The Truth About Annuities – Episode 106

Have you considered buying an annuity? Maybe you already have one. Either way, you should understand how they work and why a lot of people experience annuity remorse. In this episode of Dentist Money™, Reese & Ryan list ten things annuities and timeshares have in common. They also explain how dentists often get pressured into purchasing annuities and why they don’t always get the returns they expected.

Show notes:
www.finra.org
www.sec.gov

Podcast Transcript:

Speaker: This is Dentist Money. Now here’s your host, Reese Harper.

Reese Harper: Welcome to the Dentist Money show, where we help dentists make smart financial decisions. I’m your host, Reese Harper with my trusty old cohost, Sir Ryan Isaac.

Ryan Isaac: And we’re back, it’s good to be back.

Reese Harper: Sir, I just had a recent experience on the west coast that I thought you would find interesting.

Ryan Isaac: Yeah, I think I’ve had a similar one. Let’s hear yours.

Reese Harper: I told you a little bit about this on my way home but today’s podcast episode-

Ryan Isaac: Life changing, life-changing experience.

Reese Harper: For our listeners who have … You’ve probably experienced something like this before. The title of the podcast is yet to be determined. But I think it’s going to be something in the vein of Ten Things that Annuities and Time Shares Have in Common.

Ryan Isaac: I think that’s a good working title.

Reese Harper: Today we’re going to talk about the complex … Like you’re going to listen today and for once and for all when you’re talking to your friends about annuities or someone calls you or emails you or asks you about an annuity you’re going to know a lot about how they work and what they’re for and why you might want them, when they make sense and when they don’t. We’re going to try to keep it brief and to the point.

Justin Copier: So this isn’t about whether or not to buy a timeshare.

Reese Harper: Well, to illustrate the point –

Ryan Isaac: Tell us so you never forget.

Reese Harper: Well, what I was surprised is how much timeshares and annuities have in common. Trying to figure out a story to tell that would actually make this relatable and I thought what better than to tell the story of –

Ryan Isaac: So paint the picture.

Reese Harper: I want to paint the picture for you.

Ryan Isaac: Take us back there.

Reese Harper: I went to visit my family in southern California and we stayed in the Newport Coast Marriott Villas.

Ryan Isaac: Shout out to New Port Coast Villas because it’s very cool there.

Reese Harper: Great people there.

Ryan Isaac: Great resort.

Reese Harper: Great quesadillas by the pool. My kids ate them all the time.

Ryan Isaac: That’s new. They have the big chess board.

Reese Harper: You can bounce around there, a little wave pool. So we were staying in unit 1210, just want to throw that out there.

Ryan Isaac: That’s very specific.

Reese Harper: Good unit, a little shout out to unit 1210.

Ryan Isaac: That’s a good little unit.

Reese Harper: People that were taking care of us out there. And so we went … We get there and I didn’t know, I paid a good … I paid like a promotional rate to stay there for the week because the last time I was there they’re like, “You should come back and buy a time share.” And I’m like, “Yeah I should except I know too well –

Ryan Isaac: Except I shouldn’t.

Reese Harper: That this is a bad idea.” So I said, “But I will take your promotional rate and come back and join you.” But I didn’t realize that when I took the promotional rate that it involved a free gift, which is a fake way of saying-

Ryan Isaac: That ain’t free.

Reese Harper: You … It’s not really free, you have to come sit through a presentation and you get the promotional rate. So I get there, it’s the first day, and I get to see this thing on my door when I walk in. It’s like-

Ryan Isaac: A little reminder.

Reese Harper: A little reminder of like your appointment with the friendly folks down at the time share village is at 1:00 p.m. Just pop on in and you’ll have your friendly presentation with your friendly friends. And I thought you know this is starting to feel a little bit scary.

Ryan Isaac: A little forced.

Reese Harper: But you know it was six days away, I thought I’m not going to miss it.

Ryan Isaac: You’re getting a promotional rate.

Reese Harper: Bottom line is I forgot about my time. I forgot that I was supposed to go.

Ryan Isaac: Weird.

Reese Harper: And it’s the day I’m supposed to leave, I’ve got a flight later that afternoon and I went and checked the fine for it and it said, “You’ll be charged the full retail of your week.” And I got like a three bedroom little nice place and it would’ve been pretty pricey. I think it was like $3 or $4,000 or something.

Ryan Isaac: Those would be like between $3 and $4.

Reese Harper: And I only paid like $500 or $600, you know?

Ryan Isaac: Significant discount.

Reese Harper: So I’m like I’m going to just … I’ve got to figure out a way to salvage this because I missed my appointment slot. So I call them, I tell them I’m sorry. They’re like, “I’m sorry sir we don’t have any availability for you today. You’re not going to be able to make it in because we’re booked.” I’m like, “I kind of need to sit through my dang presentation or I’m going to get a bill for this.” So they said, ‘Well call back in an hour, every hour we have people show up for their slots and if someone’s not there then you can take their slot.”

Ryan Isaac: Oh, man.

Reese Harper: And so I call back an hour later –

Ryan Isaac: It ruins the last day of vacation so hard.

Reese Harper: It was so bad. I was like, “I hate this.”

Ryan Isaac: Because you could’ve taken a walk to the beach and gotten a little lunch.

Reese Harper: Worse day ever. So I go show up. I call at 11:00am and they say, “Oh, yeah. You can come on down, we can accommodate you.” And the bottom line was I go in there, it was one of the worst experiences of my adult vacation life. I have this like really nice timeshare professional. Call him a time share advisor professional.

Ryan Isaac: Okay. That’s good.

Reese Harper: They had a fancy title. It was just a nice girl that was on like summer break trying to be the friendly, Q&A person at the beginning.

Ryan Isaac: The hostess. [crosstalk]

Reese Harper: Like, “Oh my gosh. You’re such a cute family. Can I see the pictures on your Instagram account of them? Because I’m really interested.”

Ryan Isaac: Yeah.

Reese Harper: And I’m like, “I can’t do this with you. I can’t build a relationship-”

Ryan Isaac: Yeah.

Reese Harper: I just have to tell-

Ryan Isaac: We know where this is headed.

Reese Harper: We know where this is headed. I’m not here to buy a timeshare. I just want my free gift.

Ryan Isaac: Yeah.

Reese Harper: My obligatory week stay at a $3000 discount. That is where I’m here-

Ryan Isaac: So to paint the picture, these … It … Was this in like one of their units but it was converted to an office so it’s kind of awkward?

