People want yes/no, black and white answers. The truth about annuities is that you will get a guaranteed return in the form of an eventual or immediate income, but not a great return. So, if the stock market is best in the long run, why bother with annuities? The answer is this: Predicting the future losses or returns for stock, realty, bond, gold, etc. is impossible. Yet you MUST have income that — at least — meets your expenditures. All of your expenditures? No, not discretionary ones; just living expenses. Do people need annuities, such as pension, Social Security, or private annuities? Yes; again, here is why: It is prudent to match your guaranteed-to-pay-out expenses with guaranteed-to-receive income. Selling off lots of shares when the market is down to get the needed income forces you to fail to recover well from a downturn, and there is serious danger of exhausting assets during life. So, this simple equation can examine your basic expenses or all, as you may desire, but it is very — very — imprudent to risk not being able to pay your basic living expenses just because the at-risk investments probably will get a better return over the long haul. You might not have the long haul to recover from a stock downturn, either! Your advisor should be able to convert your “minimum income” requirement to an amount that must be provided from guaranteed sources (pension, Social Security and private annuities). That calculation provides you with the amount that MUST be in an annuity, given reliable payout rates. The remainder of your investable funds should be at the risk level that is reasonable for you, personally. In summary, many will want more than the minimum needed for this “prudence” and many will want no money in annuities. But the fact remains that there is a method for determining this, independent of biased and generalized opinions.
Month: March 2018
Balance Transfer Credit Card Use – Caution
Zero or low interest balance transfers to new cards can save you quite a bit of money. But, if you use them for new purchases, that new amount owing accrues interest from day one, and is retained (no payments reduce it) until the transferred balance is paid off. That can cost you far more money in the long run than using cash or non-promotional cards for the new purchases. Watch for my book, The Secrets of Successful Financial Planning in stores in July; pre-order copies as gifts for those about whom you care the most!