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B - Green Money

B - Green Money

Advantages: Protection and Protected Growth

Disadvantages: Partially Liquid

Examples: Fixed Indexed Annuities or Fixed Annuities

The second category is Column B, the Green Money Column, and holds Protected Growth assets. These assets offer potentially moderate returns, are tax deferred, and offer partial withdrawals during the surrender period.

There Are Three Green Money Rules

  • The principle is protected from loss.
  • The previous year’s gains are protected.
  • You can protect an income for life.

The best fit or asset for this column that achieves all three Green Money Rules are Fixed Indexed Annuities. Let’s see how a basic indexed annuity works.

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  • Typically, you can get up to 10% per year as a free withdrawal during the surrender period. So the general rule of thumb is don’t allocate money to the B column in which you would need more than 10% of the next year while in the surrender period.
  • This is the Fixed Principal Asset column where principle is protected. This is where the ABC model differs significantly from the Wall Street approach.
  • The Wall Street approach to this column traditionally has been to use a laddered portfolio of bonds to accomplish the goals of column B. The problem is that bonds violate Green Money Rule #1, Bonds can and do lose money.
  • If an asset can’t do the Three Green Money Rules, it does not belong in that column. Because Bonds can’t follow those rules, it is a C column asset. Therefore, a Fixed Indexed Annuity is probably the ideal asset for column B.