Influential Entrepreneurs with Mike Saunders, MBA - Interview with Marc Hernandez, Founder of MAH Financial Services -Determining if an Annuity is Outdated?

Episode Date: March 26, 2026

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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 back with us Mark Hernandez, who's the founder of MAH Financial, and we'll be talking about how to determine if an annuity is outdated. Mark, welcome back to the program.

Well, thank you, Mike. Hey, I think that this is really a powerful topic because I think that most people look at their annuity as one of those things like back in the old days, there were some misconceptions and annuities were bad, but now annuities are good and it's safe money. You never can lose your money at all. And it's all, annuities are wonderful. But I don't think the thought ever crosses people's mind. Wait a minute, outdated.

It's like a best if used by or an out. outdated date. I want to dive in deep on that. What does it mean about an annuity being outdated? Well, I've been doing this 40 years. So I've been exposed to annuities since I started my career. Back when I first started, you had annuities primarily where you could have one year renewable annuities where you you'd buy an annuity, maybe the interest rate back then. You know, when I when I started, it could have been 7, 8%, you know, we'd love to have those back. And then you'd have multi-year guaranteed annuities. So we would have, I can remember, I put a client in annuity for 10 years at 8.5%.

Okay. Wow. And then when his annuity matured, he got a renewal rate. It was probably in the fives, because it's still pretty decent, but he's in fives. And he goes, Mark, I need that, you know, 8.5 percent. Well, it didn't exist. So, I mean, back then there was pretty much just what we call multi-year guaranteed annuities.

And then there were, and I don't think we haven't anymore. There were like one year to your renewable annuities. Well, then variable annuities became very popular. Variable annuities. You had separate accounts, mutual funds. in those accounts, but they were very expensive. Variable annues are very expensive. They had state taxes, federal taxes. They had a lot of different account fees and administrative costs. Variable annuities were very expensive. And we did a lot in the past, but then as time went on,

we saw that there was more value to our clients with some of the newer type of annuities that came out, specifically indexed annuities tied to some kind of index. And these indexes first really started as the S&P 500. Then there was the NASDAQ, the S&P mid-cap. You know, there were some allocations that came out. But even now, they're getting more and more progressive in terms of allocations that are out there. But so what happens is that we have clients that, let's say, 20 years ago had one annuity product, but they might have had been, had limits on it,

such as they may have had caps. In other words, what caps are, it just, and whatever allocation you're in, the cap is the most you can make on that particular annuity. So, and you've got to be careful, because sometimes companies will start with a cap. Let's say they started with a cap at 5%. But next thing you know, two or three years later, the cap drops to 3% or in some cases we've seen caps at one and a half percent which is which is is is is very very poor type of of program now the thing is most annuities have contract periods so when you when you take out an

annuity you're going to take it out and the contract period is the time that you have to be in the contract because if you leave early, there'll be a subtype of surrender charge attached to leaving early. So you've got to be mindful of any type of program you get that it fits your time horizon, meaning if you're looking, if your time horizons for life, well, maybe a 10-year annuity contract may not be that long, you know, but if your time horizon is two or three years, then and you're looking at an annuity where you better get a two or three year annuity, you know? And so annuities that were issued in the past, they could be outdated, but some, I'm going to

tell you, some could even be very still valuable because I have some clients that have annuities that had a minimum guarantee of 5% or 4%. Well, the thing is that hopefully it's still has some upside potential that they could be earning maybe it's got a cap. They might still have a cap of 6% or 7% or they might have a participation rate. What a participation rate is what percentage are you participating in the gains of that annuity? So if it's got a 50% participation rate, you're participating at 50% of the gains. So if your annuity was up 10% for the year, it's participating at 50% you'd be credited with 5%. So that's where a participation rate comes in.

So what happened is that if you have an annuity, if a client has an annuity and it has a guarantee of 5%, 4%, we would never recommend our clients replacing that annuity. Because the fact is that the worst case scenario is you're earning 4% or 5%. Now, we don't, I think I have two clients that have those still because those basically you know, don't exist nowadays. I mean, there's, in some cases, there's, there, the, the, the, uh, the, the annuities, the guarantee is zero, meaning the worst case scenarios, you don't lose any money, you just don't make any money, could be zero, okay? So the thing is, the thing is, if you have annuities, and now the other thing got to worry about it, if you got an annuity and that annuity has

a benefit attached to it, because we have, we have clients, if they, if we get a client and their main concern is providing an income stream for the rest of their life guarantee. We may have put them an annuity that has an income rider, and this income rider may be gaining, or could be gaining 8% a year, 9% a year, could be gaining more on the income base. And in that case, if they're, concern is still to provide income, that's an annuity that is irreplaceable. I mean, the client needs to keep that. It's building the... income base and they're going to take the income base and start getting paid on it. So that is, if you're in that type program and that's your needs and goals, then you're going to be,

