Annuity Recomendation

[Norwayguy]

Yes, if you hold the bond to maturity you can calculate the YTM with certainty.

I skimmed the article posted and the main point is ensuring the issuing company is financially stable to meet its obligations. I would not recommend many bonds in the financial sector.

I use this as an alternative to annuities quite often when individuals want little to no risk and more liquidity or want income payments that beat any income rider and preserves majority of the principal.

How do you square the little to no risk with the liquidity angle...You know depending on what interest rates have done if your selling that bond you might be selling at a discount...then again it might sell at a premium.

 

[njh_lfg]

How do you square the little to no risk with the liquidity angle...You know depending on what interest rates have done if your selling that bond you might be selling at a discount...then again it might sell at a premium.

An actively managed account with discretionary trading authority and a good handle on the interest rate environment coupled with a laddered approach prevents this issue.

Longer term bonds with higher yields with shorter term bonds blended in to allow reentry into the market when rates improve.

 

[0b1kanobee]

An actively managed account with discretionary trading authority and a good handle on the interest rate environment coupled with a laddered approach prevents this issue.

Longer term bonds with higher yields with shorter term bonds blended in to allow reentry into the market when rates improve.

Sounds like work.

 

[njh_lfg]

Ha, thanks for the advice Franz. Sorry to speak the truth. I love annuities if they are used in the right way. Unfortunately there are more under qualified agents with little to no insight into the global economy (other than regurgitating FMO/wholesalers BS pitches) that over use these products to generate a sale; without thinking of the long term repercussions for the individual they sold the FIA to.
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Sounds like work.

It is work, doesn't your RIA handle things like this for you? Refer it over to them and take your ongoing referral fee or 25bps or whatever it is.

 

[Franz Kafka]

Look up section 408(b) and tell me why annuities shouldn't be used in retirement accounts:

United States Code: Title 26,408. Individual retirement accounts | LII / Legal Information Institute

You own an annuity. As a matter of fact, everyone who pays incomes tax owns an annuity. Do you know what that annuity is called? Do you know the difference between defined benefit and defined contribution plans? Do you know what pension plan is?

Annuity is an insurance contract; that's why it's called a policy and the contributions are called premiums. Do you know the difference between insurance and investment? Are you old enough to remember the junk bond debacles of 1980's? Do you actually tell your clients that their corporate bond portfolio is a "safe money"?

Do you own corporate bonds yourself? Have you ever traded them for profit? If not, how do you plan to make profit for your clients?

Stock peddlers of '99 = RE peddlers of '04 = Corporate bond peddlers of '11.

You've been brainwashed by those know neither bonds or annuities. I know you mean well but that means nothing when money disappears from someone's retirement accounts. JMHO!

 

[Crabcake Johnny]

Try having a family member a few years away from retirement who bought the 401k scam (yes, 401ks are pure scams IMHO) and now is about 50% down in her portfolio with no chance at retirement.

Eventually this scam is going to have to be exposed. You might as well hit Vegas and play craps with your retirement savings rather then put it your 401k.

Employees are asked to "check boxes" next to investment vehicles typically after the company's "financial advisor" has a 6 hour meeting. Does anyone know why people REALLY select their 401k portfolio? By how cool the names are:

"Wow, the Magellan Capital Growth Fund? Sounds great!" Then they allocate which percentage goes into which vehicle.

Of course, they're all taught the same rubbish; "You're young so get risky! Get 70% into those aggressive growth funds!!!!"

 

[VolAgent]

I have participated in four different 401k programs. I never saw a single person to advise me on how to invest, nor was I provided with contact info on anyone to contact.

But I have to agree with you John. 401ks were originally designed to reward high level executives. They had income qualifiers and strict limits. Eventually corporate America figured out they could replace pensions with this, so they got Congress to modify the code. 401ks come with extremely little risk to the company. Make your contribution every year, which you can stop at any time. All investment and mortality risk was transferred to the employee. Also, employees never got raises to compensate for the lost pension contributions.

I read today that the director for the PBGC is begging American Airlines not to transfer their pension obligations to them as part of their bankruptcy.

 

[Norwayguy]

An actively managed account with discretionary trading authority and a good handle on the interest rate environment coupled with a laddered approach prevents this issue.

Longer term bonds with higher yields with shorter term bonds blended in to allow reentry into the market when rates improve.

It might mitigate the issue especially laddering, however you said liquidity and you would have to qualify that statement because laddering only helps when the client decides to take only as much as your laddered strategy allows if they need more you may be forced to sell a bond and there is no crystal ball as to when your client wants liquidity and interest rates haven risen.

 

[njh_lfg]

Look up section 408(b) and tell me why annuities shouldn't be used in retirement accounts:

United States Code: Title 26,408. Individual retirement accounts | LII / Legal Information Institute

You own an annuity. As a matter of fact, everyone who pays incomes tax owns an annuity. Do you know what that annuity is called? Do you know the difference between defined benefit and defined contribution plans? Do you know what pension plan is?

Annuity is an insurance contract; that's why it's called a policy and the contributions are called premiums. Do you know the difference between insurance and investment? Are you old enough to remember the junk bond debacles of 1980's? Do you actually tell your clients that their corporate bond portfolio is a "safe money"?

Do you own corporate bonds yourself? Have you ever traded them for profit? If not, how do you plan to make profit for your clients?

Stock peddlers of '99 = RE peddlers of '04 = Corporate bond peddlers of '11.

You've been brainwashed by those know neither bonds or annuities. I know you mean well but that means nothing when money disappears from someone's retirement accounts. JMHO!

Yes I own them myself and yes I have traded them for profit.

I own an annuity that your speaking of because the government forces me to pay into it. How is the SS trust fund working out? It is essentially a government ran ponzi scheme.

I love your passion but your rant just solidifies my thoughts that you probably have little to no experience in the securities world (a RR is not in the securities world they are SALESMEN) and extremely ignorant.

There is no brainwashing. It is called experience and due diligence.

Tell you what, you take 50k of your own money and I will do the same. We both implement our own strategies and you pick the time frame (6 months, 1 year, 5 years, 10 years, whatever) and at the end of that time we compare account values. I will give you 20x odds on whatever amount you want to wager that my account will outperform yours. Quit bashing an idea that works if you are not willing to put your money where your mouth is.
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It might mitigate the issue especially laddering, however you said liquidity and you would have to qualify that statement because laddering only helps when the client decides to take only as much as your laddered strategy allows if they need more you may be forced to sell a bond and there is no crystal ball as to when your client wants liquidity and interest rates haven risen.

You are correct. Financial forecasting must be done to find the potential cash-flow needs and build the portfolio around this model. Generally I have 10-15% cash on hand in these accounts and jump at opportunities to sell and take a profits or sell to minimize risk or loss.

 

[Crabcake Johnny]

I have participated in four different 401k programs. I never saw a single person to advise me on how to invest, nor was I provided with contact info on anyone to contact.

But I have to agree with you John. 401ks were originally designed to reward high level executives. They had income qualifiers and strict limits. Eventually corporate America figured out they could replace pensions with this, so they got Congress to modify the code. 401ks come with extremely little risk to the company. Make your contribution every year, which you can stop at any time. All investment and mortality risk was transferred to the employee. Also, employees never got raises to compensate for the lost pension contributions.

I read today that the director for the PBGC is begging American Airlines not to transfer their pension obligations to them as part of their bankruptcy.

I no longer believe in the stock market as a place to grow the average person's money. If I had to state why it would turn into a 100 page post. Research.