you’re interested in estate planning, empowerlegacyquiz.com, and if you’re interested in tax efficient retirement income planning, hit empowerrothquiz.com, but click the QR code and come on in and meet the family.
Cynthia de Fazio 21:27
Philip, thank you so much, Phil. Thank you so much to our viewers at home. That number to call is 888-818-6557, or go ahead, grab your smartphone, click the QR code. Come in and meet the family. We’re going to take a very short commercial break. Don’t go anywhere. We have so much more regarding the world of annuities when we return.
Philip Capriotti 21:46
Hello. My name is Philip Capriotti, if you’ve already filed for Social Security and would like us to fast track you straight to a licensed fiduciary to create your tax efficient retirement income plan, we’ll be happy to accommodate you. You know, one of the most important priorities to ensure that you do not become tax poor in retirement is to, number one, structure a tax efficient retirement income plan as well as a comprehensive Morningstar report. This will ensure that you understand three major variables. Number one, how much risk are you taking? Number two, how much return Are you receiving? And number three, how much are your internal and external fees to fast track your meeting with one of our licensed and experienced team members, just click on the link below, complete the form attached so we can provide you with an accurate and detailed plan. Let’s start empowering your retirement right now.
Cynthia de Fazio 22:52
Welcome back to Retire Smart Austin. My name is Cynthia DeFazio, joined today by Phil Capriotti, Sr. and Phil Capriotti, Jr. of Empower Wealth and Tax, and we’re talking all about the world of annuities. Are the products today the same that they were 10 and 20 years ago? The answer is no. In today’s show, we’re going to do a deep dive, obviously, and talk about the different benefits that are available now. This is amazing. I love today’s show because it’s often complex and hard to understand when you’re talking about annuities, but both of you gentlemen are making it so easy and so transparent. So, Philip, I have to ask you better optional inflation adjusted income with annuities, because we know inflation goes up, so obviously you’re going to need more cash. Do annuities adjust to inflation?
Philip Capriotti, Jr. 23:37
Absolutely yes. Annuities can be adjusted toward inflation or can be adjusted due to market performance. So, a lot of times with these income products that do have inflation benefits or increasing income strategies, what will happen is we will…
Philip Capriotti 23:58
Give an example.
Philip Capriotti, Jr. 24:01
Yeah, give me an example. Well, turn on the income stream, and when the market goes up, the index crediting strategies go up, and the income goes up.
Cynthia de Fazio 24:08
Okay, excellent. And everyone wants more income to keep up with the price of, let’s say oranges in the grocery store, which are, like, astronomical.
Philip Capriotti 24:16
Well, a lot of the what I call, you know, five-star A+ annuities. Let’s say your return was 3% well, they’ll add 3% into your actual accumulated account, and then your income will go up 3% okay, it’s really nice when these annuities really outperform, you know, my annuity made 8% this year. Well, the following year, my income goes up 8% so there’s a kind of a reciprocal association between the increases. So, what I like is when we have waited, when we wait to turn on the annuity until after it’s been converted to a Roth. Now these increases, they’re still the same, except they’re tax free. So, if you can. It increases that average somewhere between three to 7% a year, and they’re tax free. Increases because you’ve done the proper tax efficient planning with the annuity, you’re really home free. This is one of the, in my professional opinion, our professional opinion, one of the best ways to structure annuity income. If your advisor is not talking with you about this type of strategy, you’re just not with the right advisory team. And again, if your financial advisor is not also a tax advisor, you really need to take one step back and take a second look at- get a second opinion from a firm like Empower Wealth and Tax, where we focus on taxes. You know, remember, folks, I’ll tell you, and I say it a lot, and I’ll say it again. Every dollar I do not give the IRS each year legally because of my retirement tax plan, is $1 I get to keep for myself, my spouse and my family, my children and grandchildren. So, let’s reduce your taxes. And if you’re going if you don’t have a pension, and you’re only looking at social security and a big old 401(k), a retirement account, let’s look at it. Putting a fixed index, tax free annuity into your plan for guaranteed income and growth should be part of it.
Cynthia de Fazio 26:21
Does it fit for almost everyone, Phillip, an annuity product?
Philip Capriotti, Jr. 26:25
Some clients prefer having annuities in their in their portfolios. A lot of folks prefer to have more annuities than others. So, they’re not appropriate for everyone, okay, per se, but that’s why we need to do a complete financial and tax plan.
Cynthia de Fazio 26:44
Sure, just to make sense that you’re lining them up, of course, with the perfect product, because that’s what you two gentlemen do the best. Phil final words of wisdom to the viewers at home today, before we say goodbye, you got about a minute.
Philip Capriotti 26:55
Folks, if you have an old variable annuity, fixed annuity or fixed indexed annuity, and you have no idea on God’s green earth why you own it. Give us a call. Give us a call at 888-818-6557, click the QR code. Either tell the operator that you have an annuity and you have no clue why you own it, if you have an annuity that doesn’t seem to make any money or maybe is burdened with high fees. Give us a shout. Click the QR code and come on in and meet the team, meet the family. Oh, and by the way, we opened up our Georgetown Sun City office. We now have Horseshoe Bay, Cedar Park, Georgetown, and Lakeway. We’re coming to you within the next 90 days.
Cynthia de Fazio 27:36
You just keep growing. Phillip, thank you so much. And Phil, thank you so much to our viewers at home, the number to call is 888-818-6557, or for even faster service, click the QR code at the bottom corner of your screen. We’ll see you back next week on Retire Smart Austin, take care now.