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Business and Estate
A Publication of Business & Estate Advisers, Inc.


A Well Deserved Honor. . .
By Sarah Kaelberer, CFP

E. Dennis Zahrbock
2003 Entrepreneur of the Year!
And the winner of the 2003 Entrepreneur of the Year . . . E. Dennis Zahrbock, Business & Estate Advisers! Our table, filled with the B & E Team and Dennis’ family erupted in applause and whistles. Dennis, in his true form, delivers an acceptance speech thanking all, starting with God, then Family, then Clients and our Team. What a day!

What a Day? What a Year! We opened the year with a transfer to our new broker-dealer partner, ValMark Securities, Inc. Then, our Rice Lake Office Grand Opening celebration comes on the heels of Dennis being named 2003 Entrepreneur of the Year by TwinWest Chamber of Commerce.

A unique individual like Dennis certainly deserves this honor! Unique indeed! His unique and creative ideas create wealth, save taxes and provide opportunities for his clients. His unique work style and schedule, adapted from The Strategic Coach™, have him fully dedicated for 3 – 4 days and fully “refreshing” on the non-focus days. But for those 3 – 4 days he is “working”, he easily covers many hours! The big joke in the office is who received the e-mail from him the latest – some are well past midnight! This work pattern requires he place a great deal of trust in his team. And that he does! His unique management style has certainly helped him build a dedicated, top-notch team!

Those of us who work with and for him, are so very proud of him, as we know his family and friends are. Next time you see him, certainly offer your congratulations!

Rice Lake, Wisconsin…Our Second Home Sweet Home

Wisconsin has been “home” to Dennis and Sue for many years as they developed their beautiful lake home in Cumberland. B & E has been serving clients in the Western Wisconsin area for almost a decade now. Opening our first branch office in Rice Lake just made sense. We officially opened the doors July 1 of this year.

We offer many thanks to those who worked so hard to help restore our beautiful building. From the scraping of paint to the exterior landscaping, it was certainly a challenge! It looks great! We are very proud of this facility and believe we are the only Financial Services Professionals in the area to own and occupy our own building. We look forward to building stronger relationships with existing and new clients in the comfort of our new “home.”


And soon the long awaited money will arrive…

Finally, after over three years, the money each General American policyholder is due is to be paid out. The original buyout (MetLife buying General American) was for 1.2 billion with potential contingencies! The 1.2 billion has now grown to about 1.4 billion but contingent claims are in the .2 to .3 billion range. It now appears that 1 billion will be paid out in the summer of 2003 with the remaining .1 to .2 billion to be paid at a future date. We are told that 305,000 policyholders will share in the payout. We are further told that approximately 65% will receive $1,000 or less, 25% between $1,000 and $5,000, 9.8% receiving between $5,000 and $100,000 and .2% over $100,000! This money is being paid to policyholders as the “old” General American was a policyholder owned company and the owners must be paid! Even though policyholders will receive this one billion plus in dollars it does not change the values of their policies. This is a once in a lifetime benefit and benefits those “that were the right policy owners at the right time”!

E. Dennis Zahrbock, CFP


By E. Dennis Zahrbock, CFP

Skip-A-Day XIX was our biggest ever. We had over one hundred in attendance and enjoyed a spectacular day of fun and golf followed by one of the best Walleye feasts in the area. The rain held off until the golfers were done. Mark your calendars now for Skip-A-Day XX (that’s right #20) the Monday preceding Memorial Day, May 24, 2004.

Log Cabin Construction continues in our woods. Last summer E. Dennis started building a 10’ x 16’ log home from scratch. The plan is to build it at about ?’s to ¾’s scale . . . of course it’s for the grandchildren with a real fireplace and an old fashioned pump for water. Hopes are for completion by 2005 or early 2006.

With the log construction going on, Stephanie and Greg added another future resident of the new cabin. Quentin was born on June 10, 2003. So that’s four reservations for the grand opening.

As many of you know Sue has been President of Bethany Lutheran Church in Rice Lake the past two years. The congregation just voted to go forward with a building project which has been greatly aided by her leadership. Her term is up in January but she won’t be retiring as Lakeview Medical Center (Rice Lake Hospital) has recently asked her to be on the board. Congratulations Sue! All of this and she is working at our Rice Lake office too!

