The Phil Ferguson Show

Recently on The Phil Ferguson Show! Sign up for the feed and get the show every week!
JT Eberhard Debunks God
Thomas Sheedy talks about starting a High School club
Ed Hensley tells us about the Kentucky Freethough convention.
Chris Johnson talks about his book and movie about atheists (A Better Life…)
Greta Christina walks us through here book “Comforting Thoughts About Death That Have Nothing to Do with God”
Amanda K. Metskas explains the fun of Camp Quest
and Noelle George joinedus to discuss Foundation Beyond Belief.

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Featured show….

Annuity – Good or Bad?

Annuity – What is an Annuity?0315_1-annuities-basics_400x400

Even the word “Annuity” can cause confusion. I can think of it being used in at least 3 different ways:

1. TSA or Tax Sheltered Annuity. This is another name (old name) for 403(b) retirement plans. Generally, you can ignore the word “Annuity” in this context and just make the best choices inside of your 403(b). If you have one you may wish to read my post on 401(k)s. Here is a link filled summary from Wikipedia….

A 403(b) plan is a U.S. tax-advantaged retirement savings plan available for public education organizations, some non-profit employers (only Internal Revenue Code 501(c)(3) organizations), cooperative hospital service organizations, and self-employed ministers in the United States. It has tax treatment similar to a 401(k) plan, especially after the Economic Growth and Tax Relief Reconciliation Act of 2001.

Employee salary deferrals into a 403(b) plan are made before income tax is paid and allowed to grow tax-deferred until the money is taxed as income when withdrawn from the plan.

403(b) plans are also referred to as a tax-sheltered annuity although since 1974 they no longer are restricted to an annuity form and participants can also invest in mutual funds.

2. An offer of a Lump Sum or an Annuity at retirement. This can be a very complicated calculation. There is a lot to consider and I strongly suggest you get help from a CPA or a Fee-Only financial advisor. (Do not use an advisor that gets paid via a commission).

3. An annuity that you willingly (or maybe under high sales pressure) choose to buy. I am a big fan of the phrase, “Annuities are not bought, they’re sold.” I have a VERY negative opinion of this type of Product. I have previously discussed a similar product in this post. That previous post gave a generic example based on actual products. If you want to read about all the different “Types” of annuities you can read this post from Investopedia.

Some have complained that I have not looked at a really good Annuity. Every time I ask for such an example the conversation seems to end. I am still waiting to see a “good” annuity. Anyone????

Recently, I was contacted by Nationwide Life Insurance. They had a “NEW” annuity that will be the best one ever! They seemed very excited so, I signed up for some webinars and collected information. Below is my analysis of a very specific product “Nationwide New Heights Fixed Indexed Annuity”. If you want more information that is what is discussed below – contact me and I can give you much much more.

Nationwide New Heights Fixed Indexed Annuity

Generally, “Fixed” and “Indexed” are considered two different types of annuities.

You also need to know that if the insurance company goes broke – You man not get all of your money.

It’s important to remember that all protections and guarantees are subject to the claims-paying ability of Nationwide Life and Annuity Insurance Company.

The sales person is paid a 7% commission to sell this to you. If you buy $100,000 they make $7,000! NOTE: I am not paid by any company to sell anything. I am one of the few FEE-ONLY advisors that only get paid by clients.

CDSC – Contingent Deferred Sales Charge. If you decide you don’t want this product you pay a 10% penalty to get out in the first year. This penalty is decreased by 1% for each year you own the annuity.

Taxes – People often think that you pay no taxes on an annuity – WRONG! Here is what the Brochure says….

If you take withdrawals or surrender your contract you may be subject to federal and state ordinary income taxes. In addition to income tax, you may be subject to a 10% early withdrawal federal tax penalty if you take withdrawals or surrender your contract before age 59½. Nationwide does not offer tax advice.

Death – How much do your beneficiaries get?

In general, if you are the sole owner and annuitant, upon your death a death benefit will be payable to the beneficiaries named on your contract. The death benefit paid will be equal to the greater of the Balanced Allocation Value (BAV) or the surrender value.

