Article Suggests Moving CDs into LTC
- Thread starter 1reason
- Start date
- Thread starter
- #32
There are NO AAA bonds with an after tax yield of over 3%. Not plenty, not a few, not one or two, NONE that I'm aware of. Perhaps you won't mind listing just one for the board?
Your 10 year fixed annuities, you can return it at any time and get at least all your money back, right?
BUT, that's not the point now is it? Sorry to be harsh, it's not my style, but I'm having a hard time getting my head wrapped around the fact that LTC salespeople are actually saying anything non-positive about an article that increases awareness and credibility for LTC products.
Seriously, if you think there are other products that make a better fit, more power to you. Is it not a good situation to have someone mention it and then be able to say you may have something even better? Win-win right?
Arthur Rudnick
Guru
- 1,652
originally posted by 1reason
Wrong my friend........
There are a number of AAA & AA triple tax free municipal bonds out there, depending on your state of residence. You can get anywhere from 3.0%-5.0%.
Go to Google: "Triple Tax-Free Bonds" and see for yourself.
https://central.trading2.fast-trade.com/fmsbonds/bondsearch.do?pager.offset=30
Wrong my friend........
There are a number of AAA & AA triple tax free municipal bonds out there, depending on your state of residence. You can get anywhere from 3.0%-5.0%.
Go to Google: "Triple Tax-Free Bonds" and see for yourself.
https://central.trading2.fast-trade.com/fmsbonds/bondsearch.do?pager.offset=30
Some LTC insurance salespeople feel threatened by single premium hybrid policies because often these solutions are introduced through a wirehouse (financial adviser) and the LTC insurance salesperson feels he/she has to sell against this option to win business. Also, some ltci salespeople are completely uncomfortable in asking for a $100,000 or a $200,000 check (do not know why). So, they continue to sell against single pay options maybe due to their own comfort zone.
You are correct, 1reason....these single pay options are part of the landscape of ltc planning solutions and are credible options that must be presented and considered.
Last edited:
- Thread starter
- #35
Thanks, I appreciate the kind words. You're probably right, but I don't know why. In my opinion, more exposure is good for everyone.
The only way I would feel uncomfortable asking for $100K is if I didn't believe it was the best thing for the customer. That said, I see people focus on money too much all the time.
- 10,806
I will do you one better; I will list 2 Aaa bonds for you.
Federal Farm CR BKS:
YTM= 4.082%
CY= 4.181%
INTL RECON DEV MTNS BE:
YTM= 10.546%
CY= 10.471%
If you want more there are 178 investment grade corporate bonds under a 20 year maturity that have a yield over 3%.
There are 61 Aaa MUNIs that are over 4%.... should I go on Mr. "not one or two, NONE".
By the way, what is the Yield on a single premium hybrid? Do you even know?? How many have you sold???
----------
There is a 2.75% 10 year with ROP... but you are right, thats not the point.
People do not buy lump sum hybrids just to cash them out 5 or 6 years later. So your point about liquidity is pointless for 99% of the prospects you would use this product for...
----------
Sorry to be harsh, but you obviously have made up your mind about this issue, think you know all there is to know, and could care less what anyone else has to say.
I never once said anything bad about the article. I simply agreed that there are better options from an economic standpoint than a lump sum hybrid. Then I gave an example of one of those options.
I even qualified my statement by saying it is solely because of the current interest rate environment. Plus I said that 5-10 years ago they were actually a good deal!! Did you just miss that or did you ignore what I said???
I have sold the product in the past... I just havent sold it in a while because of the low rate environment.
I also said that I present both options to clients when they are that type of prospect... did you miss that too??
Go back and read my posts and show me were I bashed the article. Hell, Im not even bashing the product. I said multiple times that it was perfectly suitable for many clients. But perfectly suitable is not necessarily the best return for your money, which was the point I was making. I also made the point that my example isnt right for all clients in all situations, and that what a client is comfortable with is ultimately the most important thing. (since they will not do anything if they are not comfortable with the solution)
So again; what is the return on a lump sum hybrid? How many have you sold? When did I say anything negative about the article?
----------
I have no problem asking for a $100k check... I have taken much larger checks than that. Nor do I see wirehouses as LTCI competition.
But when I work with clients I look at the big picture. It is very rare that we are talking JUST about LTCI. When we talk about LTCI it is an asset protection conversation... not just a LTCI conversation. And part of that protection is protecting assets from inflation, both for them and for the loved ones inheriting the assets. When you approach it from that standpoint then you start to see the pitfalls of the current hybrid marketplace (for lump sum options).
----------
I agree
__________________
Last edited:
Or it can be a "we don't want to burden our children" conversation; or a "what if I never need care" conversation; or a "how many times can an insurance company raise rates" conversation.
- Thread starter
- #38
Hey scagnt83, this appears to be degrading quickly and if I inadvertently stepped on your toes in any way, please allow me to apologize. My intent was never anything other than "hey, take a look at this, I think you'll like it".
That said, please allow me to suggest a few things that may be of interest. I'm not saying you're wrong about anything, and of course your opinion is valued.
I wouldn't have guessed before making the original post that this would turn into a fixed income lesson, but I'll consider it my contribution, albeit condensed.