Reese Harper: Well at Marriot-

Ryan Isaac: Or do they have actual offices?

Reese Harper: They have a whole building dedicated to sales.

Ryan Isaac: Oh okay.

Reese Harper: It’s gorgeous. You know at least at this Newport coast.

Ryan Isaac: Oh okay.

Reese Harper: So there’s like fountains and J.W. Marriott’s first day when he opened his root beer stand-

Ryan Isaac: Yeah. J.W.

Reese Harper: Set up his hotel back in 1492. Anyway, so there’s all these pictures of-

Ryan Isaac: Columbus discovered-

Reese Harper: It was on the Santa Maria where-

Ryan Isaac: They came over.

Reese Harper: He put the root beer stand that he set up his first Marriott. Little known fact, J.W. was actually a ship hand to Columbus crossing the ocean blue. And he lived on the starboard side of the ship.

Ryan Isaac: This is the stuff history teachers don’t tell you.

Reese Harper: They don’t tell you this stuff.

Ryan Isaac: They don’t want you to know.

Reese Harper: Long story short, I go through this nice intro call. 15, 20 minutes with this nice gal who couldn’t close … She couldn’t close anything. She’s way too nice. I just felt great about it. And the closer came in, zeroed in on my son-

Ryan Isaac: Who you think was the closer.

Reese Harper: Well, you thought it was the closer.

Ryan Isaac: It feels like it.

Reese Harper: For those of you who’ve never sat through a timeshare presentation, just know it’s one of the-

Ryan Isaac: There’s three people.

Reese Harper: There’s the intro-friendly-

Ryan Isaac: It’s good cop, bad cop. There’s awful FBI agent-

Reese Harper: The original manager and then you’ve got John the … I’m stereotyping because it’s usually someone with really long hair and a Hawaiian shirt.

Ryan Isaac: Yeah. Pinky rings.

Reese Harper: Been up too late the night before but he’s got a lot of metal on his hands-

Ryan Isaac: Yeah.

Reese Harper: Just you know touching knuckles together every time right in front of you. It’s scary.

Ryan Isaac: It is. It’s intimidating.

Reese Harper: Anyway, I just say, “No, no, no.” I don’t know like a hundred times. And he just wouldn’t stop. It’s just like-

Ryan Isaac: Well, they do math with inflation rates at like 25%.

Reese Harper: They do crazy math in front of you. I’m just like not interested. So, still not-

Ryan Isaac: Numbers are off.

Reese Harper: He’s like, “Well, your son has a peanut allergy.” And he kept pressing on this fact that they’d gathered from me. Because my son’s sitting there, he’s got a peanut allergy. They’re like, “You can’t vacation outside of timeshare because he has a peanut allergy. And you’ll need to bring in food from other places and have a nice kitchen.” I’m like, “I’m well aware of that. That’s why I’m here.”

Ryan Isaac: I’ve been doing it forever.

Reese Harper: It’s just a lot cheaper-

Ryan Isaac: It’s totally easy.

Reese Harper: “I’m not not staying at your resort. I’m just staying at your resort at a less expensive rate than you want me to stay at your resort at.” Okay so anyway, long story short-

Ryan Isaac: Wow. The peanut allergy.

Reese Harper: Just pressure on the peanut allergy. They’re pushing hard on trying to make that paying point be the close item. I just … It was a frustrating-

Ryan Isaac: Big moment.

Reese Harper: And I ended up … The moment that I remember there was at the end. I’m looking at the regional closer, not going to throw him under the bus-

Ryan Isaac: He’s doing his job.

Reese Harper: But he says, “We don’t pressure anyone here at Marriot.

Ryan Isaac: Yeah.

Reese Harper: We don’t pressure anyone.”

Ryan Isaac: Okay.

Reese Harper: And I said, “Okay well, can I go then?” And he said, “I just can’t believe that you’re walking away from this.” I said, “It seems like you’re still pressuring me. I want to just leave now.” He’s like, “Well I … We don’t pressure anyone here. That’s not our policy. We don’t pressure anyone.” And I was … And he just wouldn’t let up, right? And so we end up leaving, really awkward. He pushes over like the chair kind of blocking out the room, just mad kind of that he wasted 30 minutes trying to close me and I wouldn’t buy. And we start walking up the stairs to get our free gift. So the free gift-

Ryan Isaac: So cheap.

Reese Harper: So the free gift person’s the … Is nice again.

Ryan Isaac: Yeah.

Reese Harper: “Now I just wanted to sit down and do a customer service satisfaction review with you. And find out if you felt uncomfortable at all during the presentation.” I’m like, “My son’s in tears and my wife-

Ryan Isaac: She left.

Reese Harper: She’s just already left and she won’t even be here to receive the free gift. So you know, I’m going to have to give this a zero out of 10 on the score.” “Okay, well I’m going to note that in our material. I really appreciate you being transparent with us, letting us know.” I’m like, “You-

Ryan Isaac: There’s a process there.

Reese Harper: If you pace … If you pay these people like you know zero money-

Ryan Isaac: Unless-

Reese Harper: Unless I buy, there’s going to be a slight difference in the culture.

Ryan Isaac: Yeah.

Reese Harper: I’m going to be honest with you. You might want give … Think about maybe doing a salary-based program.” Or-

Ryan Isaac: They took that to heart.

Reese Harper: Yeah.

Ryan Isaac: They’re changing right now.

Reese Harper: So I gave him some suggestions, didn’t really work out. I think the reason we’re telling you this story is because there’s a lot of products in financial services that are very similar to how deliver-

Ryan Isaac: They’re delivered the same way.

Reese Harper: People are compensated the same way. The level of expertise and training is very similar.

Justin Copier: There were Hawaiian shirts.

Reese Harper: They do have Hawaiian shirts.

Justin Copier: That is actually true.

Reese Harper: They may be asking to come to Golden Corral for a free meal.

Ryan Isaac: Is that a regional place? Is that local? People not know about the Golden Corral, is that national?

Reese Harper: You know there’s a buffet in your neighborhood. Think about the biggest buffet that’s there, that is the-

Ryan Isaac: And it’s like $5.

Reese Harper: It’s like $5 for all-you-can-eat. Something like-

Ryan Isaac: It’s probably more expensive than that.