Sarah was honored to be selected as an ad hoc NAIFA Executive Committee member serving as a liaison to newer industry members.

Another congratulations to Sarah for receiving her CLU certification in June!

Jules attended the MetLife Investors Due Diligence meeting held in Laguna Beach, California.

The long awaited, first installment of the General American Sale Proceeds arrive! First payments hit mailboxes in September!

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Steve, Sarah and E. Dennis travel to Pennsylvania for the annual “School of Life” sponsored by ValMark Securities, Inc. Dennis gave a talk on “High Premium Low Death Benefit” Life Insurance.

E. Dennis and Sue will be going to Palm Springs in mid-October for the annual Top of the Table meeting. E. Dennis will be speaking on Charitable Giving.

A seminar on 401(k)’s will be conducted by Dennis and Sarah for the Rice Lake business community on October 10.

At least three trips are planned for the annual duck hunts at the Delta Marsh (50 miles west of Winnipeg).

Sarah and Darvin visit Deadwood for their semi-annual long weekend of R & R.

Business & Estate Advisers will also sponsor Jules in the annual Walk for the Cure for Diabetes!

Steve will be testing for his CFP certification.

E. Dennis and Sue go to Jamaica for a special “Wheel Chair” event. With ValMark Securities, Inc., MDRT, and Jamaican Life Underwriters, they will be distributing hundreds of wheelchairs to people of need in Jamaica.

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Stephanie Zahrbock and husband Greg Loxtercamp are proud new parents of Quentin, who joined the Zahrbock family on June 10, 2003!


Skip-A-Day XIX Photos
Skip-A-Day XIX Photos
ValMark Securities, GenAmerica Financial, Minnesota Life, AXA/Equitable, MetLife Investors, AIM Family of Funds, Fidelity Advisor Funds, Heritage Family of Funds and Putman Investments


Business & Estate Adviser's
"Tips for Teens"

Volume 8 Issue 2

Edited and Revised by Business & Estate Advisers, Inc. as an insert to our newsletter
Annuities…what are they and how do they work?
By: E. Dennis Zahrbock, CFP

“Annuity” is a word familiar to the insurance industry but not so familiar elsewhere! Annuities come in many varieties. But before we go into the varieties, let’s get a few definitions out of the way. The owner is the one who makes the investment and owns the contract. The annuitant is the one who’s life on which payments will be based. These two are often the same, but can be different. Now, back to our “varieties” – there are two main types:

  1. Immediate Annuities: These are financial instruments that pay a set sum of money for a set period of time to the annuitant. An example would be the choice given to someone who wins the lottery. They can take a lump sum or so much per year for twenty or twenty-five years. Immediate annuities are either mathematical or actuarial.
    • Those that are mathematical state that if you place a certain amount with an insurance company they will pay a set amount each and every month for a set period of time. This is mathematical as it converts a lump sum of money plus interest to get the payment for the stated period. It is virtually the same as computing the payments on a mortgage.
    • Those that are actuarial are payable for the life of an individual and thus “the law of averages” drives the payment to be made. The annuitant is guaranteed to receive payments “for life.” Should their life be short, the insurance company wins. Should their life be long, the insurance company loses. The law of averages allows the insurance company to have some wins and some losses.
  2. Deferred Annuities: These are financial instruments that allow money to grow in your account on a tax-deferred basis. This means taxes on the earnings are not due until withdrawn or converted to an immediate annuity in the future. Deferred annuities can be either fixed or variable which refers to the underlying investment. If an annuity is fixed, the underlying investment is based on a fixed rate, which is much like a savings account. If an annuity is variable, the underlying investment is based on your choice of subaccounts, which are much like mutual funds that fluctuate with the market.

It’s always said that a picture is worth a thousand words. In this case we can’t create a picture of an annuity, but we can create a story or two to paint the picture.