Nationwide did send me a 15 page glossy brochure to read but, when I asked for a prospectus they said they don’t have one. They informed me that the law does not require them to make one for annuities – buyer beware. I did find an old annuity from this same company that did have a prospectus but, I could not force myself to read all 184 pages.

Here is what the brochure says the product offers…..

1. A Return of Purchase Payment Guarantee to help protect your retirement savings
2. Unlimited growth potential

Return of Purchase Payment Guarantee – if you die or wait. The brochure does have this footnote….

return of purchase payment guarantee: You will receive 100% of your purchase payment less sum of gross withdrawals in the following instances 1) you surrender your contract after the 10th contract anniversary, 2) when the death benefit is payable, or 3) on a full surrender on or after a long-term care event or terminal illness or injury event (please note: long-term care and terminal illness or injury may not be available in all states and long-term care may be referred to as confinement). [Emphasis added]

So, you can get the money back if you die, wait 10 years or get terminally ill. Nice! Don’t forget, they take out the “sum of gross withdrawals”. Not sure what that includes.

While this is sold as a long-term plan and you can buy at any age, you cannot be an annuitant after the age 80. I am not 100% sure what this means but I bet it is fully explained in the 100+ page contract.

annuitant: The person upon whom any life-contingent annuity payments depend and the person whose death triggers payment of the death benefit.

Unlimited growth potential – True but….

Now it gets really complicated. This is heart of the product and the reason you MIGHT want to buy this thing. It is also very confusing.

New Heights offers you multiple Balanced Allocation Strategy options, known as strategy options, all of which have the potential of strategy earnings. Strategy earnings are credited at the end of each strategy term, on withdrawals, when a full surrender is requested and when death benefits are payable. Strategy options are a blend of an equity indexed component, declared rate component and strategy spread component. Since no limits are placed on your strategy earnings potential, you have the opportunity to receive potentially higher long-term accumulation based on the performance of the underlying index.

Was that clear? NO? That’s ok – they then go on to explain it….

In general, the strategy option works like this:
• The equity indexed component is the equity indexed allocation, multiplied by the performance of the underlying indexes
• The declared rate component reflects interest earned on the declared rate allocation, based on an interest rate (the declared rate) established by Nationwide Life and Annuity Insurance Company
• These two are combined and the total amount over the strategy spread component is used to determine the strategy earnings, if any, at the end of the strategy term, on free withdrawals and upon death. Partial strategy earnings may be credited on withdrawals in excess of the available free withdrawal amount. If the strategy spread component is greater than the result of the other two components combined, no strategy earnings would be credited. Strategy earnings will never be less than zero

Let me try.

First, you get to pick one of three Strategies (A, B or C). You only learn this if you get the Nationwide New Heights Fixed Indexed Annuity Rate Sheet. It is NOT in the brochure. How do you know which one is right for you? Who knows, this shit is complicated and I’m just getting started. I will not bore you with all of the details but I will select “Strategy Option A” for the rest of this discussion.

Strategy Option A

Option A has two parts:

1. 42% is in the “Declared rate allocation” – a.k.a. cash (this is the fixed part). You get 0% return every year – so suck it!

2. 58% is in the “Equity indexed allocation”. This is the part that you get to enjoy the returns of the market – Kinda. They keep 100% of the stock market dividends or about +2% per year – you get the rest. (Less fees of course)

Spread – This is a FEE you pay each year on the full amount of the Annuity (not just the Indexed part – cleaver eh).

Now, a specific example….

If you bought this annuity with $100,000 on Jan 1, 2014 this is the result you get in one year….

2014 the S&P total return is 13.69 %. However, they keep all of the dividend payments so you get 11.39%.

But that is only applied to the 58% that is in the market. You get $6,606.20. The 42% in the “Declared rate” part gets 0%. Don’t forget, you must pay the “Spread” of 2.25% on the entire $100,000 for a total of $2,250. You get a total of $4,356.20 ($6,606.20 – $2,250).

So, while the market is up 13.69% you make 4.36% – you just lost 9.33% or $9,334 (congratulations).

Let’s look at what happened in 2013….

2013 the S&P total return is 32.39 %. However, they keep all of the dividend payments so you get 29.60%.

