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Say “No” to Annuity Buybacks

If you have older annuities, you may have been offered a financial incentive in exchange your guaranteed income and death benefits. Don’t take the bait. Say “no” to annuity buybacks.

Understanding motivation is the key to understanding behavior. Say “no” to annuity buybacks.

Say “no” to annuity buybacks

Understanding motivation is key to understanding behavior. When you understand why a company is offering to buy back your lucrative annuity, you’ll understand why it’s probably a bad idea for you to take the offer.

Companies sold deferred variable annuities with generous guarantees in the late 1990s and early 2000s, when the stock market was rising and interest rates were higher. With their investments still battered by the 2008 market downturn, insurers are now looking to shed these guarantees from their books.

By offering you an apparently large payment, companies can avoid paying you more over time.

Many of these older annuities base lifetime payouts and death benefits on the investor’s original investment plus annual returns of 5% and 6%—no matter what happens in the stock market. Several companies recently began offering annuity holders one-time payments to give up those guarantees, and other insurers are planning to do the same.

Rick Rodgers, a financial planner in Lancaster, Pa., says such annual returns are “difficult if not impossible to replicate in today’s low-interest-rate environment without taking risk.” If you expect to live at least 15 years, he says, the insurers’ offers “aren’t going to make up for the security the guaranteed contract offers.”

Rest assured that everybody’s out to make a buck, and if they can do it at your expense, they will. Just say “no” to annuity buybacks.

Click here to read more about why you should say “no” to annuity buybacks.

Posted in Planning for Your Retirement, Retirement Investment Options, Retirement Plan ChallengesComments (0)

Retirement Investment Options

It seems like the stock market is the investment option of choice when saving for retirement, but it may not be the best — or safest — choice for you. Depending on your age, willingness to take risks and a host of other variables, you might want to consider diversifying your portfolio with these retirement investment options.

You have other retirement investment options, besides the stock market, that will diversify your portfolio.

Retirement investment options

While the stock market has generated an average return of about ten percent a year — over the long haul — it’s been subject to devastating fluctuations on a fairly frequent basis and wise investors have other options to mitigate those wild swings.

Annuities. The basic idea with annuities is that you pay an insurance company a lump sum in exchange for a guaranteed monthly payment for life.

Bonds. The classic alternative to the stock market is bonds. You can lend money to the government or a corporation and receive some interest in return.

CDs. CDs are not very attractive at the moment because the yields are very low. However, the return is guaranteed and the risk is also very low.

Real estate. Rental properties are a great way to generate some income, but they can be a lot of work. If you really don’t want to be a landlord, consider a real estate investment trust (REIT) instead.

Gold. Gold is another diversification from the stock market. Traditionally, gold represents stability, and a small portion of your portfolio might benefit from that.

Peer-to-peer lending. You lend money to individual borrowers and you’ll be paid an interest rate. The good thing about peer-to-peer lending is that you can lend in $25 increments and diversify your lending portfolio.

Long-term care insurance. The cost of long-term care can put a big dent into any retirement portfolio. A good nursing home can cost over $10,000 a month depending on where you live. Long-term care insurance can offset that cost.

Some of these retirement investment options may not be right for you, but the more diversified your investment portfolio, the more protection you have against wild market fluctuations.

Click here to read more about these retirement investment options.

Posted in Creating a Personalized Retirement Plan, Planning for Your Retirement, Retirement Investment Options, Retirement Plan Challenges, Saving for RetirementComments (0)

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