On the one hand you have what has been shown to work, meaning it supplies you with retirement income: The fixed-indexed annuity. On the other hand you have new products being engineered by brokerages because what they have always said would work, didn't... umm... well... work. Now I am more about the deeper historical data than I am the recent trends, but I have to point this out since I made mention of it in my last post: FIAs are growing in popularity because they make sense. They just do. There has been, to say the least, an explosive increase in consumer interest of fixed-indexed annuities.
Now I had planned on providing a boring old statistical comparison of CDs and FIAs over the last twenty years, but during the last week I noticed a lot more rhetorical traffic around "annuity alternatives." I think now is a good time to stop and put a few volleys back in the serving court where they belong. What I mean is this: don't listen to the crazy talk.
Yep there it is again. This time, it is coming from the engineers of doom themselves. The very ones who helped you lose your money are peddling "safer" products.
Where were these products last year, when the drunk-drivers owned the road? Why is their advice now worthwhile and worth another whirl? That was a rhetorical question. Not for nothing, the hangovers own the road today and they kept their licenses. Lesson: drive carefully.
Alright, I've gone overboard. For one thing, if there is a mutual fund company I would recommend, it goes by the name Vanguard. In my opinion, the class of the industry. I don't mean to bad-mouth this organization because their practices, to my knowledge, are certainly not representative of the bad behavior of the industry in the horribleness that ensued last year. That being said, I don't recommend mutual fund companies. I don't like the risk. I want a boat in retirement. It doesn't need to be ninety feet long anymore if ninety feet means it could easily be particle board in the surf, depending on the seas.
I have no trust in the market or those that play it. I want guarantees. I don't want alternatives to guarantees. I lost a lot of bank last year on the advice of securities experts. I'll take my pension, thank you. I created my own pension with a Safe Money representative. It'll be there when I get there (retirement). I will lose nothing, regardless of another tanking market. My money is safe. The alternative to safe money is called gambling.
Wednesday, August 12, 2009
Monday, August 10, 2009
Fixed Indexed Annuities are growing in popularity because they make Sense
I was listening to this guy today. A pretty sharp guy, more or less, is what I thought as I took in what he was saying, until he started with the crazy talk. I can spot crazy talk pretty quick these days, when it comes to money. Listening to crazy talk cost me a healthy chunk of my retirement savings recently, and you know the saying, "Fool me twice..."; I tend to be on guard and on the lookout for crazy talk. (FYI, at the time, it was the stock advice from all the expert advisors.) So when this otherwise reasonable fellow starts telling me that it is madness to purchase an annuity these days because interests rates are going to fly and the market is going to boom, my crazy talk antennae go straight up. You know how I spot crazy talk. Crazy talk predicts the future. Crazy talk speculates and tells me what I need to do with my retirement savings. I don't listen to crazy talk. Neither should you.
Stop the madness, the crazy talker says: It is unwise to lock in for 5 years because some very smart people think interest rates are going to rise. Unless you desperately need to earn an extra two percent, keep your money in a money market account. Current money market rates are at 1%.
What kind of advice is that?
I'll tell you what kind of advice that is. It is unsound advice. Keep on earning 1% and don't earn an extra 2 percent where you can? What is left out and is important is the gains you earn with your annuity are tax-deferred. What else is important is this advice ignores inflation. If the recommendation is to keep your money liquid, so you can move it into a risky fund at some unspecified point in the future, or when CD rates or money market rates suddenly pay exuberant returns, the recommendation will only cost you money. I am reminded of something I heard recently: "Brokers are only finding more creative ways to lose you money". This is one of the most creative yet.
If you keep your money liquid by not saving it or putting it into a low return money market account, you are actually losing money to inflation. I point you to our last post about the importance of making sure your investment returns out-pace inflation.
If you put funds into a fixed indexed annuity, you benefit from market index growth, your principle is protected from the losses that many us of suffered last year when the markets went over a cliff due to the sub-prime mess (one of my IRAs lost 40%, and as you know, I was not alone), your returns out-pace inflation and your gains are tax-deferred.
What else is important is if you extend your investment horizon, you earn more. We are talking about retirement savings here. We aren't talking about casino money. You should be looking to lock it up longer so there is more income in retirement.
To provide more insight into the soundness of the FIA strategy, and the unsoundness of brokers' recommendation to avoid them, we will be turning again and again to history (markets, interest rates, policy) in this blog, because it is true that those who do not learn from it are doomed to repeat it. Our business is your financial security. We want you to learn from history (which is why our domain name is learnhowtoretire.com and not learnhowtogambleyourretirementsavings.com or learnhowtoloseyourretirementsavingsbylisteningtoyourbroker.com). We provide the history, and connect you to local, independent representatives that will advise you on how keep your money safe and create your own personal pension.
Stop the madness, the crazy talker says: It is unwise to lock in for 5 years because some very smart people think interest rates are going to rise. Unless you desperately need to earn an extra two percent, keep your money in a money market account. Current money market rates are at 1%.
What kind of advice is that?
I'll tell you what kind of advice that is. It is unsound advice. Keep on earning 1% and don't earn an extra 2 percent where you can? What is left out and is important is the gains you earn with your annuity are tax-deferred. What else is important is this advice ignores inflation. If the recommendation is to keep your money liquid, so you can move it into a risky fund at some unspecified point in the future, or when CD rates or money market rates suddenly pay exuberant returns, the recommendation will only cost you money. I am reminded of something I heard recently: "Brokers are only finding more creative ways to lose you money". This is one of the most creative yet.
If you keep your money liquid by not saving it or putting it into a low return money market account, you are actually losing money to inflation. I point you to our last post about the importance of making sure your investment returns out-pace inflation.
If you put funds into a fixed indexed annuity, you benefit from market index growth, your principle is protected from the losses that many us of suffered last year when the markets went over a cliff due to the sub-prime mess (one of my IRAs lost 40%, and as you know, I was not alone), your returns out-pace inflation and your gains are tax-deferred.
What else is important is if you extend your investment horizon, you earn more. We are talking about retirement savings here. We aren't talking about casino money. You should be looking to lock it up longer so there is more income in retirement.
To provide more insight into the soundness of the FIA strategy, and the unsoundness of brokers' recommendation to avoid them, we will be turning again and again to history (markets, interest rates, policy) in this blog, because it is true that those who do not learn from it are doomed to repeat it. Our business is your financial security. We want you to learn from history (which is why our domain name is learnhowtoretire.com and not learnhowtogambleyourretirementsavings.com or learnhowtoloseyourretirementsavingsbylisteningtoyourbroker.com). We provide the history, and connect you to local, independent representatives that will advise you on how keep your money safe and create your own personal pension.
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