you're going to have to remain that annuity. But if you have outdated annuities that have low caps, that have low participation rates, that may be the allocations, sometimes you run into annuities, that their allocation, are not very good. You know, you go, I look at the allocation and go, wow, this allocation, the history of this allocation, this is the returns of this allocation, it's not very good. You know, you can look at it and compare it. But the fact is that you need to look at these anewitness because if client has an annuity,

and then especially if they're already out of their contract period, if they took out of a newty 15 years ago, it was an eight-year contract and it's been out of contract period, they may be able to, if they would still looking at safe money program and want to look at annuity, they could look at annuities that have much higher participation rates. We, I mean, I would never have believed that when I started this business and started marketing annuities when I did, that we would have participation rates well over 100%. Some of, you know, and I mean, we have some clients that their participation rates are 170, 230 percent. participation rates. That's fantastic. And so very rarely do we see, we are annuities that we

market to our clients usually are uncapped, meaning unlimited returns with high participation rates that also have to have liquidity factors, meaning that you're able to take money out yearly if you need to, to support yourself for emergencies. And most annuities allow you, you to take anywhere from 7 to 10% per year. So, you know, that, that's very important. And a lot of times, again, looking at clients' annuities, and here's the problem. A lot of clients took out annuity years ago, but they've never seen the representative or the advisor since then. So there's no one servicing it. So what happens is they're not taking advantage of being able to make adjustments to their annuity on an annual basis or every two-year basis. Some annuities can be

modified annually. Some it's every two years. Some it could be longer. But the fact is that though it's very important to review their annuity options and to take advantage of what's happening in the markets today. Okay. So so that's very, very important. So the thing is that to look at the annuity and advise the, so if they're not, if they have not been seen, then, and if that's what they, they, after looking at a managed account, after looking at their options, if the annuity is still the most viable program for them to put their money in, then at that point, you know, there are so many diverse annuities these days that do so many different functions that can help them.

You know, I've even heard that there are some additional writers that can, you can add into an annuity for things like long-term care. if that's the case, if you had an annuity from two, three, four, or five years ago that did not have that writer and you came in and met with, let's say, yourself, and you're looking at that going, hey, you know what? You know, with allocations and with caps and all these things, we can make some tweaks, but we can add this writer on. So my question is, can a writer like a long-term care writer be added on to an annuity once you're in it, or do you have to set it up that way? Normally, you have to set it up that way. So you brought up a good point, Mike. So we run into clients that have, like you said, their annuity may not be up to par of what they can get nowadays.

So we will sit down with them. And first step is we look at their situation. Are they going to need to maybe use the funds in this annuity in a short period of time? I mean, are they going to have to pay off debt? are they going to have to use it for some other purpose? But if that's not the case, say, no, no, I just want this. This is my rainy day money. I want to save this.

I want to leave this to my kids, that kind of thing. Well, then at that point, then, yes, we can look at showing them annuities that have those riders. Yes. So some annuities have riders. I mentioned the income rider where they, of course, they're earning returns on their money, but then there's a guaranteed amount return. that's going to increase their income base that they can use in later years to activate the income rider and start getting paid an income stream that's guaranteed for life.

Even if the annuity value went to zero, they're still going to get an income stream from that. Now, older annuities may not have that. If they've had this annuity, even if they've had it for 10 years or 8 years, or possibly the advisor or the agent that they were, that sold them this annuity, may not have showed them an annuity that did that, had he shown them an annuity that had that feature, they probably would say, I want that. So now they have the opportunity to look at that.

But then the other riders, you mentioned, one, you call it ADL benefit, which could, if they need, they cannot do two of six activities of day living. You could activate it. There's extra money there that could be used for assisted living facility, long-term care, home health care, then there's enhanced death benefit riders.

So in other words, if their main concern is legacy, I want to leave this money to my kids when I die. I could say, Mr. Prospect, the annuity you currently have now, you know, you've accumulated $150,000 in 10 years. If you pass away, this is the death benefit, which is your account value. But if your main concern is leaving a legacy, well, this, money if it went in here, let's say for the next 10 years, it grows and then let's say X amount of dollars is what you have in your account, but there's more money going into,

there's more money going in to build the death benefit to enhance it. Well, if, let's say, you use a figure, you have $300,000 in your account value. If you died, the kids would get that. But if they had an enhanced death benefit rider, maybe they'd have closer to $400,000 or 500,000. So they actually will leave more benefit to their family. So yes, Mike, I can answer your question. There are riders that exist that a client can utilize not only the growth in their annuity to supplement their income or to defer their gains or to build a nest egg for their, to leave a legacy for the family, but there's also other riders that could be as to as a nest egg. And that would maybe meet their specific needs.

