Jumpline magazine OCT 2022-pages - Flipbook - Page 29
Financial Alternatives
Mark Buckely, Ret.
After speaking with my fellow firefighters
who are either retired or soon will, most of their
concerns are about what to do with their DROP
and 457 accounts. Since most have their pensions
sorted out, the total of these types of accounts can
be quite substantial. Moreover, most do not know
what to do with these large sums of money. Many
either keep the money in conservative accounts
such as bonds or cash. They are afraid to really
invest in the stock market because investing in the
market does present issues. When investing in the
market, you can either choose stocks yourself or hire a money
manager to do it for you. If you do it yourself, you must know
what you are doing when making choices. If you hire a money
manager, you will pay a management fee of anywhere from
0.5% to 3.0% of your total account value.
But there is an alternative that can offer you a way to
participate in market gains AND protect you on the downside
by anywhere from 5% top 100%. These are Index-Linked
Annuities, which allow investors to transfer some risk without
sacrificing the possibility for upside potential. When used as
a portion of the portfolio, these protections may reduce the
portfolio’s overall risk by adding a buffer to smooth out the
ride when markets get choppy, as they are now. How it works
is that you are given a choice of one or a collection of indices,
such as the S&P index. Depending on the amount of downside
protection you want, it offers you a cap to the upside of how
much you can gain in 1, 3 and 6-year increments WITH a
protection to the downside by as much as 100%.
For example, if I invested $100,000 in the
1-year performance of the S&P and had a
protection of 20% to the downside and a cap
of 20% to the upside and market goes down
20% in that year, my account is still $100,000.
If the market goes up 25% in that year, then I
would be capped at a 20% gain, which I would
be super happy to take.
Among these features is the advantage that
you can invest in pre and post taxed accounts,
and there are NO FEES. I repeat: NO FEES
involved to invest in these annuities. Every year you can take
out up to 10% of the total invested with NO PENALTY and
this money is creditor protected, which means no one can
touch this money. The one major disadvantage is that you
must commit to a 6-year investment. That is because there
are surrender charges for every year until it winds down to 6
years. Once the 6 year term is up, you are free to take your
money elsewhere without charge. Of course, anytime you
take this money, you are subject to income tax which you
would pay from most investments you have anyway.
Considering current market volatility and uncertainty, this
can provide an excellent alternative to keep your money
growing during your career AND after you retire. If any of you
have questions, please feel free to reach out to me. I offer
investment help and advice to many members of MDFR.
My number is (305) 608-2690.
Thank you for your service and stay safe!
After the Fast Attack
Photos by to Lt. Scott Mullin
October 2022 | JUMPLINE Magazine
29