But that is only applied to the 58% that is in the market. You get $17,168. The 42% in the “Declared rate” part gets 0%. Don’t forget, you must pay the “Spread” of 2.25% on the entire $100,000 for a total of $2,250. You get a total of $14,918 ($17,168 – $2,250).

So, while the market is up 32.39% you make 14.92% – you just lost 17.47% or $17,470 (Yeah!).

The nice part of the annuity is that if the market goes down next year by 12% (NOTE: not a prediction just an example) you will make 0% and not lose money. Sadly, you missed most of the upside for the last 6 years. Here are the results of 2013-2015 (with the theoretical decrease of 12% in 2015 fyi… a loss this big happened only 4 times in the last 45 years).

S&P 500 Annuity
2013 32.39% $132,390.00 14.92% $114,920.00
2014 13.39% $150,117.02 4.36% $119,930.51
2015 -12% $132,102.98 0% $119,930.51

You are still behind by $12,172 in just 3 years.

Taxes – Yeah Right. Info from Forbes…

…the tax deferral comes with a downside in that there’s a 10% penalty for withdrawals before age 59 1/2. That could be a problem if you need the money in an emergency, decide to invest it in something else, or want to retire early.

Another tax problem is that when you take withdrawals or annuitize it, the earnings are taxed as regular income.

But if you would have invested in a regular stock mutual fund, a lot of those earnings would have been taxed at the lower capital gains rate (currently 0-15%). You also give up the ability to use losses to offset other taxes.

The final tax problem doesn’t affect you but your heirs. When someone inherits the annuity, they’ll have to pay taxes on all the earnings that you haven’t paid taxes on during your lifetime. On the other hand, if that was a stock mutual fund, they may be eligible for a step up in cost basis, which could mean little or no taxable gain for your heirs.

Let’s say you are less than 59.5 years old and you now want to spend 100% your money. You get the following results…

Taxable account you paid Tax on the dividends each year for a loss of about 1% and now 15% capital gains (assume you are single tax filer with an income of $100,000) on the extra $32k. Total tax around $6k (at most). This is a rough guess, I am not a CPA. So you get a net amount of about $126k

Annuity – you pay no tax in the dividends – you did not make any. You pay no tax as you go – this is the biggest selling point of an Annuity. However, when you take the money out you get a 7% penalty or about $8,400 (you were only in 3 years) another 10% penalty because you are not over 59.5 years old (loss of $11k). The remaining amount of $400 you pay a 28% tax. So you get a net amount of $100k for a 3 year loss of $26,000.

Let us say you are a long-term investor. If you held the annuity for the last 24 years you would a value of $355,950. (This value is from the document I received from Nationwide)

If you invested in the S&P 500 you would have about $893,864 (I even took out estimated annual taxes). Most people just pay the taxes and don’t reduce their investments. I am giving the annuity every break that I can. (If you don’t remove taxes you would have $1,025,100 – Just sayin’.)

But wait it gets worse…..

After taxes you get:

$241,844 from the annuity ($335,950 less 28% tax) or

$759,784 from the taxable account ($893,684 less 15% capital gains – you paid income tax along the way).

These are some of the reasons I don’t like Annuities.

 

Listen to The Phil Ferguson show here….

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For more information visit Polaris Financial Planning or

send me an email: [email protected]

NOTE: This post is part of an ongoing education series. This information is for educational purposes only. This information does not constitute investment advice. Please consult with your financial advisor before taking any action.

Creation Museum Heading For Choppy Water

Creation_Museum_logoThe “Museum”

The Creation Museum is run by Answers in Genesis and promotes “Young Earth Creationism” in this case about 6,000 years.   They believe in a “literal” reading of the bible.  Of course, it is their “literal interpretation” and anyone that reads the bible “literally” but gets a different interpretation is wrong.  The logo (right) says it all, “prepare to believe”.

From Wikipedia…

The 60,000-square-foot (5,600 m2) museum cost $27 million—raised entirely through private donations to AiG—and opened on May 28, 2007. In addition to the museum proper, the facility also houses a special effects theater, a planetarium, and a gift shop, and serves as the headquarters of AiG.

Since it opened the “museum” added several other features:

A zip line (over a pond) called the “Screaming Raptor”

A petting zoo

Camel Rides

A sky bridge (think rope bridge)

An insect collection

A Carnivorous Bog Garden

A Butterfly / Hummingbird Garden

A “Rainforest”

and a real Allosourus skeleton.

