This blog will cover why the Teton 14 Bonus would be a great G-Fund replacement. This product is safer investment and will help grow your money more effectively. Read on for more information on this great investment vehicle!
What is a G-Fund?
We work with several current and retired US Federal Government employees. The Civil Service Retirement Act (CSRS) established a retirement system for certain Federal employees. It is a defined benefit, contributory retirement system. Employees share in the expense annuities to which they become entitled. Those covered by CSRS paid 7, 7.5 or 8 percent of their pay to CSRS. They generally paid no Social Security retirement, survivor and disability (OASDI) tax, they had to pay the Medicare tax.
The CSRS was replaced by the Federal Employees Retirement System (FERS) for federal employees who first entered covered service on or after January 1, 1987. Congress created FERS in 1968. The FERS is a retirement plan that provides benefits from three different sources : a Basic Benefit Plan, Social Security, and the Thrift Savings Plan (TSP). Social Security and the TSP can go with you to your next job if you leave the federal government before retirement. The Basic Benefit and Social Security will be withheld from your pay as payroll deductions. After you retire, you will receive annuity payments each month for the rest of your life.
We encourage anyone investing their money into the G-fund and getting approximately 1.68% or less each year on their money to invest the portion of their retirement nest egg that they want to keep safe into a Fixed Indexed Annuity that provides a bonus and a high participation rate or a low spread. US federal employees who are older than 59.5 years old can roll their TSP money over into a Fixed Indexed Annuity like the Equitable Teton 14 Bonus Fixed Indexed Annuity and can earn between 5-7+% without exposing their retirement nest egg to market risk.
G-Fund Replacement out of a TSP Account: A G-Fund Replacement is when a federal employee who has a Thrift Savings Plan (TSP) with a majority of their money invested in the G-fund for safety and security implements a traditional rollover into an IRA and invests 100% of the IRA rollover money into an accumulation-based, Fixed Indexed Annuity for growth and safety they saved from their hard-earned government paychecks.
Equitable Life & Casualty’s Teton 14 Bonus
Did you know that Babe Ruth owned Annuities that he purchased from Equitable Insurance Company? Babe Ruth was known as the “Sultan of Swat.” He came into his glory days during the roaring twenties, and his manager was worried that he was blowing through all of his money without putting any of it away. He introduced Babe to an insurance agent from the Equitable Insurance Company (now AXA Equitable). From 1923 to 1929, the slugger contributed more than half his salary annually, purchasing between $35,000 to $50,000 worth of annuities each year.
The Great Depression hit the country hard in October of 1929. Babe Ruth was forced to retire from baseball in 1935 due to health reasons. He was unemployed during the worst time in history, but Babe Ruth had his income annuity. It’s been reported that he received an income of $17,500 a year, which translates to an annual salary of more than $290,000 using today’s dollars. [source: https://en.wikipedia.org/wiki/Annuity(American)]
With the Coronavirus pandemic, a bear market on US Stock Exchanges and significantly rising US unemployment in the private sector, US federal employees are investing a majority of their money in the G-Fund, which earns a low interest rate. As of March 2020, the TSP G-Fund interest rate is 1.250%. This rate is calculated monthly, based on the average yield of all U.S. Treasury securities with 4 or more years to maturity. The rate has fluctuated in the 1.5% to 3% range since 2012.
The G-Fund interest rate is still near all-time lows. It was as low as 1.25 percent in March 2020. For more information and to see how the G-Fund interest rate has fluctuated since 2012, go here: http://www.tspfolio.com/tspgfundinterestrate.
Federal Employees can grow their money significantly at a higher rate of interest with similar safety of the G-Fund in their TSP. Annuity companies must reserve 100% of the assets their policyholders invest into their annuities. That’s $1.00 for every $1.00 invested.
Here’s how those products work. Annuity companies invest 100% of the money you give them into 10-Year US Treasury Bonds. At the end of the first year of the annuity policy, the annuity or life insurance companies invest the interest proceeds from those US Treasuries into indexed options like the S&P 500. They take a portion of the growth from the indexed options and they give you, the annuity investor/policyholder, a portion of the gains. It is important to work with a licensed Life and Health Insurance Agent who is experienced with these types of investment products.
We recommend Fixed Indexed Annuities that are low in fees and provide either a high participation rate or a low spread. A participation rate within a Fixed Indexed Annuity policy is the percentage amount the annuity company will allow the policyholder to participate in the growth of the index.