Reese Harper: Lot of financial advisors around the US. I know many of you listening to this would be like, “I would never do that.” But that’s very common in the financial services industry for people to get people to come to a big restaurant and sell them food and sell them a high-pressure product. Maybe a secondary meeting, at least.

Ryan Isaac: Yeah.

Reese Harper: So what we’re going to talk about today is 10 reasons that the timeshare experience is just like the way annuity works. And annuities are one of the number one products that you will see on state securities websites kind of cautionary list of things to not do with your money.

Ryan Isaac: Yeah. State securities, agencies, FCC, they’ll put out lists usually annually sometimes every few years about like the top 10 most common scams. Not just scams but things to be cautious of. Get second opinions, do your homework-

Reese Harper: Yeah.

Ryan Isaac: Annuities are always on that list.

Reese Harper: So for those of you who don’t know, annuity is an investment. Think about it like a type of account. It’s just a type of an account that you can put money in that is specific to accumulating money for retirement. It allows you to put money in and there’s a lot of features that make it attractive. At the outset for people, one of them is that the interest and dividends that are paid inside of the account or the growth it experiences is deferred from taxation. I mean you don’t have to pay tax year after year. So if you wanted to save money inside of annuity as opposed to a regular investment account, there’s a tax shelter basically-

Ryan Isaac: For this account.

Reese Harper: It’s kind of like an IRA.

Ryan Isaac: Yeah just like one.

Reese Harper: That you can’t touch till you’re 59. And it’s … It has that feature that people find attractive. Sometimes inside of these accounts there’s also special bells and whistles that differentiate them one from another. They’re one of the most expensive investment products in the United States and they cost the most money of almost anything you can put your money into when you compare different types of retirement saving vehicles. So compared to like a 401(k) or an IRA or a simple IRA, they’re a lot more expensive. But they come with some bells and whistles that are really attractive for some people.

Ryan Isaac: So another feature of what annuity is it’s through an insurance company product through an insurance company where the main feature benefits usually being sold is the guarantee of income. All right? That’s the … What the word annuity means. It means you give up a sum of money for a guaranteed amount of income that lasts for a specified period of time. So, the attraction with annuities is that the guarantees that are in place guaranteed payouts. A lot of times they have minimum or floors that your account can’t drop. Like you can’t lose money beyond a certain point. So those are some of like the main features that people are most interested in with annuities.

Reese Harper: Yeah. When we say annuity, we’re talking about just the … Like Ryan said, the word is just defining, converting a lump sum of money-

Ryan Isaac: Into a payment.

Reese Harper: Into a payment. A stream of payments.

Ryan Isaac: Yeah.

Reese Harper: And that’s usually what annuity means. And in a lot of cases in like sometimes in divorce settlements or sometimes in the case of different types of lawsuits. You’ll get annuity instead of a lump sum of money. That’s just a series of payments over time instead of getting a lump sum.

Ryan Isaac: Yeah. It can happen with life insurance settlements. It can happen with pension plans-

Reese Harper: Yeah.

Ryan Isaac: That have companies.

Reese Harper: You work for a state or local district, sometimes you’ll get annuity as opposed to a lump sum of money.

Ryan Isaac: Yeah which doesn’t always … Yeah, it’s an interesting point. It doesn’t always refer to an insurance contract. It’s just that’s the method of payment-

Reese Harper: Yeah.

Ryan Isaac: For the benefit.

Reese Harper: Yeah. So tell us about item number one, Ryan, that timeshares and annuities have in common.

Ryan Isaac: Number one is they’re hard to figure out what you actually own and how to use it. So let’s talk about the … First the different types of annuities that you can buy, why it is kind of hard.

Reese Harper: Yeah. Well, you have different types of annuities, just like you have different types of timeshares and they’re really complicated to figure out. Most people don’t understand what they actually own. You have fixed annuities that are kind of offering you a guaranteed minimum rate of return over a certain period of time. Kind of like a CD or a short-term bond portfolio.

Ryan Isaac: Mm-hmm (affirmative).

Reese Harper: So basically a fixed annuity is just a conservative way to accumulate money. And indexed annuity offers you a rate of return that is kind of tied to like a bench mark. Like the S%P 500 or some kind of investment vehicle. And those indexed annuities promise to give you the benefits of a fixed annuity contract. But the upside of one that can be invested in the market-

Ryan Isaac: It could grow a little bit.

Reese Harper: Then you have the opposite side of fixed which is variable annuities where you can put your money inside of different sub-accounts or different mutual funds that allow you to target certain types of investments that might grow a lot. And so those kind of a mixture between the two. You can have this fixed, you can have this variable or you can have a blend which is that indexed annuity.

Ryan Isaac: Yeah it’s probably good to mention to you also can have qualified and non-qualified annuities. So qualified annuities like when you have an IRA account, this is really common actually. We have an existing IRA account and you move that inside of annuity which gets warned about a lot because it’s redundant. You know, the deferred tax deferral in an IRA doesn’t improve or get any better by moving it inside of annuity but happens really frequently.

Reese Harper: Yeah. A lot of brokers since they get paid a lot to sell these will move people’s monies from an IRA or a 401(k) into-

Ryan Isaac: The annuity.

Reese Harper: And that there’s big incentives for them to do that. But those are … That is not a … That’s not good advice under almost all circumstances that I can think of.

Ryan Isaac: Yeah so, you have these different types based on the investment, the payout you have. You know IRA types and non-IRA types. Then there’s stipulations inside the annuities on how your money can grow, how far it can go down which is usually the benefit of these things, you know? Like there’s a floor, how much it can grow.

Reese Harper: Yeah. Let’s talk about the things that happened inside of the accounts-

Ryan Isaac: Yeah.

Reese Harper: How will your money grow? Well, if you’re inside of a fixed annuity, a fixed annuity has a stated interest rate and kind of a guaranteed minimum amount.

Ryan Isaac: And those are usually the lower payout ones because it is fixed.

Ryan Isaac: I mean it’s-

Reese Harper: Yeah. It’s similar to if you were to give your money to a bank or like we’ve talked about a bond in the past where you can kind of get a guaranteed fixed rate of return.

Ryan Isaac: Mm-hmm (affirmative).

Reese Harper: It’s very similar in a fixed annuity. You’re just getting the insurance company to state a fixed rate of return to you-

Ryan Isaac: Yeah.

Reese Harper: And you either keep your money [crosstalk]

Ryan Isaac: Mm-hmm (affirmative).

Reese Harper: What about a performance floor? What does that usually mean?

