Business Innovators Radio - Interview With Gary Scofield Founder of Mansfield Financial Strategies Discussing Annuities 101

Episode Date: August 8, 2023

Gary is an accomplished financial advisor who has spent over four decades dedicated to guiding clients toward financial prosperity in retirement. With impressive credentials, including a lifetime membership in MDRT (Million Dollar Round Table), Gary’s expertise shines. His certifications as a Certified Senior Advisor (CSA) and Certified Long-Term Care (CLTC) specialist demonstrate his proficiency in navigating the complexities of senior financial planning and long-term care. Pursuing additional designations in ChFC and CLU, Gary remains at the forefront of industry knowledge.“We take a personalized approach to help individuals by understanding their unique circumstances, goals, and concerns. As independent advisors, we have access to diverse products and solutions to create comprehensive plans that provide secure and predictable lifetime income. Our mission is to guide people toward a worry-free retirement, building lasting relationships along the way.”Learn More: https://mansfieldfs.com/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-gary-scofield-founder-of-mansfield-financial-strategies-discussing-annuities-101

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of Influential Entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have with this Gary Schofield, who's the founder of Mansfield Financial Strategies and will be talking about annuities. Gary, welcome to the program. Thanks, Mike. Happy to be here. Hey, I know annuities is a pretty broad topic, but before we dive into that, I want to learn a little

bit about yourself and your story. What's your background and how did you get into financial services back when you did? Well, it's been 46 years since I began in the industry. Wow. I was previously in a construction business with my brother-in-law, and it was during the time when things were not going well economically. I had worked with a couple of advisors or a couple of agents from a company, and they recruited me into the industry, which I first thought was going to be a very quick turnaround on my career, but I'd managed to stay for now 46 years.

Yeah, you thought it was to be a stepping stone or a little pause or a pivot, and it turned out to be like, hey, this is pretty cool. The water's good. I'm going to stay in this. Absolutely. And I do really enjoy the business, and that's why I'm staying in it as long as I have. You know, it's kind of like it reminds me of the old Henry Ford quote that's attributed to him. If you have a job that you love and adore, you really don't have a job.

You don't feel like you're going to work. And I think being into the industry for 40 plus years, that sure is the definition of what you've been experiencing. Well, you know, to quote Ben and Jerry's, if it's not fun, why do it? Yeah. Oh, good. We'll have a little quote battle going on here. That's awesome. So we're going to talk about annuities. And like I said, as in the intro, annuities is quite the broad topic. Let's first start with defining what exactly is an annuity. You know, an annuity is just a contract between you and an insurance company. And you pay for the annuity through either a lump sum or you can make multiple payments. Then the company uses a strategy to grow your assets. A variable annuity invest your money in certain types of funds called sub-accounts or separate accounts. There's a fixed annuity which grows via a set interest rate, and an indexed annuity earns returns based on the performance of an associated index.

However, growth only occurs during the accumulation phase of the annuity. This is the time when you make the payments, the insurance company attributes your returns to your account based on the type of annuity that you have. And once you're ready to begin receiving income from your annuity, there are several ways that this can be done, including payments for a fixed period like five, 10, 15 years, or you can exercise an option of lifetime income payments, which, by the way, you can never outlive. You can receive payments in a variety of modes, whether it's monthly, some annually, annually, or lump sum. You know, in the United States, an annuity is a financial process offers growth, and which usually has benefits such as income

for life. Now, typically, these are structured insurance products that each state, approves and then regulates, in which case they are designed using a mortality table and a guaranteed by a life insurer. There are a lot of different varieties of annuities sold by carriers. In a typical scenario, an investor, usually the annuitant would make a single cash premium to own the annuity. And after that contract is issued, the owner may elect to either annuitize the contract, which means start receiving payments. And this process can provide a predictable, a guaranteed stream of future income during retirement or until death of the annuitant or even even joint annuitants. Alternatively, an investor can defer annuitizing or getting their payments

until the contract is much later. They could be used to hedge long-term care cost increases or to maximize, they can maximize a lump sum death benefit for a named beneficiary. Now, one of the things that we've seen is there have been a lot of of changes over the last 20 years or so. And, you know, previously, annuities really got a bad rap. And most of it was unjustified, or most of it, I'm sorry, was justified, being that they actually had higher surrender fees. They had limited options. You could either get a fixed or a variable annuity. Now fixed had, you know, pretty low returns. The variables contain a lot of risk, you know, market risks. You know, some financial advice.