Many people have visited the “museum” and AiG says that more than 250,000 people visit per year.  The first year had over 400,000 guests.  In 2009 I went PZ Myers and 300 of my best friends.    The place is beautiful.  You can buy a lot of cool stuff with $27 million.

Most of the “exhibits” show a panel that contains “Human Reason” on the left and “God’s Word” on the right.

Human Reason

The “Reason” side often contains factual errors or distortions about science.  The other side contains Ken Ham’s opinion on the bible.  As the photo shows above Ken uses the bible to support his position, “Reasoning is God’s gift to Humankind, but He has instructed us to use the Bible as our ultimate starting point (proverbs (1:7)…”

Here is Proverbs 1:7…

The fear of the LORD is the beginning of knowledge: but fools despise wisdom and instruction.

There is no instruction here suggested.  Additionally, you need to replace “fear of the LORD” with “Bible” and change “Beginning of Knowledge” with “ultimate starting point”.  So in classic christian style, you need to rewrite your sacred book to get what you want.  I will point out that Mr. Ham completely ignores the second half, “…fools despise wisdom and instruction”.  Mr. Ham is not open to wisdom or instruction so……

I also found it hysterical that the “original” model for “Adam” may have been involved with porn.

You can see all of this and a dinosaur with a saddle for just $29.95.

 The Ark!

The next big addition is going to be the ARK Encounter!

background-construction-wide_sm

 

They claim to have $18 million of the $30 million needed to build the thing.  This is down from the original amount of $172 million.  Recently, Ken reported that they have started to pour some concrete in a hole.  They are using huge machines, concrete and steel just like Noah would have done.  Ken also tells us….

“Space-age technology is being used at the Ark construction site!”

They also have to build a cistern to hold 50,000 gallons of water.  This was required by local fire code.  Ken claims that this (except for the all of the concrete and steel) will be the largest wooden structure in North America.

As you may know AiG was hoping to get an $18.25 million in tax credits from the state of Kentucky.  The state has now come to its senses after learning about some job requirements.  AiG wants all employees to sign “statements of faith” to be considered for the jobs.

“Employees at Ark Encounter don’t just have to believe in God; they have to believe in Christ, the Holy Spirit, Satan (as “the personal spiritual adversary of both God and mankind”), Adam and Eve, “the Great Flood of Genesis,” a 6,000-year-old Earth, and the eternal damnation of “those who do not believe in Christ.” All employees must follow “the duty of Christians” and attend “a local Bible believing church.” Just for good measure, employees must oppose abortion, euthanasia, gay rights, and trans rights.”

New Law Suit

Mr. Ham and his minions are now suing the state of Kentucky!

The ministry is asking a federal judge to compel tourism officials to place the ark project back into the incentive program.

The lawsuit also argues Kentucky’s action violates religious freedoms protected by the First Amendment, along with the equal protection clause of the 14th Amendment and state laws.

Here is a video from Mr. Ham.  Does he have a case?

Finances

From a blog post at Pharyngula…

AIGFinances

One of PZ’s readers, Brian, made this cool chart with data from Answers in Genesis’s 990 tax forms.  It does not look good.  While AiG brings in around $20 million per year the “museum” is losing about $3,000,000 per year.  That place is costing them a fortune but, they have found a way to collect more money from the suckers…. The ark!

Brian sums it up pretty well….

The most interesting conclusion I have come to is that the Ark Project is quite clearly an effort to gain a massive cash injection into the organization given the losses they have been sustaining due to the Creation Museum’s operation.

They are losing money while collecting millions for the boat.

Future

If Mr. Ham can’t find a new source for lots and lots of money (or win his lawsuit) his boat may never open.  At this point, I expect they may actually get the thing built (or partially built) and then the creditors will come looking for their money.  With a little luck maybe you can get your own ark in a bankruptcy auction!

The Phil Ferguson Show – 109


Guest – Jamila Bey & Karl Wulff

This week is my good friend Jamila Bey!