Ryan Isaac: Yeah. So this is kind of like one of the big features of an annuity which is the minimum amount your account can lose. So if you’re in one of variable products. So if you’re in one of the … A variable annuity where you can pick all kinds of different investments or the indexed annuity. The indexes that are tied to or the sub-accounts the investments you put in the variable ones. They can, just like any investment, they can go negative, right? And so the performance floor of annuity just guarantees that it won’t … You know, if the index goes down 10%, your floor might go to zero. Like you can’t go below zero in your account balance.

Reese Harper: Yeah so they’ll-

Ryan Isaac: Rate of return, I mean.

Reese Harper: So I think it’s important to just specify that between fixed annuities and indexed annuities and variable annuities, these three types that we talked about. A performance floor usually only applies to an indexed annuity or-

Ryan Isaac: A variable.

Reese Harper: A variable annuity.

Ryan Isaac: Yeah.

Reese Harper: With these types … These latter two types, you’re going to see performance floors. You’ll see performance caps and you’ll see what are called participation rates. Floors, like Ryan said, provide that kind of downside protection. Caps set an annual maximum so you can’t make more than a certain amount.

Ryan Isaac: Yeah. This is … That part get overlooked a lot though.

Reese Harper: Yeah.

Ryan Isaac: The floor is the main feature because a lot of times, these get sold preying on a little bit of maybe fear or misconceptions about markets or investments. You know, people are afraid to lose money. But the cap plays a huge role in how your money will grow and if you … It’s interesting. We were looking at a study over the weekend about if you remove the floor and the caps, what kind of performance … Basically if you just had a normal investment account versus if you had a floor which sounds nice. But then a cap with it, I mean you know, you miss out on a lot of those big years in exchange for having the safety of the floor. And the performance is very, very different from what you get in an outside investment account.

Reese Harper: Yeah so, what Ryan’s saying is imagine a big wavy line going up and down. A big wave that goes up and down through this line that goes right through the center. You’ve probably seen an audio wave like that, right? Imagine if you took off the top and you took of the bottom and you just kind of kept all the stuff right in the middle. Now that’s kind of what the intention of annuities trying to do, it’s just trying to make the ride be a lot more smooth. What ends up happening though is all of these returns are still based on … If you listen to any of our prior podcasts, you understand that good returns in a market don’t happen every year. They only happen once every three to four years or sometimes every five to seven years, you’ll have a big year. And if in those big years, the insurance company caps your return, you’re not able to get as high of an average over five to seven years as you would if they didn’t cap the return.

Ryan Isaac: But what’s important about that is a lot of times these caps are around the 10% mark. Which, on the outset, that sounds like, “Well that’s fine.

Reese Harper: “I’d love to get 10%.”

Ryan Isaac: Yeah, that’s fine. I’ll get eight or nine or 10%. You can cap me though, that’s fine.” What people don’t realize is what you’ve just said is the average return of eight or nine or 10% doesn’t happen because it goes perfectly 10% every year. It’s because some years, you’ll get 25 or 30 or 35% in exchange for years that go down. But when you miss out on that, you’re not getting like a 10% average.

Reese Harper: Yeah.

Ryan Isaac: I mean it’s a lot lower however.

Reese Harper: What Ryan said is every five to seven years, if that one big year, your attorney gets capped. What it does is it just make your average return be a lot-

Ryan Isaac: Way lower. Oh yeah.

Reese Harper: And so what we typically see … If you see a lot of independent academic studies around this, indexed annuities typically perform much poorer than people would expect given the way they’re described up front. If you tell me you’re never going to lose money because it’s going to be a zero floor-

Ryan Isaac: But you have the upside-

Reese Harper: But you have the upside of up to 10%.

Ryan Isaac: Yeah.

Reese Harper: So you could make … You’re always going to make between zero and 10. While that feels really good on the outset, except when you realize that what that means is you’ve kind of locked yourself into like a 3% annual return.

Ryan Isaac: Mm-hmm (affirmative).

Reese Harper: Because you’re capped, your upside and you took away all the downside. I’m kind of exaggerating. You’d see some indexed annuities that might do better than that depending on the time period and some will do way worse. The principle is don’t get caught up in this because you pay a lot of fees in order to have these floors-

Ryan Isaac: Yeah.

Reese Harper: And caps. There’s also one thing to kind of think about that I didn’t get a say which is a participation rate on the index. So even though they say they’ll cap your return at 10% a year. Sometimes they don’t give you the full return that the index offered you. So they might say you know, “Instead of getting that 10% cap, we’ll only going to give you 80% of that 10%.”

Ryan Isaac: Yeah.

Reese Harper: It’s called a participation rate index. And they create this index internally to the annuity product and it just doesn’t give you the full upside of what’s promised. So those are really … They’re just tricky things to think about. We don’t want to get too down in the weeds on these-

Ryan Isaac: Yeah.

Reese Harper: Because they’re pretty heavy. But I just … I think it’s important for people to know that these three things, you don’t get what you think you’re going to get out of them.

Ryan Isaac: Well I mean logically, these are very, very profitable businesses and companies. I mean, they know what they’re doing mathematically. And when they do the underwriting when they set all these caps and minimums and participation rates, you know? I mean they’re not going to overpay someone and guarantee that they’ll never lose money.

Reese Harper: Yeah. So while it sounds good, I just think you got to realize … You got to know what you’re paying for and we’ll get to that in just a second. There’s a lot of warnings all over the securities board websites. You can go to finra website or the FCC website. I think it’s finra.gov and fcc.gov. And then there’s the North American Securities Administration Association, formally called the NASD. I think it was North American Securities Dealers. Their websites will show you know these are the top 10 schemes and scandals. They’re even … There’s just a lot of annuity products get a lot of attention-

Ryan Isaac: Yeah.

Reese Harper: In the state market, so. What’s the second thing Ryan that we go through when we’re looking at annuities that have a lot do with timeshares?

Ryan Isaac: Yeah. They usually end up costing more than you thought they would.

Reese Harper: So upfront, they cost a lot more than you ever realized?

Ryan Isaac: Yeah.

Reese Harper: I think we see that with timeshares. We see that with annuities. Tell me about a couple of things inside of annuity that are expensive. Let’s type … Just talk about the types of fees that are inside of these.

Ryan Isaac: Yeah. So, we’ll start with probably the biggest one. It’s called the M&E Expense or Mortality and Expense. This is just basically the cost of paying for the benefits and a few other small costs. The industry average of the M&E charge is 1.25% annually. But they can go up close to 2%.