1. Bond prices go up and down inversely with interest rates. If rates increase and you want to cash out in two years, you can face a significant loss (or gain if rates go lower). For example, if relative rates increase 2.8% in the next two years, someone wanting to sell the Federal Farm Dec 2026 maturity bought today would suffer about a 24% loss in capital. Many may not find that acceptable, and hopefully we can all at least agree that it may not be an appropriate investment substitute for comparison purposes.
2. Using the above maturity date again, the YTM is less than 3% before tax. Perhaps we're not looking at the same bond as the Fed Farm GSE issues a lot of them. If you like, provide the Cusip and I'll be happy to look up the last trade, bid-offer, and effective yields.
3. Fixed income is an over-the-counter product, and the yields aren't what they seem for most people. The bid-ask spreads and transaction costs can easily knock half a percent off the typical retail investor's results (or much more if they're not holding for years).
4. Coupon based fixed income yields are based on reinvesting coupon payments at the exact same rate and with zero transaction costs. For most retail investors, it's just not possible (or even close to it). As a rule, any knowledgeable fixed income investor is going to discount the yields unless they're in a rising interest rate environment.
5. Almost all fixed income is thinly traded and beyond the above mentioned haircuts most retail investors experience, the pricing is often stale. You have to examine the last trade date to know if the last price (and generator of the yield you're likely looking at) is relevant at the time you're looking at it. Upon looking at many of the CUSIP's from the Federal Farm bank show last transaction dates over two or three months ago. In order to know what to expect for a yield you have to use the yield curve, and that's well beyond what most here are going to understand.
6. You're just not going to see wide 200+bp differences between AAA rated products. The market is too efficient (most of the time) and there's no reason why someone would buy Corporate AAA 10 yr at an average (pre tax and transaction cost) yield of 2.73% on Tuesday when they can get State tax free Federal Farm Bank debt for over 3%.
7. I think beyond stale quotes (easily solved by viewing the bid/ask during market hours), you may be looking at tax adjusted quotes. Some sites list the equivalent pre-tax yields so retail investors can more easily compare rates. Maybe that's what you're seeing?
As a side note, Federal Farm isn't AAA rated (AA+ I believe), but it's Aaa so close enough for here...lol
There's more, but it's going on midnight, I'm tired, and I've likely gone beyond what most here want to know anyway.
Here's a link to a relatively useful URL to provide a better understanding of current yields, but of course, adjust for the above caveats, or you may be disappointed in the actual results. Composite Bond Rates: Bonds Center - Yahoo! Finance.
Fixed income is to stocks as chess is to checkers. It may at first blush appear simple with fixed moves for the pieces, but if you don't fully understand the nuances of the game, you'll quickly find yourself not realizing the hoped for results.
Lastly, fixed income isn't my specialty, equity options are, and without trying to insult anyone or come off as arrogant, I have a high degree of confidence there isn't anyone on this tread with a greater understanding and experience in fixed income. I'm sure many on here know much more about LTC and I'm eager to learn.
Hopefully we can now get back to LTC, which is where I want to be.
Tyler settle down bro, why do you have to get nasty? Do you educate prospects with such an attitude!?
- 10,806
Im aware of the risks of bond investing. Which is one reason I never suggested using them for the strategy I suggested...
I suggested a FA or a bond fund (which I realize is not guaranteed like the annuity)
You asked what pays 3% and I gave you multiple options.
Then you said:
Which was a fairly rude way to phrase your thoughts.
And even though Bonds have nothing to do with the underlying subject, I named not 1 but 2. Now you want to nitpick that statement... whatever...
Basically my issue was that you were ignoring the subject at hand and trying to nitpick semantics that were irrelevant to the conversation. In your words your post directed to me was "harsh".... and for what reason? To nitpick about 1 of the 3 options I mentioned... the option that I never suggested a client use and had no bearing on the subject at hand??
And my real issue is that you accuse me of being anti LTCI awareness when I never once mentioned the article. Only the merits of the product mentioned in the current rate environment. I attempted to have a professional and intelligent conversation about lump sum hybrids compared to alternative options. Instead you just argued semantics about AAA Bonds, and made baseless accusations about the intent of my posts.
If you honestly want to discuss LTCI, then why not go back and actually consider the alternatives mentioned and compare them to a lumpsum hybrid? Why argue semantics that have nothing to do with the conversation? Every one of my posts in this thread except for one are on topic and professional. If you honestly want to discuss LTCI then prove it. Because so far your only interactions with me have been totally off topic. I didnt take the left turn down Bonds lane...
But I do look forward to having productive an open minded LTCI discussions with you in the future
----------
First, he is not a client.
Second, all but one of my posts were on topic and professional. In a very rude manner he asked me to name a bond that paid over 3%.
In his very own words he claimed his post directed at me was "harsh". Then I was accused of being against LTCI awareness.
If the OP wants to discuss LTCI then they are welcome to do so. But so far they have yet to prove that. It seems that they are offended that I would discuss the merits of the product mentioned in the article and compare it to alternatives.
And if you dont like my posts then dont read them Justin. I dont get "nasty" unless someone else does first.
Last edited:
