Annuity Myths
There is a lot of information out there about annuities and it can be difficult to understand what’s true and what isn’t. Here are the 4 biggest myths about annuities and how they work.

Looking for general information about annuities?

  • Myth #1: All annuities are loaded with expensive fees.

    There are several kinds of annuities and some of them are rightfully known to be loaded with expensive fees, like variable annuities. Annuity fees come in several shapes — some annuities have administration fees, ownership fees, and/or management fees in addition to caps and surrender charges. Typically, when you see this many fees you are looking at a variable annuity, which isn’t usually a good investment.  Many investors would do better buy just buying an S&P 500 index fund instead of putting their money into a variable annuity.

    On the other side of the spectrum are fixed indexed annuities. There are no annual fees or management fees with most fixed indexed annuities which greatly reduces their expense. Instead, indexed annuities usually offer a choice between a spread or a cap (or sometimes both play a role).  A cap is just what it sounds like – a cap on the performance of your annuity – the insurance company takes whatever performance is above your cap to offset their expenses. A spread is similar – the insurance company collects money by taking a set percent difference, or “spread” between what your annuity gets paid and what the index it is tied to does.

    It’s important to keep focused on the role an FIA plays in your retirement – it isn’t to keep up with the market or grow your estate — it’s to provide guaranteed income to secure your retirement while giving you a good chance of seeing that income increase.  Fixed annuities are really alternatives to bonds, CD’s or other low risk investments meant to protect principal while creating some income.

    Fixed index annuities do have surrender charges for taking money out of the annuity ahead of schedule. Typically this charge falls every year your investment stays in the annuity until it finally hits zero.

  • Myth #2: The person I’m working with says Fixed Index Annuities keep up with the Stock Market.

    This is not true. When an annuity is linked to an index like the S&P 500, your annuity will be credited part of that index’s annual performance, subject to whatever cap or spread your contract offers you. Your money is never invested in the stock market. Rather, your annuity will be credited whatever performance you are due according to your agreement. This is actually one of the benefits of a fixed index annuity — because it is not invested in the stock market, it doesn’t go down when the stock market falls, even if the market falls 50%. But when the market is up, depending on what index your annuity is linked to, you will participate in a portion of that upside. This gives typical fixed index annuities more potential upside than other interest pegged investments like CDs, many bonds, or money market accounts without sacrificing safety.

    Myth #3: I can’t take any annuity income for at least 10 years, so why bother?

    There are a few variations of fixed annuities — some allow you to take income immediately. These type of annuities are predictably called “immediate” annuities.

    The second type is called a “deferred” annuity, because you wait a certain period of time before you begin drawing on the income.  Deferred annuities can range from a 1 year mandatory deferral to a 10 year mandatory deferral.  There are two things to keep in mind here – usually the longer you defer a fixed index annuity, the higher your income payout is likely to be.

    The smart thing to do with annuities is to understand your income needs in retirement and how inflation will impact them.  Then you and your retirement planner can build an annuity “ladder” which is just a fancy way of saying using multiple annuities to give yourself a “raise” when you need one because inflation is catching up with your income.

Myth #4: If I die before I use my annuity, the insurance company takes all my money.

Not true. Fixed Index Annuities pay your beneficiaries the remaining benefits and some even give your beneficiaries the choice of taking the money in a lump sum or over a period of time. Best of all, these payments take place outside of probate and are usually not considered to be part of your taxable estate.>


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For ACI, investment management begins with understanding and actively managing risk for our clients and partners.  We do this through smarter investments built on low cost, highly liquid and diversified investments rather than expensive financial products.


Understanding the needs of investors seeking stable results for portfolios greater than $500,000 is a core strength of ACI.  One of the most important things we do is help your investments to create stable income while generating sufficient growth to meet your future demands and the needs of those you care for. 

ACI uses customized planning and software to create retirement income plans to meet the specific needs of each of clients while providing confidence, flexibility, and cost efficiency.


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Market Income

This portfolio invests in a basket of highly liquid Index or Sector securities and sells off atypical returns in exchange for a premium on a rolling basis. That’s a fancy way of saying we take the bird in hand and let someone else have the two in the bush.  We buy sectors that are undervalued relative to the rest of the market or vs. their historical value ranges which reduces downside risk vs. the broad market.  Typically out-performs in bear markets, neutral markets and mild bull markets, and under-performs strong bull markets.

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Invests in diversified components of the financial markets and broad economy by targeting sectors which demonstrate the greatest potential for a consistent range of multi-year returns, while offering a risk adjusted investment profile equal to or lower than the broad markets.  Our research tells us which sectors demonstrate the greatest potential for consistent multi-year returns while offering greater risk efficiency than the broad markets.  We invest on an “Outcome Oriented” basis – meaning we have a good idea what the returns over time will be at a given purchase price.

Durable Opportunities

This portfolio invests in companies possessing a Durable Competitive Advantage.  Such companies are likely to be around for decades, easing the concern of principal return.  DCA companies often suffer less in bear markets and usually lead recoveries.  These companies allow ACI to build portfolios with minimum expected returns that can be in the mid-single digit range over any 3-5 year period which can provide long term stability partnered with long term growth in equity.

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This portfolio is derived from the ground breaking work in ‘risk parity’ by Ray Dalio, arguably one of the top 10 money managers in history and founder of Bridgewater Associates.  The Full Cycle portfolio is built on the allocation models Ray designed to provide the highest potential risk adjusted returns possible through all phases of the economic cycle.  Bridgewater’s “All Weather” fund was designed for pension funds and other large institutional investors that needed to earn stable returns with stable risk, and has been closed to new investors for years.  At the time the fund closed, the All Weather Portfolio had a minimum required investment of $100 million.

Equity Builder

This is a risk management overlay which helps build and protect accounts by collecting small premiums against held positions on an opportunistic basis during correcting markets through synthetic “short” positions.  EQB seeks to collect an extra 2% – 5% per year against the cost of underlying investments.  While primarily targeted at increasing account equity, EQB gives an extra layer of protection to capital during periods of higher volatility.

Fixed Income

Diversified, broad exposure to fixed income ETFs and best of breed no load funds including core fixed income components such as Government, Corporate or MBS, municipals, and unconstrained “Go Anywhere” funds.

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Dak Hartsock; Investment manager with over 15 years of experience with securities & securities options. Dak has worked full time in the financial markets since 2007. He has more than a decade of operating experience as a business owner & developer. He is a graduate of the University of Virginia.

Robert Hartsock; MBA. Bob has over 30 years of senior management experience in diverse markets, products and businesses. He brings an exceptional record that includes management roles in two Fortune 500 companies and leadership of 7,500+ employees. Bob’s career features a specialization in identifying and fixing management and operational problems for multiple companies including leading over a dozen acquisitions, private placements and a public offering. He is uniquely positioned to provide ACI with highly relevant C-Level management perspective. Bob provides operational & macro perspective on investments ACI undertakes for client portfolios. Bob holds degrees from University of Illinois and University of Washington.

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