Reese Harper: So this 1.25 to 2% per year is part of the fees you’re going to pay to have those floors-

Ryan Isaac: Yeah.

Reese Harper: And those caps, right?

Ryan Isaac: Mm-hmm (affirmative).

Reese Harper: Okay. There’s also administration fees, riders. Administrative fees and riders between these two … I think you know those can add up to be you know well over another percent-

Ryan Isaac: Oh easily.

Reese Harper: Until about half a year.

Ryan Isaac: Yeah. Administration fee, I think the industry average is .25%. So it’s another quarter.

Reese Harper: Yeah.

Ryan Isaac: Just for the … I mean that’s to mail you stuff. And you know, it’s just communication.

Reese Harper: Keep track of your money. Do the accounting on it. Send out statements.

Ryan Isaac: Now riders, these can vary a ton. You mentioned these before, you can add a lot of things onto annuity. You can add more features and bells and whistles. And things like life insurance stuff, death benefits and beneficiary add-ons. You know pass this thing to someone if you die.

Reese Harper: Long-term care insurance-

Ryan Isaac: Yeah.

Reese Harper: Comes with it. You get some disability benefits occasionally.

Ryan Isaac: Yeah. And these things range from a quarter percent to over 1% a year per rider.

Reese Harper: Yeah.

Ryan Isaac: So.

Reese Harper: You also … Some riders, there’s riders for buy-backs where some annuities … Well, some annuities will make you pay money in order to guarantee that your contract never changes?

Ryan Isaac: Yeah.

Reese Harper: And then, some annuities will … Can completely-

Ryan Isaac: Come back and ask for their stuff back.

Reese Harper: They can come back and ask for benefits that they promised you.

Ryan Isaac: That’s actually been … Yeah, it’s been in the news for years now. My own grandma has an annuity where she’ll … I’ll look at her mail and she’ll ask me these questions and they send her these letters asking for their benefits back. Basically, they over promised payouts that were too big. They couldn’t themselves of their own investment models and returns keep up with the payouts. So they write letters and say, “Hey. Give us this one benefit back. We’ll increase your benefits bays or we’ll allow you to pull out some money or something.” But it’s never a good enough exchange, you know? They want that back because you’re getting a better deal than they want you to have.

Reese Harper: Yeah. So that’s why if you do have an annuity, that the annuity company’s telling you they want to make changes to a bunch. Probably a good sign that maybe you’ve got something that is decent.

Ryan Isaac: Yeah. Keep it.

Reese Harper: Maybe they screwed up.

Ryan Isaac: But this isn’t advice. But usually they want some that’s [crosstalk]

Reese Harper: I mean our point too on this is that they’re not always … It’s not always a good idea to get rid of one you have. It’s just usually a good idea to avoid them in the first place. And so, I think that’s just something to-

Ryan Isaac: It’s good. Okay. Another kind of fee is you pay fees on the underlying investments that you put in your account. These apply more to indexed and especially variable annuities so those investments that you can choose inside of the annuity, they carry fees as well. Usually all the one’s I’ve ever seen for clients have always been over a percent.

Reese Harper: Yeah.

Ryan Isaac: And they’re always like 1.3 to 1.5%.

Reese Harper: Yeah.

Ryan Isaac: And the choices that you have. And this is another complaint people have, there’s like five options. Pick between one of these five really crappy funds that cost a percent and a half a year.

Reese Harper: And in fairness, some of these are getting better. And you’re seeing annuity companies feel pressure to offer more options. Bring down the prices of funds but what Ryan’s saying still true that … Though typically, not … You know, if you go to Costco and you buy a case of eggs, you know you’re getting that at a wholesale price. If you go to annuity and you buy a mutual fund. Let’s say you want this particular investment, you want a United States stock index, you’ll find that it’s kind of like going to Costco and then saying, “Here’s the price.” But just because it’s a Costco, now it’s three times as expensive. And they show it to you. Imagine if you went into Costco, you go to the egg section. They’re like, “Eggs cost $2 a dozen. But since you’re buying it from us, it’s [crosstalk]

Ryan Isaac: Since you’re putting in that type of a shopping cart.

Reese Harper: Since it’s going to go in this shopping cart, it’s $6 an ounce. [crosstalk] You have to pay it.

Ryan Isaac: Yeah sorry. It is $2 outside that shopping cart.

Reese Harper: Yeah.

Ryan Isaac: But now it’s $6 inside of yours.

Reese Harper: Inside of your cart. And so, you just know that you’re getting the same investments inside or outside. If you set up an IRA and bought that same investment [crosstalk] wholesale. It might be a third of the cost. So they typically have a lot of mark-up on their investment fees. There’s what are called 12 Newton Fees that help [crosstalk] more expensive. Because the annuity company or the insurance company that has the annuity is paying money to … Well, the fund inside of the annuity is paying the insurance company to feature it. So if I’m a mutual fund and I want to be in someone’s annuity. Let’s say I’m you know mutual fund X, Y, Z and I want to be John Hancock’s new annuity. I might pay them-

Ryan Isaac: The harper fund.

Reese Harper: .25% a year to feature me in their annuity. That’s called the 12b-1 fee and those still exist and many of you are paying those inside of your annuity. So it’s just a really … You get the sense from all these fees.

Ryan Isaac: We’re not done yet either.

Reese Harper: Yeah. We’re not even close to done. It’s just hard to understand what’s going on.

Ryan Isaac: Yeah.

Reese Harper: And so, talking about surrender fees.

Ryan Isaac: Okay this is one of the bigger ones. Surrender fee or surrender period, surrender charge. This just means that if you want your money back before a certain period of time is done, it can range from anywhere from three to 15 years in some cases, there will be a percentage charge. So take for example, a 10 year surrender charge. Normally what’ll happen is they’ll say you’re one or you’re 0.0 to your one. If you want your money back, we’re going to charge you 10% on top of everything. Just take it back. And so you pay a fee of 10%, you get 90% back out.

Reese Harper: Yeah.

Ryan Isaac: Year two, it’s 90%. Year three, it’s 8. And it goes down to zero after-

Reese Harper: So why do they have 10% in that first year?

Ryan Isaac: It’s because that’s how much they pay the agent to sell the policy upfront anyway.