Story 1:

An individual retires fifteen or twenty years ago. To provide annual cash, the individual invests and withdraws funds from their retirement accounts. Unfortunately, the down stock market of the early years of the twenty-first century result in a dismal future for this individual’s retirement needs. Even though the concept of investing and withdrawing made sense fifteen or twenty years ago, the attractiveness of an “immediate annuity” may look better now! What funds remain in the investments are given to the insurance company and the annuity company agrees to pay for life to the annuitant. The older you are the more they’ll pay. It is not uncommon to receive a 15% annual payment if one is 85 years old or older. In other words you give the insurance company $100,000, they may agree to give you $15,000 per year for life! The insurance company is hoping that “life is short,” as they get to keep the balance at death. The annuitant is hoping that “life is long,” as they get $15,000 per year for their entire life. In today’s low interest rate environment receiving a 15% cash flow is very attractive for many income needs.

Story 2:

An individual wants to be in the Stock Market (risk investments) but wants some security in case the market doesn’t do well! In today’s annuity market, the individual could purchase a Variable Annuity that offers two rider guarantees (guaranteed by the insurance company, not the federal or state government). The investment in the variable annuity will increase or decrease based on the market returns of the chosen investment risk. If it goes up and up and up, the individual is happy and gets the growth.

But what happens if it goes down? Here’s where the two rider guarantees come in. Death Benefit Rider says that should the annuitant die, their beneficiary will receive the highest of 1) the actual account value, 2) the original investment compounded at a stated rate (usually 5%-6%) or 3) the highest anniversary value since they invested in the annuity. These death benefits can offer great comfort for survivors. The second, an Income or Living Benefit Rider says that should the amount remain invested (generally for a minimum of 10 years) that they can convert to an immediate annuity. The immediate annuity value will be based on the highest of 1) the actual value, 2) the original investment compounded at a stated rate (usually 5%-6%), or 3) the highest anniversary value since they invested in the annuity.

Let’s look at a hypothetical example: Our investor invests $100,000 in 2003. In 2008, (5 years later) the account is worth $250,000. Then in 2009 and beyond it keeps going down until 2015 (year 12) when the account value is only $10,000! Let’s further assume the investor will receive $6 per $1,000 for an annuity payment. The annuitant’s new alternatives are:

Option 1:

They could take the $10,000 and purchase the annuity that would pay them $60.00 per month. Or they could take

Option 2:

The original $100,000 compounded at 6% for 12 years. Money doubles in 12 years at 6% so this computation would be based on $200,000 so they could take $1,200 per month. Or, finally they could take

Option 3:

The highest anniversary value between start and annuity date. In this case it hit a high in 2008 of $250,000. The annuity payment based on this would be $1,500 per month.

It’s obvious that a person would choose the $1,500 per month!

So, is this a “free lunch?” No not at all! Annuities charge a fee to provide their guarantees. Generally speaking, an investment professional’s fees for a “no guarantee” mutual fund would run about 1% of account value annually. An annuity with the two guarantees would cost about 3% per year. That’s 2% more expensive. Is it worth it? If your account goes up and up and up of course not. But if one wants the guarantees to protect the downside and be certain the day they start of at least a 5% or 6% return and maybe (due to actual or highest anniversary value) more, this expense may be worthwhile.

Some have asked, if fire insurance a good deal since houses hardly ever burn down. Obviously it’s not a good deal unless it’s your house that burns down. Variable Annuities with the two guarantees are not a good deal either if the market goes up and up and up. But if it’s down when you need it to be up, these can be a good deal for you.

The stories above are not an actual clients, the examples are hypothetical to illustrate the general experience of our clients.

Today's Quiz:

  1. Fixed Annuities allow for investments in Mutual Fund like investments. T F
  2. Immediate Annuities are primarily for tax-deferred growth. T F
  3. Annuity Riders can guarantee a future return on investment. T F
  4. Actuarial calculations are used for fixed period annuities. T F
  5. Variable Annuities are less expensive than Mutual Funds. T F


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Business and Estate
Business & Estate Adviser, published periodically, is composed on a personal computer utilizing Microsoft Word 2000 and Times New Roman typeface. Camera-ready copy is generated on a Hewlett-Packard LaserJet 4050 printer. Gray-shades and printing by Wallace Carlson Company, Minnetonka, Minnesota. For additional copies or information, please contact Jule Kingren at (952) 475-0440. Copyright © 1990-2003 Business & Estate Advisers, Inc. All rights reserved.


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(952) 475-0440

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Rice Lake, WI 54868
(715) 434-0440

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Business & Estate Advisers, Inc and B&E Investment Advisers, Inc. are separate entities from ValMark Securities, Inc.

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