This handy summary from WIKI…

Jamila Bey is an African-American journalist and public speaker. She was host of a weekly radio program The Sex, Politics And Religion Hour: SPAR With Jamila on Voice of Russia, and writes for the Washington Post‘s blog, She the People. Before working for the Washington Post and the Voice of Russia, Bey spent around a decade working as a producer and editor for National Public Radio, including for Morning Edition.

Jamila on religion…. (also form Wiki)

Besides for her journalistic activities, Bey is notable as an outspoken African-American atheist, who has publicly stated that she believes religion to be actively detrimental to African-Americans, suggesting that religion both contributed to the physical enslavement of African Americans, and continues to contribute to their mental enslavement. she significantly objects to the common characterization of the civil rights movement as a religious one, acknowledging that although churches were significantly involved in the movement, “humans did all the work.”

You can learn more at her web page.

she is also on Twitter…

220px-Reason_Rally_DC_2012

Talking about Bankruptcy law – Karl Wulff

Karl’s Web site.

He received his Bachelor of Arts degree from Webster University in 1993 and his Juris Doctor degree from Oklahoma City University School of Law in 1996. Prior to attending university Mr. Wulff served in the United States Navy on board the amphibious assault aircraft carrier U.S.S. Tripoli (LPH-10) in the air department from 1987 to 1989 and later on board the aircraft carrier U.S.S. Saratoga (CV-60) as a reservist, earning the Sea Service Ribbon and the National Defense Medal. Mr. Wulff is a member of the National Association of Consumer Bankruptcy Attorneys (NACBA) and is a founding member of the Bankruptcy Association of Southern Illinois (BASIL). A frequent speaker at seminars on the topic of bankruptcy law, Mr. Wulff’s practice has been concentrated in consumer bankruptcy for more than seventeen years, during which time he has represented over four thousand individuals and small businesses in bankruptcy cases. Mr. Wulff is admitted to practice in Illinois and Missouri, as well as the United States Judicial Districts of Southern Illinois, Central Illinois and Eastern Missouri.

Bill introduced in the U.S. House of Representatives – Would Make Student Loans Dischargeable in Bankruptcy

Wulff-Karl-J-2004-150x150

 

 

Listen to The Phil Ferguson show here….

iTunes link….

RSS feed to add to your favorite podcast player

http://www.spreaker.com/show/1334552/episodes/feed

Please like The Phil Ferguson Show Facebook page…

For more information visit Polaris Financial Planning or

send me an email: [email protected]

NOTE: This post is part of an ongoing education series. This information is for educational purposes only. This information does not constitute investment advice. Please consult with your financial advisor before taking any action.

The Phil Ferguson Show – 108 (Old 401(k) & Atheists On Air )


Guest – “Cash” from “Atheists On Air” Podcast (more below)

Investing Skeptically….

Top 5 Reasons To Move That Old 401(k) – NOW

The Bureau of Labor Statistics say that the average person will have 11 different jobs between the age of 18 to 44. That is a new job every 2.4 years.

 

There are several things you can do with that old 401(K)

1. leave the money in your former employer’s plan;

2. roll over the money to your new employer’s plan, if the plan accepts transfers;

3. roll over the money into an IRA;or

4. take the cash value of your account.

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The Phil Ferguson Show – 107

Guests – Muhammad and Mya members of Ex-Muslims of North America (more below)

US Market Segment Analysis Ending 2014 (More Detail on post at Polaris Financial Planning)

12-Month Return 3-Year Average 5-Year Average 10-Year Average
Total Stock Market Return 12.56 20.49 15.70 8.10

You can also use this as a guide to check the performance of your portfolio. If the US stock segment of your investments have returned 7% per year for the last 5 years – you may have a problem.

The Swiss Franc

The Swiss central bank introduced the peg in September 2011 in response to investors buying up massive amounts of the Swiss franc as a safer foreign exchange alternative to the euro or the dollar.

In a statement Thursday, the SNB said the franc was now out of the period of “exceptional overvaluation” during which the minimum exchange rate had been introduced.

“The euro has depreciated considerably against the US dollar and this, in turn, has caused the Swiss franc to weaken against the U.S. dollar. In these circumstances, the SNB concluded that enforcing and maintaining the minimum exchange rate for the Swiss franc against the euro is no longer justified,” the statement said.

 

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