Reese Harper: So the annuity broker, the guy that sold it to you probably got paid-

Ryan Isaac: Not quite 10. That’s a little-

Reese Harper: He probably got paid whatever your surrender charge is.

Ryan Isaac: Oh yeah.

Reese Harper: So whatever your surrender charge is, whatever you have to pay to get out of it [crosstalk]

Ryan Isaac: When you and I get emails on this and phone calls every week about the latest annuity with an 8 and 9% commission, you know? Here’s a new-

Reese Harper: Yeah. Ryan … Our firm at Dentist Advisors, we’re what’s called a fee-only fiduciary. So we don’t get paid commissions to sell annuities. And but we get marketed too by annuity companies all over the country that want us to promote their product. And in our email accounts almost like on a weekly basis, for sure. And on our voicemails, we’ll get voice messages saying, “Look if you sell this many this year, we’re sending everyone to Cabo.” Or, “We have a new bonus available at 8% if you do seven annuities with us.”

Ryan Isaac: Yeah.

Reese Harper: They’re really aggressive at marketing to getting people to sell these.

Ryan Isaac: So here’s the thing to think about too. And I’ve run into this lately with a few clients where this has been a surprise. If you have an annuity, know … Let’s make a distinction too. There’s … In your annuity, you can have it where it’s not annuitized yet. Meaning you’re not taking payments from the annuity yet. You could go back and get your money back. That’s called a deferred annuity. You haven’t started taking payments yet.

Reese Harper: Yep. So we’re talking about types of annuities here. You can do one where immediately the payout starts or one where you parked the money somewhere. Let it grow for a bit and then maybe start getting-

Ryan Isaac: Then taking payments. When people have those deferred kind where they haven’t started taking payments yet and they’re still adding money to the annuity, something to remember about these surrender periods is they start over usually. They start over with every new payment. So if you put in $10,000 one year, your 10 year surrender period starts that year. If you put in $10,000 the next year, you get a new 10 year period on that $10,000 piece. So this has been a surprise to some people that have had annuities inside of retirement plans where monthly contributions are being sent in. Or just deferred annuities where people are sending in their savings monthly. And they didn’t know that there was a new surrender period starting with every new … Not the whole account, but with every new payment has its own surrender period.

Reese Harper: Yeah.

Ryan Isaac: Kind of a pain.

Reese Harper: Totally. So I mean that’s … There’s also financial advisor fees on top of that so this is before the person’s got any kind of trail. It’s upfront commission. And a lot of times after that, they get a trail commission-

Ryan Isaac: Ongoing.

Reese Harper: Ongoing … On an ongoing basis. And that can range … You know, that can be a really broad range.

Ryan Isaac: So all in, you’re probably on an a typical annuity. Now there are some good ones. I mean we could get to-

Reese Harper: We’ll get to-

Ryan Isaac: There’s a few companies that [crosstalk]

Reese Harper: So let’s talk about the worst option.

Ryan Isaac: Yeah.

Reese Harper: The worst option might look like-

Ryan Isaac: You’re going to be in the 3 to 4% range every year, maybe a little bit more. Not including the surrender fees if you want out of it.

Reese Harper: Yeah. So every year, if you’ve got $100,000 sitting there, you could be paying between 3 and $4000 a year just in fees to have it sitting there.

Ryan Isaac: Mm-hmm (affirmative).

Reese Harper: And your money would have to grow a lot for it to outpace just those fees. I mean think about just put $100,000 in an IRA, you know? I mean it’s a very different scenario to put money inside of an IRA where none of these fees apply. None of these same benefits and features are promised. It’s just more of a wholesale version of an investment. And if you put it inside of annuity, you get all of these features where they come at a really high cost.

Ryan Isaac: Mm-hmm (affirmative).

Reese Harper: And there’s usually so complexed, that most people don’t know what they’re paying for which was kind of our second kind of timeshare correlation there.

Ryan Isaac: Yeah.

Reese Harper: So our third one that we wanted to talk about. When you want to use the annuity or the timeshare, there’s always some reason that you can’t. Right?

Ryan Isaac: It’s hard.

Reese Harper: And it’s hard to-

Ryan Isaac: [inaudible]

Reese Harper: Hard to use it. You got to pick the right week or you’ve got to schedule the right time. And with annuity, it’s just there’s always complications. Whether it’s I have to wait till I’m 59 and a half or I have to wait for my surrender period to be up. Or the monies that I put in, they started my new surrender period. Or I’m missing out on some bonus if I do anything with it right now.

Ryan Isaac: Yeah. That one’s … Just talk about that one for a sec. That one’s kind of common where let’s say if I talk my annuity at 55, I can start getting a 5% payout. But if I wait till 63, it’s kind of like social security. I can get a 5.5%. And if I wait till 70, I can get a 6% payout. So you kind of like, “Should I wait? Should I not do it?”

Reese Harper: Yeah. There’s a lot of reasons why it’s always just kind of complicated.

Ryan Isaac: Taxation is [crosstalk] Taxation is ordinary income. Where if that money had been growing inside of a brokerage account, for example.

Reese Harper: Mm-hmm (affirmative).

Ryan Isaac: You would have paid capital gains taxes on your growth. Annuities, you’re going to pull the money out and pay ordinary income tax.

Reese Harper: What’s our fourth item?

Ryan Isaac: Number four is harking back to your story. They’re always sold in high-pressure situations. And I was talking to a client this week actually that he got pitched an annuity. But the way he said it was he didn’t make time for this person. They didn’t schedule anything. He said he was caught upfront one day after multiple attempts. And the guy caught him up front in the office and he had to listen to the pitch. So he ran some stuff past me-

Reese Harper: So someone literally walked into his office soliciting his business-

Ryan Isaac: This was like the third or fourth time-

Reese Harper: Man.

Ryan Isaac: Trying to find it. But he said he was caught upfront. So it’s kind of like indicative of how these things are … No one wakes up and is like, “I really want to buy an annuity today.” You have to get caught upfront.

Reese Harper: Yeah. You ever been caught by that person where you know they’re chasing you down. And your phone-

Ryan Isaac: You were upfront grabbing a record.

Reese Harper: You just accidentally [crosstalk]

Ryan Isaac: Shouldn’t have walked out front.

Reese Harper: Yeah.

Ryan Isaac: Shouldn’t have been up there

Reese Harper: Yeah.

Ryan Isaac: Change your clothes before you go upfront.