placed clients in products that were not a good fit for their portfolio. And that was either because the advisors were not really fully educated on annuities or they were just less than honest. So if we look at history, although annuities have existed in their present form for only a few decades, the idea of paying out a stream of income, which is what an annuity does best to an individual or family dates all the way back to the Roman Empire. Wow. Now, the Latin word enua meant annual stipends. And during the brain of the emperors, individuals would make single large payments into

the annua, sorry, and then they would receive payments. And depending on, you know, the single payment made into the annuity, they'd receive payments each year either until death or for a specified period. During the Middle Ages, annuities were used by feudal lords and kings to kind of raise capital. They needed that money to cover their heavy costs and constant wars and conflicts with each other. And at this time, the most popular form of annuities were those offered in the form of a tonne, where a fixed annual payment was shared amongst a dwindling number of surviving members, leading to increasing payments for the longest-lived investors.

And, you know, one of the early recorded uses of annuities in the United States was by the Presbyterian Church, and that was back in 1720. Now, the purpose was to provide a secure retirement to aging ministers and their families, and it was later expanded to assist widows and even orphans. So in 1812, Pennsylvania Company Insurance was, was the first to begin offering annuities to the public in the United States. And there are some prominent figures who are noted for their use of annuities, and that includes guys like Benjamin Franklin.

He was assisting the cities of Boston and Philadelphia. Babe Ruth used an annuity to avoid losses during the Great Depression. And then Ben Bernanke, in 2006, he decosed that his major financial assets were two annuity. the Fed chairman I beg your pardon is that the Fed chairman the old Fed chairman Ben Bernanke yeah and Ben Bernack yes exactly wow you know it's neat to hear the history of certain things and I think like you've really explained well is annuities are misconstrued sometimes and people have heard something in the past but it's really neat to hear that it's going back to you know the such old days, not just 20, 30, 50 years ago. And from someone from the outside listening in, like myself,

hearing this, I think of a financial investment and here's a amount of money that I have. You know, one of the options might be, I'm going to put it in a local bank CD. Well, when you're, that term is up and you want your money back, you get it. You don't really have the aspect of what you've mentioned several times. And this is where I want to zero in on for a second and get your opinion, income for life and lifetime payments. Talk a little bit about how that differs from many of the financial instruments that people choose because most of the time you put your money in, you get some growth, you take your money out, you pay taxes, whatever, and now what else do you do with it? But with an annuity, you've got income streams. That is correct. You know, there's a lot of

different types of annuities out there. There's a fixed that has a guaranteed rate of return. And really pay a minimum rate of return and provide a fixed series of payments under the conditions that were determined by you when you bought the annuity. So, you know, during the accumulation phase, the insurance company invests the premiums that you paid in high quality fixed income investments like bonds. Because your minimum rate of return is guaranteed. The insurance company is really taking all the risk on that type of a product. And, you know, fixed annuities are are really hot right now with the uncertainty to the market. As of June of this year, the most popular fixed annuity today appears to be a five-year fixed annuity, and some of them are

paying upwards of 5% for five years. Wow. Yeah. Some of the best features of the annuities are the ability to have life income paid, and also the fact that most of them, if they're properly structured, defer any taxes on income on the growth. So unlike a CD, which you pay taxes on their returns, and typically CDs are, well, they're doing better now than they've done in a while, but there are multiple year guaranteed annuities, or they're called migas, and they pay a fixed return on your money for a set period of time. And that type of annuity is designed to provide a stream of income, and most of the time it's for retirement. There are also variable annuities, and a variable annuity is a type of an investment account, and as the name suggests, a variable

annuity can vary over time depending on the performance of the investment assets that you've choose, typically a variety of mutual funds and index funds. Now, there are no two variable annuities that are the same, and they have features that can make them very different from other types of annuity products. Since their value really depends in part on market returns, variable annuities may provide a greater growth than other kind of annuities, but the bad side is they also carry far more risk than any other annuities. Now, with a fixed indexed annuity, and that's technically a version of a variable annuity, but it really combines the benefits of both fixed and variable products. And the returns you earn from an indexed annuity aren't based upon the investment

