Displaying items by tag: income

Wednesday, 14 April 2021 17:30

Annuities are the New Bridge to Social Security

(New York)

Retirement has never been so insecure. Part of the appeal of annuities has been as a strategy to offset the decline in pensions. Yet, if you dig deeper there is another good utility for annuities that some retirees and pre-retirees are using: as a bridge to getting social security. Many lower income retirees hit a wall where they only have tens of thousands to low hundreds of thousands of dollars when they turn 60. The issue is that if the claim Social Security early, they can grossly lower their income versus waiting a few years. Given that the average 60 year-old male right now is expected to live to 88, the difference of $500 a month really adds up. Accordingly, in this situation an annuity—such as an immediate annuity—can work very well, as it buys time for retirees to defer taking Social Security.


FINSUM: This strategy can make a ton of sense, but it takes some convincing as most retirees don’t want to part with their money even if they know it will give them more security.

Published in Wealth Management
Tuesday, 30 March 2021 16:37

The Benefits of Annuities vs 401(k)s

(New York)

401(k)s and annuities are two of the most prominent retirement savings products in the US. However, clients often have a hard time distinguishing one’s advantages versus the other (and disadvantages). In reality, they are quite different products. The only cross-over between them (for now) is that they are both geared towards retirement, and that one can cash out a 401(k) and use it to buy an annuity. The big advantage of 401(k)s is that there are no sales incentives/commissions for a client to take part in an employer’s plan, as well as the fact that they can benefit from employer’s matching their contributions, something that cannot happen in annuities. Annuities, however, have the big advantage of guaranteed income, and because of the ability to choose which annuity one buys, there is more freedom in investment selection. Both have similar terms for early withdrawals.


FINSUM: These products are also great in concert with one another. For example, using part of a 401(k) cash-out to buy a deferred annuity, allowing upside in the 401(k) and guaranteed income in the annuity. Soon enough annuities will be allowed in 401(k)s.

Published in Wealth Management

(New York)

Infrastructure investment is a fascinating area that can have good yields and strong returns. However, advisors should be forgiven if they feel like the hype that has surrounded it over the last five years has never matched reality. Politicians have been talking about a new golden age of US infrastructure investment since the Obama years, yet almost nothing has materialized. That seems like it will change under Biden, and the whole sector looks poised to benefit. According to Goldman Sachs, the big winners look likely to be materials, construction, and machinery stocks.


FINSUM: Frontrunning this infrastructure package could be a good idea. As soon as there is an indication that it may become a reality, there will likely be a work-from-home-like jump in prices.

Published in Eq: Dividends
Tuesday, 16 March 2021 18:41

What Annuities are Really Worth

(New York)

One of the challenges with annuities, whether as an annuities salesman or as an advisor explaining them to clients, is how to position them. The most fundamental utility of an annuity is the idea that it can provide income for life. In other words, the client can have peace of mind that they will have income even if they live to be 120. In this way, an annuity is not a market-based investment in the traditional sense, but rather it is an insurance contract. For advisors this concept will be second nature, but for clients this is not as clear. Accordingly, the main value of the annuity is not specifically in the income it provides, but in the risk mitigation it offers against very long lifespans for clients.


FINSUM: If you are active in annuities this might sound like a broken record; if you aren’t, it is a useful line of thinking. Either way, everyone needs to be reminded!

Published in Wealth Management
Friday, 12 March 2021 16:09

It's a Good Time to Pivot into Bonds

(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

Published in Bonds: IG
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