Reese Harper: Book. Our item number five right? The subject that they have in common is you end up feeling depressed about owning them at some point. I think most annuity owners … I’ve never met an annuity owner that … There’s going to be one of you out there that’s going to comment on this podcast episode.

Ryan Isaac: Let us know, yeah. [crosstalk]

Reese Harper: I’d love to hear.

Ryan Isaac: Yeah. That you’d still love it. That’d be great actually.

Reese Harper: I want to hear that you love it and you would never change a thing. Because I just have met like nine out of 10 people like loathe it. And then one person’s like, “He’s my brother-in-law.

Ryan Isaac: Just keep it there.

Reese Harper: At least I helped him out. Helped him get his … Him off the ground. He really needed some business.” Number six. Somehow … I would say this that number six. The difference or the number six similarity between time shares and annuities is?

Ryan Isaac: They somehow keep getting people to show up for the free gift.

Reese Harper: Yeah. Somehow they keep getting people to show up for the free gift.

Ryan Isaac: And sit through the presentation.

Reese Harper: And sit through their-

Ryan Isaac: A lot of this has to do with a little trickery, okay? You got to get caught up front in your office. You got to go and get tricked or schemed into sitting down, you … A lot of times, you’ll hear … Our clients will say, “Hey I sat through this meeting and here’s what was pitched.” But the subject of the meeting on the outset when they presented it was like really pretty different, you know?

Reese Harper: Yes.

Ryan Isaac: Like it’ll be like, “And we’re going to talk about your health insurance benefits and a few other things that your corporation could do for your employees.” And you know, some owners think that, “Okay, that’s cool. Like to learn a little bit about the benefits I can provide for my employees.” And it’s like two minutes on that and 90 minutes on annuities.

Reese Harper: Yes. The seventh item is they’re usually targeted to various specific groups of people.

Ryan Isaac: Yeah.

Reese Harper: And most often than not, they appeal to people that are in the later stages of their working life.

Ryan Isaac: Yeah [crosstalk].

Reese Harper: Elderly, retired, 60s, late 50s, starting to think about retirement. And somehow there’s this magic retirement account that you’ve never heard of. It’s got all these bells and whistles. They position it like everyone else is an idiot, they just don’t know about these. And you’ve just found out-

Ryan Isaac: The little thing no one wants you to know about.

Reese Harper: Yeah. It’s just … And it usually ends up attracting people that have like lump sums of money.

Ryan Isaac: Mm-hmm (affirmative).

Reese Harper: To put in these or-

Ryan Isaac: It’s good commission.

Reese Harper: And they’re worried about investments they don’t have a lot of knowledge honestly. Like a lot of the financial knowledge that these people that fall prey to some of these. I mean I’m just … We’re bringing this up because most people really get hosed when they’re putting their money inside of annuities. It’s not … They usually don’t pick a good annuity with a good contract with good terms. And I’ll talk about alternatives to some of these bad options [crosstalk]

Ryan Isaac: Well I was just going to say that the elderly … I think the FCC calls it elderly financial abuse or something like that.

Reese Harper: Yeah.

Ryan Isaac: That’s one of the biggest warnings that they have is unfortunately it just gets sold to older people that are really worried. They’re finally in retirement. They’re done working. And they have a lot of fear and concern, anxiety about their money lasting.

Reese Harper: Yeah.

Ryan Isaac: Which is you know … That’s one of the big sales pitches too. And so-

Reese Harper: Yeah. So one thing to be aware of is not all annuities are the worst thing ever. We’re making these … We’re just trying to like warn you. Like if anyone says annuity, your first reaction should be-

Ryan Isaac: Second opinion.

Reese Harper: “I don’t think that’s going to be good for me.” That should be your first reaction. And then, it’s okay to learn a little more from there. But just react poorly. Okay? [crosstalk] Yeah. If someone’s leading with that, something’s wrong. Like I … Ryan and I are in this fee-only fiduciary world which is like one of the most highly-regulated. We don’t sell products for commissions, we can’t get paid on commissions. But there are a lot of annuities that are built for … To appeal to people like Ryan and I. Because these annuity companies don’t want to lose a big segment of the market-

Ryan Isaac: Mm-hmm (affirmative).

Reese Harper: So they create very low cost-

Ryan Isaac: No commission.

Reese Harper: No commission. Stripped down, no loan, no surrender fee products. And some of them are pretty good. I mean … And it’s a compelling option for certain high-income people with really good cash flows.

Ryan Isaac: For a segment of their portfolio.

Reese Harper: For a small segment of their portfolio. For example, let’s say annuity costs .4% more than a straight IRA or 401(k). Let’s say that that was really the cost difference. And in some cases, some of these no-fee products are starting to approach that.

Ryan Isaac: Mm-hmm (affirmative).

Reese Harper: If you put your money … Instead of putting it in an investment account or brokerage account after tax, right? And just didn’t save it because you maxed out your 401(k) and your retirement accounts. And you’ve got a little extra money to save, you got a choice. You can put it in a regular investment account or you can put it in one of these lower-cost annuities. Some of the advantages to that might be that you won’t have to pay taxes every year on the interest and the capital gains and the growth. But it better have great investments inside of it that you could have at the same cost or similar cost.

Ryan Isaac: That you could buy outside.

Reese Harper: Bought outside. And you should use it for types of your investments that are going to be in your portfolio that pay out a lot of interest in dividends because this annuity will shield those things from taxes. And so if you wanted to have a lot of … A really conservative investment in your portfolio and you were going to hold it in your regular taxable investment account. And you decided that this annuity that you found that was really inexpensive.
Some of the good options out there that I’ve seen recently. There’s one from TIA-CREFF. They have an after-tax, no loan, no commission annuity that’s not super expensive. Instead of putting your bonds inside of your after-tax account, you could put some inside of annuity. In my own personal experience though, this still tends to be slightly more expensive-

Ryan Isaac: A little more complex too.

Reese Harper: And a little more complex because now I’ve tied my money up for sure till I’m 59. And it … And I’ve also created a situation where I have to pay ordinary income taxes on the back end. When you pull money out an annuity, it’s not capital gains, it’s ordinary income. And that’s a higher tax rate than it would be if you just kept it inside of a brokerage account. So even though the fees might be really conservative and really reasonable, we’ve found in our experience that there’s still not quite as compelling for most people. But I do have clients who have annuities and it usually boils down to someone who’s so conservative and they’re so worried about the future that they really just want to have these guarantees or a really … You know, even in a low-cost annuity, there are options to get investments that have annual guaranteed returns or very predictable annual returns. And that’s just sometimes gives people more closure than the idea of owning bonds. Because they like the idea that an insurance company can maybe provide them with that level of certainty.
Like absolute certainty where a bond is pretty conservative and it … You know, if you own a bond mutual fund. I would argue that in most cases, it’s more diversified and maybe even more conservative than what you’ll find inside of annuity.

