2.5 to 8.9% tax deferred growth option

Nate Crosby | May 31, 2022

Earn 2.5 to 8.9% interest

In a low interest environment, clients often ask if there are conservative investments available to grow money without stock market volatility. For healthy investors under the age of 79 this one is hard to beat.

Access to all your money in the first year without penalty
Interest crediting of at least 2.5% annually with the potential to earn as high as 8.9%
Tax deferred growth for as long as you want with no required minimum distribution
The contract comes with a tax-free death benefit to your beneficiary

Those who love this product tend to be clients who have excess cash in the bank earning little to no interest, grandparents who want to help grandchildren with future opportunities, business owners or just someone who wants to grow money tax-advantaged and with minimal risk. These products are called single premium indexed life policies. There are only a few companies that offer penalty free access to 100% of your money in year one and Crosby Advisory Group represents what we believe is the premier company for such products. If this sounds like something that could benefit your accumulation plan, contact us to learn more. Since the contract is guaranteed by the financial strength of the company writing it, financial stability is an important as part of our due diligence process. Request an illustration that shows both minimum and assumed growth rates.

Why is a Beneficiary Important?

Carly Snyder helped put together a beneficiary checklist for us which I think is outstanding. If you did not see her post on our blog, here is a summary.

Beneficiary designations take priority over what’s in other estate planning documents, such as a will or trust, so it is critical that they are maintained properly. Often times we choose a beneficiary and they don’t even know it! Your beneficiary should be aware of the information listed below – your assets, any loans, and your key contacts.

We recommend reviewing your accounts annually to ensure your beneficiaries are kept up to date as your life changes. Here are a few key things that you will want to ensure are kept up to date:

List of assets(examples include: retirement plans, Life Insurance, annuities, investment accounts, bank accounts, credit cards, stock options / restricted stocks, deferred compensation plans)
Outstanding loan information(examples include: home, vehicle, personal, etc.)
Power of Attorney(examples include: medical, financial, legal, business, real estate, etc.)
Important contacts(financial advisor, insurance agent, lawyer, accountant, etc.)

5 Tips for Managing Your Beneficiaries

Remember to name beneficiaries: If you don’t name a beneficiary, it’s possible your account / policy may have to go through probate. Unfortunately, this process can lead to delays, additional costs, and tax implications.
Name primary and secondary beneficiaries: When possible, it’s a good strategy to choose a secondary or back-up beneficiary in case the primary beneficiary dies before you.
Review Annually: We recommend routine reviews of your beneficiaries to reflect life events like births, deaths, marriages, and / or divorces.
Coordinate with your will and trust: Remember that beneficiaries operate separately from your will and trust. If you update one, be sure to contact your lawyer / financial advisor to ensure your overall estate plan is aligned.
Be aware of tax consequences: Often assets that transfer via beneficiary have unique tax rules. Work with an advisor who can give you the information you need in order to make these decisions.

We are here to help! Download our checklist to capture information and remind you that your beneficiaries are not always aware of their role in your estate. A simple conversation can help you rest easy that your estate will be taken care of in the manner in which you hoped it would be.

Stock Research by Demand

Over the past few weeks a handful of readers have ask, “What happened to Derek’s stock research?” I hear the clamoring, so I am including his recent piece on Nvidia, which despite a rough 2022, remains a long-term favorite growth stock of ours.

Nvidia Q1 Earnings by Derek Ballinger

Disclaimer: Nvidia is my largest stock holding and we own Nvidia in some client accounts

If you listen to the podcast, we often talk about how bullish we are on the long-term outlook for Nvidia and other select chipmakers more broadly. If you own a large-cap mutual fund or ETF or have a significant portion of your investments in the S&P 500 you have exposure to Nvidia. Today I’d like to go into detail on their most recent earnings report and talk about the stock from a historical perspective and the prospects for the company.

For the thousand-foot view, Nvidia makes computer chips, more specifically GPUs (Graphics Processing Units) which are capable of processing large amounts and many different pieces of data simultaneously. This makes them an incredibly sought-after product across many different sectors. They are used in data centers, machine learning, gaming, cryptocurrency mining, autonomous driving, and other applications. Over the past 5 years, or even more specifically the past 3 years, Nvidia has experienced spectacular growth in demand and profitability. Since late 2019, Nvidia has increased its earnings per share by 292% and increased revenue by around 260% and the stock has returned an average 107% annual return from 2019 to January of 2022.

This year every stock that isn't trading at a deep value has gotten beat down significantly regardless of the underlying performance of the company. Nvidia is a great example, so far in 2022 Nvidia posted an 8% earnings beat in February and a 5% earnings beat on May 25th yet the stock is down 37% YTD more than double the drawdown of the S&P 500. As the Fed tightens economic conditions, this will affect corporate earnings in the short to medium term. A quick thought experiment, as the fed raises interest rates this will make variable interest rate debt more expensive. Even if you don't have variable interest rate debt you will still be affected because your suppliers might have variable interest rate debt so your inputs are more expensive or on tighter supply. Also, consumers may have variable interest rate debt so they aren't purchasing as much. These things may lead to lower consumption which means less hiring which creates a feedback loop of economic tightening.

This is why even well-managed, profitable companies are still being taken down. We often talk about “multiples” or P/E ratios which measure how expensive a stock is. When we are in an economic boom, stocks deserve higher multiples because you are willing to pay more for the expectation of higher growth in the short term, and when economic conditions get tighter these multiples contract because of expectations of slower growth or a decline in earnings. Nvidia reported earnings on May 25th, they posted earnings per share of 1.36 for Q1 and 8.29B in revenue. Revenue increased by 46.3% in the past 12 months beating estimates of 8.11B. Their Data Center business has been a powerhouse for revenues, Data Center was responsible for $3.75B passing Gaming as their #1 segment. You can read a breakdown of every segment of the business here.

Wall Street reacted negatively to its earnings report despite astounding growth from last year. The reason being is their outlook for the next quarter and the end of the year came in lighter than what was anticipated by analysts. CFO Colette Kress said the company will be slowing hiring and keeping an eye on expenditures to navigate the tough macroeconomic environment. They also revised how much they expect to make in the current quarter. This quarter shows robust demand for their products as well as stellar management decisions to get the company through an unfavorable short term. No changes have been made to allocations of Nvidia due to this earnings report.

Disclaimer: This newsletter represents the opinions of Crosby Advisory Group, LLC. This newsletter is not designed to replace one on one consultation. Investing involves risk including the potential loss of principal. Carefully consider all risks and fees before investing. Not all investments are suitable or all investors. Crosby Advisory Group, LLC and Nate Crosby have ownership interest in NMD Insurance and CAG Marketing.

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2.5 to 8.9% tax deferred growth option