So again, that's the thing. If someone has an existing annuity, whether it's been in force for 20 years, 30 years, or whether it's been enforced for five or six years, even a five or six year annuity could be considered outdated with everything that's changing in the environment. Here's another thing. They got an annuity, but they go, oh, my investment philosophy, change. I want some of these stocks. I want some of these tech stocks. I want some, I want to be in the market. Well, maybe they want to, they want to partition some of the money that they had in the

annuity, put it under a managed account, and then maybe leave the rest in some form of annuity. So, again, it's just meeting with the advisor, looking at your current situation, because, again, a client who took out an annuity 15, 20 years ago, or 10 years ago, or six years ago, they're needs or their mindset financially may have changed. So, you know, and it's not even like, um, you made a bad decision back then because you probably made the best decision for what you knew at that time of what your needs were, but now seven years later, four years later, whatever the time is, um, your needs changed because now you need some income stream because you just told me that you've got a little gap in your,

you know, what you need for retirement and what you're bringing in. So we just need to make a tweak that way. And I think what your point you brought up about lifetime income is a powerful one because too many times people look at their retirement savings as a big lump sum amount of money. But they don't realize that with properly structured annuities, you can turn them on to provide lifetime income. And that's a piece of mind. That is correct because when you have a guaranteed income stream, whether it be your pension, whether it be Social Security or activating an income rider on an annuity, The fact is that that could not be affected, especially with a fairly volatile financial situation. So those are going to, you can count on that income coming in, whereas, hey, if you're drawing income from an investment and the market corrects, then you, if you draw an income taking withdrawals when the market's going down, you're exasperating your decline.

So a lot of times what we do is working with our clients, they might have some form of investment. they might have some form of annuity providing income. And what we try to do is whichever one is any given time is doing the best, we will change the allocation of how we're taking money out. So if the annuity is doing really well and the managed account is flat or going down a little bit, we might take more money out of the annuity at that time. If vice versa, the annuities, yeah, doing okay, but the market's booming. we might take most of the funds from the managed account at that time.

Again, it all works together working with your advisor to see what is best for you at that given time. Even after we've set up the program, it's servicing the account. And that's the key component. That's where I see annuities that are outdated is because the agent didn't service them properly or even did not set them up in the right type of annuity to begin with that didn't meet their primary needs. So what are some red flags that someone can look at in their own annuity and tell, ooh, I don't have the answer to this, but maybe I need to check in further. So maybe an underperforming or lacking some of these features you're talking about. But what are some of the red flags someone should look at or notice to say, look, I need a little bit more clarification on this.

Well, you hit the nail on the head regarding the performance. So they should be getting an annual statement on their account. So the first thing is I would tell them, I would want to see their last annual statement. They said, well, I don't get one or I don't have one. First thing you do, get on the phone, help them contact the company to find out how they're receiving in their statements, whether it's done electronically or it's mailed to them. And if they have not received or we'll try to go back as many years we can to retrieve those statements. The second is look at the rate of return.

If your rate of return looks very low to you or zero or underneath what, you know, you think is a decent return, immediately question the advisor or question the company to find out why this occurred. A lot of times we see that because of improper service. An agent, remember I told you, some of these newties can be modified annually or biannually to change allocations. And if you're not being changed to reflect what the market conditions are at the time, then the client could be paying the price. That's a big thing. The third red flag is really, if you haven't heard from the advisor or the representative who sold you the annuity, I mean, I would want to know, hey, you know, is he still in the business? Who's going to service me? Who's going to take care of me?

So those are the red flags that should prompt you to say, you know what? Let me get with someone competent to look at my situation to see if there's something, take advantage of my current plan, or if there's something that could be done that would be better and meet my financial goals better. So if someone's got an annuity that they've not heard from their person that set it up in several years, that would be calls for pause. And so if that is happening with someone listening to this, what's the best way that they can reach out and connect? with you, Mark, to have you give a little bit of a overview and a second opinion on that annuity to see if they're in the best one. Well, again, going to getting ruled back, if they haven't heard

from them in a year or two, I wouldn't wait several years. Also, as I said before, if they see that the returns are very minimal, those should be the reg keys. If they have a question, they can reach out to us at machf Financial.biz, machfinancial.biz, and we'd be happy to have a conversation. with them to see how we can be of service. Perfect. Well, thank you so much for coming back on. This has been a really great conversation, Mark. Thank you, Mike. You've been listening to Influential Entrepreneurs with Mike Saunders.

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