Ryan Isaac: But still an investment that carries the risk of loss.

Reese Harper: But it’s still an investment that carries a risk of loss and some people don’t want that. And so, they’re not bad. It’s just you got to get your fees stripped down to the point to where they’re … I mean you can’t be paying multiple percentage points a year in annuity fees and have it even come close to where it should be for what you’re getting out of it.

Ryan Isaac: Yeah.

Reese Harper: So I’m … Just my pitch for maybe a balanced approach to this. I don’t think that they’re all bad. But you’re talking about 5 to 8% of the annuity market has products that are actually geared in a lower-cost way to solve some of these problems. And then the bulk of the market is still honestly preying on people that don’t know what they’re doing. And paying financial advisors high commissions to promote these products.

Ryan Isaac: Well another problem is how often … If you own annuity or … We see this too, how often does the annuity get changed to a different annuity?

Reese Harper: Yeah.

Ryan Isaac: Resets the surrender period. But it pays the person again.

Reese Harper: You mean a broker comes and tells you that the one you own’s not good enough?

Ryan Isaac: Well here’s a better one.

Reese Harper: And change to a new one.

Ryan Isaac: Now that does … I mean, it is true.

Reese Harper: That’s called churning and we see it a lot.

Ryan Isaac: Yeah.

Reese Harper: So-

Ryan Isaac: New product comes out, different bells and whistles, changes it again, gets paid again.

Reese Harper: That’s all I wanted to say about the new products. Did you want to say anything about-

Ryan Isaac: I was just going to say if you’re listening to this and I don’t know, what advice Reese, you would want to give people listening to this. I would say if you’re listening and you have an annuity or you’re thinking about buying one. But you’re concerned or you’re worried or you fall into this category, you can relate to this and you’re maybe concerned that it’s not the best thing for you right now and what are your options, give us a call. So you can call us anytime 833-DDS-PLAN. You can go to our website and book an appointment with us and we can chat about it. You just go to dentistadvisors.com. At the top of the website, there’s a link you can get on our calender and let’s talk about your annuity and what options you might have. Because there’s a few ways that you can make them better. You can improve at least the investment selection.

Reese Harper: You can cut some of the costs-

Ryan Isaac: Cut some costs. You can bleed them out slowly. Even if there are surrender charges. You can take a little bit out every year without a penalty and get the money out of there, you can get rid of it completely, you can transfer them to better annuities. You have options so give us a call 833-DDS-PLAN and we’ll chat about what options are maybe best for you.

Reese Harper: So we’re going to hit these last three as we part ways here that I think are kind of our last timeshare annuity comparison.

Ryan Isaac: These are the closers.

Reese Harper: And number eight, you thought this would be a great thing to pass along to the kids. And then you realize that the kid … You’re passing a bill along to the kids. The timeshare that they have to keep paying for their annual dues.

Ryan Isaac: Can’t you get them a timeshare? [crosstalk] $10,000 a year [crosstalk]

Reese Harper: Keep shelling out this money for your maintenance dues. And the second thing is annuities tend to be a little bit more expensive way for kids to inherit money as well.

Ryan Isaac: Mm-hmm (affirmative).

Reese Harper: And so you know. But number nine, reasons that annuities and timeshares have in common is what?

Ryan Isaac: You know someone who has one.

Reese Harper: You know someone who has one.

Ryan Isaac: Everyone knows someone who’s got one.

Reese Harper: Yeah-

Ryan Isaac: And you use them for that benefit.

Reese Harper: Use them for that benefit. Or that’s a reason [crosstalk]

Ryan Isaac: I don’t know how you use a friend for their annuity though.

Reese Harper: You get … Well, they get you into it usually because they have one.

Ryan Isaac: Okay.

Reese Harper: Number 10.

Ryan Isaac: Last but not least.

Reese Harper: The last but not least item. I think this is probably my favorite. You don’t like to talk about it because you know you probably got a bad deal.

Ryan Isaac: Just don’t bring it up after a while.

Reese Harper: You don’t bring it back up.

Ryan Isaac: Don’t say anything.

Reese Harper: Annuities are one of the more complicated things you’re going to have to navigate throughout your retirement. If you are the type of person that’s doing this without a financial advisor, it’s just … It’s almost impossible to understand the bells and whistles of each contract and make good comparisons. So if you’re doing your own financial planning, I’ll just say stay a long way away from annuities. But they do have a place in certain personality types. Depending on how much risk and stress people want to have. In some cases, if people have limited means and they have a really, really high amount of income that they need. And they’re just going to run out of money anyway.

Ryan Isaac: They need to squeeze a high withdrawal rate out of a small account-

Reese Harper: Yeah.

Ryan Isaac: Balance.

Reese Harper: You got to get a lot of money. Like you’ve got to take 7 or 8 or 9% out of your account every year. Man, you can’t hardly invest that money anyway. So sometimes, an annuity can make sense for certain types of people. It’s just kind of a bummer because the people who probably shouldn’t have them are the people who are the ones that end up getting targeted the most. I just … I’m giving people just a word … I guess like just … I want people to know they should be cautious about these and make sure that they’re not trying to look at annuities as a way to get ahead. As a way to invest in a better investment vehicle-

Ryan Isaac: Get a better return.

Reese Harper: Than they could get from the straight IRA, 401(k) or after-tax account with low-cost investments. And I do think that that … If people can just get second opinions constantly before they make any changes to their annuities or before they ever buy one the first place. They’re going to be a lot better off than kind of going through it blind just trusting the sales person that they’re talking to.

Ryan Isaac: Okay. Well thanks for your thoughts. Thanks everyone for-

Reese Harper: Thank you.

Ryan Isaac: Joining us today. Appreciate you listening. If you have questions, again you can reach us any time by calling us at 833-DDS-PLAN. You can go on our website dentistadvisors.com. At the top of the page there is a little link where you can schedule on our calendar. We can talk about your annuity. We can talk about the options you have or any other questions you’d like to discuss with us. And thanks a bunch, talk to you later.

Reese Harper: Carry on.

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