decisions that you make. Instead, your money is going to follow the performance of a stock market index, maybe like the S&P 500 or other indexes that are out there. You know, one of the things that I think a lot of people move money from, you know, quote unquote the markets at a certain age because we don't have the runway toward retirement and now we're at a certain age. We want to make sure we protect our money. And I think annuity is one of those choices that they consider for the safety and the guarantee. You've mentioned the word guarantee several times. So talk a little bit about how when someone has a properly structured annuity, like you've mentioned, can you lose money? You know, is there risk like it is in the market? You know, even if it's

tied to an index that's tied to the market and maybe the returns would be up one year, down one year. Can it be under and now you've lost principal? That happens in a variable annuity. And because the variable annuity is linked to the stock market, your returns are going to be based on what's happening there. So it absolutely is possible to go backwards or to lose money with a variable annuity. However, most of the other annuities, there are like immediate annuities. That That's one that it converts to an income stream for the buyer pretty much immediately. And although it's anuitized immediately, an immediate annuity doesn't start paying income right away.

You can make a single lump sum payment to an insurance company, and it could begin paying you for 30 days to one year later. It really depends upon the payment plan that you choose. Now, the deferred annuity, that's one that begins paying an income at a future day. determined really by you, the owner. Deferred annuities provide taxed advantage savings and lifetime income. Now, with a deferred annuity, you can begin receiving payments years or decades into the future. In the meantime, your premiums grow tax deferred inside that annuity. And they're often used to supplement IRAs or employer-sponsored retirement plans. Now, the only limiting factor would

be the amount of premiums an insurance company is willing to accept on the same individual. And this amounts to ranges anywhere from 500,000 to 5 million. But we typically see risk, I mean, not risk, those things capped typically at $1 to $2 million. So you may be thinking when and what annuity should I buy. And that really depends on, you know, your individual circumstances and preferences. Yeah, that's the big piece is like you said, oh, one annuity could be variable and you could lose principle. And if you're willing to take that risk and your risk tolerance is high, that's a good choice. But for many and most people considering annuities, show me the safe, guaranteed, can't lose money. So that gets down to what you just said, which is let's talk,

let's learn about what you need and put you in the right recommendation. You would mention a couple things about some of the newer benefits of annuities. And so years and years ago and maybe someone heard that annuities were not a good idea, some of the annuity providers may have layered in some benefits that bring new benefits. Talk a little bit about how that works these days. Sure, sure. Well, the biggest thing with the annuities are principal protection. That means that regardless of what the market's doing, if you go backwards in the market and your money's in an annuity other than a variable annuity, your principal is protected, so you can't lose that money. Also, they provide steady streams of guaranteed income in retirement. So if you buy an

annuity because it can do things that no other investment can do, and that's provide that guaranteed income for the rest of your life, no matter how long you live. You really won't run out of money, so it's a predictable paycheck, no matter what the markets are doing or what they've done, one of the folks, or one of folks' biggest fears is running out of money in retirement, outliving their financial resources, you know, with annuities, if they're set up properly and you turn them on as as far as the income is concerned, and you do so for life, that's money that you cannot help live. You know, I think that one of the biggest benefits that I hear when people are talking about the safety and you can't lose money, and if it's set up and structured the right way, it's just

that peace of mind. And I heard a stat, you know, I forget where it was, but recently I read this article where some economist or theorist had said, you know, when someone realizes that they're in a financial product, that their money is safe and protected, and they don't have to worry about turning the news on, hearing the stock market crashed and their retirement is now gone down. When their money is safe and protected and their peace of mind now is elevated, it allows them to literally, live longer. So talk a little bit about some of those additional benefits beyond just the financial aspects that you've talked about here. Oh, certainly. You know, some of the additional benefits, there's spousal coverage, which could be in joint and survivor types of annuities. They also now

provide a death benefit, which is pretty much equal to the accumulated value. They can help offset long-term care costs. And those are costs that everybody has to be concerned about. but most people are very concerned about the premiums associated with long-term care insurance. And there's something now called a lifetime income benefit rider, which if you access that, you don't have to anewitize the contract because once you do annuitize a contract, it stays that way. The lifetime income benefit rider means that you can literally turn this benefit on. You can also turn it off. So that's a big plus that's recently, you know, developed and been developed by the companies that

