Displaying items by tag: income

(New York)

Bond market investing hasn’t seemed so attractive recently as rates on even long-term government debt such as the 10-year Treasury hit lows…view the full story on our partner Magnifi’s site

Two junk bond indices, Bloomberg Barclays U.S. Corporate High Yield Index and ICE BofA US High Index Yield, hit record lows both dipping to about 4%...view the full story on our partner Magnifi's site

(New York)

Most people don’t think about annuities much when rates tumble, but those who are in the market for them sure see a difference. For example, when rates plunged at the start of the pandemic many annuities providers had to significantly scale back the payouts they were offering. Since annuities payouts are highly dependent on rates, insurers need to adjust their offers as yields move. With that in mind, if you are thinking about annuities, it might be a good time to buy. For example, Prudential just announced it was eliminating all its variable annuities with guaranteed income benefits because of super-low rates and volatility. Other major insurers are likely to follow suit as the market environment makes offering these products difficult.

FINSUM: Despite the fact that yields are rising, it is starting to feel like annuities providers are throwing in the towel on some products because of the ultra-low income they can provide and the potential volatility in yields.

(New York)

If there is a product that looks like it has a great ten-year horizon ahead of it, it might just be annuities. Just like eSports and electric vehicles seem to have a great demographic trend behind them, annuities will ride a wave of retirees into great success. However, that is not the only tailwind. The other is ultra-low interest rates, which have completely upended the role of bonds in a portfolio. They yield very little and have a great deal of risk. Understanding that, annuities have a very interesting role to play, as between the three major types: fixed, variable, and fixed index, they offer a range of options that can help replace bonds. Fixed annuities offer set guaranteed income, variable give banded income but offer some upside, and fixed index work as a hybrid between the two.

FINSUM: Annuities have gotten a bad reputation over the years because of some high fees and bad actors, but product suites have gotten better. They can really round out a client’s need for low volatility income.

(New York)

Annuities have seen a pickup in interest over the last year. At first this was because of the big drop in markets last spring, but as the year progressed annuities picked up steam because of ultra-low interest rates, which effectively rob retirees of income. For those who want rock solid guaranteed steady income, fixed annuities work best. But for many, especially those can afford some risk to the exact of income they will receive, variable annuities can work very well. Most variable annuities have a couple critical features—they allow you some degree of investment selection, if not total control, and they often guarantee your principal (though not interest income). What this allows is higher payouts if the market does well, but still a guarantee you won’t lose your principal. For those who want the safety of an annuity, but still some income upside because of market growth, variable annuities can be a good choice.

FINSUM: Annuities have some strong demand behind them right now and only seem likely to do better as rates stay low and more Boomers enter retirement.