The S&P downgrade’s impact on your clients’ nest eggsArticle added by Karlan Tucker on August 15, 2011
Karlan Tucker

Karlan Tucker

Littleton, CO

Joined: August 18, 2006

My Company

Tucker Advisors

If clients allow their principal to be reduced by 50 percent again, it could easily take a decade or longer just to get back to what they have today. Instead of waiting till 2021 to have the same amount they have today, you can offer them a safe strategy that, independent from the market, is guaranteed to double their money within the next 10 years.

The world we live in has just come to the realization that America is not as strong as it once was. Spending $2 trillion more than we are taking in annually and our massive debt exceeding $14 trillion are crippling our economy.

The rest of the world isn’t helping either, with the bailouts of Greece, Italy and Spain by the European Central Bank raising concerns of the financial stability of the European Union.

The headwinds our U.S. stock market is facing are so strong that the market has now turned, and we are heading for a double-dip recession.

Remember just a few years ago…

2007
2011
National debt: $9 trillion $14 trillion
Treasury bonds rated AAA Declined to AA+ negative outlook
China - largest buyer of U.S. bonds U.S. - largest buyer of U.S. treasuries
Low unemployment High unemployment
Your home had equity Lost home equity
Home prices rising Home prices still falling
The market was strong and rising Level and now falling
People were spending People are saving
Banks paid respectable interest Try living on the interest today
Social Security paid COLAs Gone for the past three years
Lower taxes Higher taxes coming
Individual healthcare Government health care coming
Easy credit Difficult to get credit


On May 1st of this year, the Dow was at 12,876; today the Dow is at 11,500. Last week we saw the Dow drop to its lowest point since Dec. 1, 2008. I believe the Dow will fall to below 8,000 within the next six months. This would mean a possible 40 percent loss to your clients’ portfolios if they stay in the market unprotected.

Protection from the market’s volatility has become increasingly important as a result of the headwinds we are facing. In 1978, Jimmy Carter announced that the Dow made history because it shot up in one day more than it ever had before. It rose 35 points that historic day.

Today that number pales compared to the wild swings of our current market.

Today’s record increase in a single day is 936 points, and the greatest decrease in a day is 777. The recent flash crash actually erased 1,000 points in 1 hour and 45 minutes but then recovered most of the loss by the end of the day.
Protection of principal from volatility in this unprecedented era is critical to your clients’ financial well-being. Do they remember what it felt like in January 2009 when the Dow was at 7,000 and the market had lost 50 percent of its value from its high in October 2007? Did they tell themselves that if they could just recover some or much of what they had, they would never let this happen again? Well, they have recovered much of what was taken and now the market is poised to take it again for the third time in just over a decade.

The American dream of retirement cannot be supported by a volatile market if they don’t have downside protection. Remember, the market dropped by 49.5 percent in 2000. It dropped again by 50 percent in 2008–09. And now in 2011, it’s dropping again, perhaps by 40 percent or more, for the third time in approximately 10 years.

Warren Buffett said that what we learn from history is that we don’t learn from history.

If clients allow their principal to be reduced by 50 percent again, it could easily take a decade or longer just to get back to what they have today. Instead of waiting till 2021 to have the same amount they have today, you can offer them a safe strategy that, independent from the market, is guaranteed to double their money within the next 10 years.

Fixed indexed annuities have a flawless track record of safety and offer returns that are both respectable and guaranteed. When clients never lose principal and each year’s interest is credited to the largest amount they have ever had, not only can they double their account over the next 10 years, they get to sleep at night with tremendous peace of mind in some of the most volatile times we have lived through.

Your clients may think, “Wow, a fixed indexed annuity can double my money in 10 years? I’ve always been under the impression that annuities don’t earn much, but the stock market is the place to be instead.”

Ask them to consider this: According to a study just released in March of this year by J.P. Morgan, the S&P 500 has delivered annualized gains of 7.7 percent for the past 20 years — not 10 percent, or 12 percent, but 7.7 percent.

The average investor, however, did not earn 7.7 percent. Due to bad timing and emotions, along with taxes and fees, the average investor, according to J.P. Morgan, earned 2.6 percent annually. Numerous other independent studies come to a similar conclusion.

So your clients put up the capital, take the risk and then earn far less than a safe guaranteed annuity that will double in 10 years. At 2.6 percent it would take 27 years to double.

I tell my clients, "Don’t delay; the market is making decisions for you right now — decisions that will likely require you to work much longer than you had planned.”

Let your clients stay in control by calling you, their safe-money advisor, right now to see how simple it is to get safe and double their safety by doubling their nest egg over the next 10 years.

I wish you great selling!
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