In part Five of what is now a two month series, I look at the options for savings and investment of clients funds AFTER we have secured their monthly or annual income through the use of an immediate annuity.
As you recall from our prior posts, the important aspect of this planning is the assumption that interest rates are low and will stay low for the next two to three years as our economy continues to battle high unemployment, limited Federal Reserve flexibility and Congressional gridlock on further stimulus spending due to budgetary concerns. These elements will keep us in a low rate, deflationary situation, until I believe we get a change in leadership in Washington DC and a stimulus package tied to tax cuts is enacted. Until that time we are going to be in a 1970ish malaise economically, but at some point we will face an inflationary burst due to these huge deficits.
With all that in mind, this videos talks about a bridge strategy using annuity products and plans two secure decent short term yields of 3% to 4% over the next two years, but to plan and choose products that allow you to then participate in the anticipated interest rate moves upwards. No one can plan these or time them perfectly, but if you have a coherent strategy and annuity products that allow for this reinvestment you will have a better than even chance of staying ahead.
We discuss the use of single premium deferred annuity products, equity index annuities and flexible premium annuity programs with market, or interest rate, adjustment features. These are all complex, distinctively different products and require any person thinking of using them to find a competent, financial or insurance professional to explain them! They are great if used as part of a well thought out plan, but you need to know all of our options, read the fine print and look at things such as surrender charges, guaranteed minimum rates, sale commissions, etc. In short, find a real pro and work with them, don't be sold a product outside of a comprehensive plan.
The concept of rebuilding the 75% balance to 100% at or around the time a client needs more income or rates are higher is a time tested, conservative approach. However, as I keep stressing it must be part of an over all plan of action and implemented as part of a written, documented plan that the client understands, buy's into and is suitable for their needs, income level and age.