offer these products. Now, you know, just last month, Fox Businesses Barron's Roundtable covered many of these topics in a discussion titled annuity sales are back for investors. You know, I've noticed that other news outlets are responding as well. For example, the Wall Street Journal published an article, why annuities may be safer than you think. And some of the benefits that are beyond that, there's protection against abuse and fraud. Now, when you make a contract with an insurance company

early in your retirement years, it does protect that particular amount of money. I'll give you an example. A couple of years back, my father-in-law, Bud, who was unfortunately no longer with us, was taken in by one of those grandparents, grandfather schemes where someone had called him suggesting that it was his grandson and they needed, you know, a sum of money to get this young man out of jail. Well, it was, it was all, you know, a fake. There was nothing that happened. However, he did send a large amount of money to the people that were posing as the grandson and as an attorney representing the grandson. Thankfully, thankfully, thankfully, my wife has been able to get all of that money back, it was with a lot of efforts and a lot of time involved

with, you know, several police agencies and things, but we were able to, she was able to find the money and it was completely returned, which is very, very unusual. So the other thing I like to say about peace of mind, you know, pensions provide the guaranteed income. And they've been increasingly they become increasingly rare. Most employers now have moved to 401ks rather than offering a pension, which was done in the past. And, you know, annuities can provide peace of mind knowing that you're not going to outlive your financial resources. You know, that's a huge point that you bring up, and you've mentioned this twice in our conversation, is outliving your resources in retirement. And more and more these days, we're taking better.

care of herself. We are eating better, exercising. Our health care system is watching our vital signs and our health better. And so I think some of the financial advice used to be, well, let's plan for retirement from this age to this age. And now that is spreading out and getting longer. So we need to really calculate that number that you're mentioning. How much money do I have and will that last? So having this type of a product where you can put it in, you can annuitize, you can get lifetime payments. It's fixed, guaranteed, not going to lose money if it's structured the right way. I like that aspect that you just mentioned recently here in a second ago, which was you can turn

some lifetime benefit income stream on and then you can pause it. You might just need some extra money to buy a car for a handful of years. So you turn it on and then when the car is paid off, you turn it back off. Maybe if that's what you needed. And that gives you freedom and flexibility. and I think that that really is so important for people considering where to put their money in their retirement years for safety and security. You know, that's exactly true. In fact, Time Magazine recently published an article about this and it was titled,

you know, lifetime income stream is the key to retirement happiness. Yep. You know, so it gives you the confidence to enjoy your money without sufficient guaranteed income to meet your essential expenses. nearly every spending decision in retirement can become a difficult one. Can you really afford that vacation? Should you give that grandchild a little bit less of a generous birthday present just to be safe? In fact, a lot of studies show that some retiree households spend much less than they can afford to, particularly during early retirement.

And that's possibly due to the fears of what we said outliving your money. by locking in a certain level of income, an annuity really may help you to give yourself permission to enjoy the money that you've worked so hard for to accumulate. And what you spend today is not going to jeopardize your income 20 years from now. So you can go ahead and live those years to its fullest or to their fullest. You know, in wrapping up, you know, when I'm asked if an annuity is a good buy, I reply, it really depends on your situation and your goals. annuities are long-term investments, and they're not for everybody.

If you aren't worried about running out of money, you may not need an annuity. Bill Gates, for example, I don't think needs an annuity. But if you're healthy and you want the security of a stream of income, you can't outlive or you want to provide for your spouse or your heirs, you really may benefit from an annuity. Well, Gary, it's been so eye-opening, hearing your perspectives and thoughts in the history of annuities and really appreciate you coming on. If someone is listening to this, wondering if it might be a good decision for them,

how can they learn more and reach out and connect with you? Well, I have a website, and my website address is MansfieldFS, which means financial strategies, mansfieldfs.com. We'll get you to my website. I also do a lot of webinars concerning different topics.

I have one coming up on the 15th of August, and it's going to be, about mistakes and blunders that people make with IRAs and 401Ks. And that goes into a lot of information with regard to annuities. Excellent. Well, thank you so much for coming on today. It's been a real pleasure talking with you. I appreciate it. Thank you for the time. And I hope you have the rest of the day in a very good way. You've been listening to influential entrepreneurs with Mike Saunders. To learn more about the resources mentioned on today's show or listen to past episodes, visit www.

www. influential entrepreneurs radio. com.