For example: we really like a product that Equitable Life and Casualty offers, the Teton 14 Bonus. It provides a 10% upfront bonus to go into the account and it also offers a 95% participation rate with no annual fee. Equitable Life and Casualty makes 5% of the gains from your annuity and you make 95%. Also, you are contractually limited to a ZERO LOSS should the index lose money within the one-year, point-to-point protection period. So with a Fixed Indexed Annuity like the Teton 14 Bonus product, ZERO IS YOUR HERO! If the market goes down 30% in one year, you will lose nothing, not one single dollar, because your money is not invested in the market. Instead, your money is invested in 10-Year treasuries and the interest is invested in Index options like the S&P 500 or the Barclays Atlas 5.
The Barclays Atlas 5 is a unique volatility index that rebalances daily to smooth out the returns. It is the ultimate tactical asset allocation. In fact, as of March 27, 2020, the Atlas 5 Index is only down a little more than 1% when the S&P 500 is down over 25% year to date in 2020. That’s an incredible investment performance, especially when you consider that policyholders will not lose a dime. The only way a policyholder can lose their principal with a Fixed Indexed Annuity is if the annuity company fails financially.
Equitable Life and Casualty has been in business for over 135 years; they have a seen a lot of Bull and Bear markets. The guarantee associated with any annuity is based on the claims paying ability of the annuity or life insurance company. Each state has an Annuity and Life Insurance Guaranty Association that is put in place to further protect policyholders against insurance companies defaulting on policies. If one company gets into trouble, then the other companies within the Guaranty Association will assume the policies to further protect policy-holders.
Be sure to ask your advisor about the solvency ratio of an annuity company. Equitable Life and Casualty has a solvency ratio of over 135%. That means they are holding liquid assets of 35+% more than the money their policyholders have given them, plus the growth they have earned. That’s remarkable.
I would prefer to invest into a product where the financial institution was required to reserve 100% of the money I invested with them. Did you know that with FDIC regulations, banks are only required to reserve up to 3-10% of the money that is deposited with them? That includes bank CDs and money market accounts. I will take the 100% reserve system with Fixed Indexed Annuities, please.
The bottom line here is that US federal workers should consider moving the money they invest into the G-Fund into a Fixed Indexed Annuity like Equitable’s Teton 14 Bonus Fixed Indexed Annuity to earn important market-like growth while also avoiding market-like risk 100% of the time. Enjoy getting a 10% bonus, being able to withdraw up to 10% of your money each year starting in year two without penalty and receive 95% of the gains generated by the Barclays Atlas 5 index.
If you are looking to invest your money safely and soundly into a Fixed Indexed Annuity like Equitable Life and Casualty’s Teton 14 Bonus, then I invite you to set an appointment directly into my calendar or feel free to give me a call in our office at (770) 685-1777.
Here’s to safe and sound investing while getting a better return than the 1.25% that the G-Fund is generating for hard-working US federal employees during the month of March 2020! Replacing G-Fund Investments with a Fixed Indexed Annuity, like the Equitable Teton 14 Bonus, in this economic environment affected by the Coronavirus panic will make US federal employees a lot of dollars and cents. We think it makes a lot sense.
Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, including the risk of loss of principal, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this presentation will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio
Investment advisory services offered through Brookstone Capital Management, LLC (BCM), a registered investment advisor. BCM and Active Wealth are independent of each other. Insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents. Any comments regarding safe and secure investments, and guaranteed income streams refer only to fixed insurance products. They do not refer, in any way to securities or investment advisory products. Fixed Insurance and Annuity product guarantees are subject to the claims-paying ability of the issuing company and are not offered by Brookstone Capital Management. Index or fixed annuities are not designed for short term investments and may be subject to caps, restrictions, fees and surrender charges as described in the annuity contract.
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Active Wealth Management is a private wealth management firm located in Atlanta, GA. Our team is passionate about educating clients in order to empower them to invest and retire successfully and we believe in managing our client’s assets actively. Active Wealth Management works with three primary groups of people; pre-retirees, retirees, and business owners.
Active Wealth Management is led by our Founder and President, Ford Stokes, and by our Senior Vice President, Brandy Seats. They aim to help clients understand their current financial situation, analyze their current portfolio, and develop a customized financial plan to accomplish their goals. If you would like more information about the firm, please visit our website, https://activewealth.com, or call our office at (770) 685-1777. You will not be passed off to another advisor. You will meet with either Ford or Brandy. You can schedule directly into their calendars at https://activewealth.com/consult/.
