Monday, January 27, 2014
Thursday, October 24, 2013
What is an Annuity?
An annuity is an insurance product that pays out income, and can be used as part of a retirement strategy. Annuities are a popular choice for investors who want to receive a steady income stream in retirement.
Here's how an annuity works: you make an investment in the annuity, and it then makes payments to you on a future date or series of dates. The income you receive from an annuity can be doled out monthly, quarterly, annually or even in a lump sum payment.
The size of your payments are determined by a variety of factors, including the length of your payment period.
You can opt to receive payments for the rest of your life, or for a set number of years. How much you receive depends on whether you opt for a guaranteed payout (fixed annuity) or a payout stream determined by the performance of your annuity's underlying investments (variable annuity).
While annuities can be useful retirement planning tools, they can also be a lousy investment choice for certain people because of their notoriously high expenses. Financial planners and insurance salesmen will frequently try to steer seniors or other people in various stages toward retirement into annuities. Anyone who considers an annuity should research it thoroughly first, before deciding whether it's an appropriate investment for someone in their situation.
Here's how an annuity works: you make an investment in the annuity, and it then makes payments to you on a future date or series of dates. The income you receive from an annuity can be doled out monthly, quarterly, annually or even in a lump sum payment.
The size of your payments are determined by a variety of factors, including the length of your payment period.
You can opt to receive payments for the rest of your life, or for a set number of years. How much you receive depends on whether you opt for a guaranteed payout (fixed annuity) or a payout stream determined by the performance of your annuity's underlying investments (variable annuity).
While annuities can be useful retirement planning tools, they can also be a lousy investment choice for certain people because of their notoriously high expenses. Financial planners and insurance salesmen will frequently try to steer seniors or other people in various stages toward retirement into annuities. Anyone who considers an annuity should research it thoroughly first, before deciding whether it's an appropriate investment for someone in their situation.
A 90% Stock Market Correction Coming?
A 90% Stock Market Correction Coming?
By Joe Simonds
I am sorry to report that there is no typo in the title above. That is a '9' followed immediately by a '0'. As in ninety percent. As in unprecedented. As in global devastation of capital and equity. So you are probably wondering if this is an arbitrary number I used to garner attention? Unfortunately, no. In fact, it stems from a very well respected economist who accurately predicted the 2008 financial collapse. So please read on...and brace yourself.
To begin, I would imagine many of you are already reading this with a huge seed of doubt in your head. To be honest, I can't blame you. The stock market is not only reaching four year highs, it is quickly approaching all-time highs again. And even though we are still at over 8% unemployment, we have added approximately 4 million jobs back to the economy since the 2008 financial crash. Moreover, there are hints that the housing has finally bottomed, mortgage rates and borrowing rates are at all-time lows, and things really don't seem all that bad with our economy from a 30,000 foot view.
Then where, when, and what could possibly cause an event so tragic, that it could force us to give all of these stock market gains up again? More importantly, what could cause us to not only give up what we have gained back since 2008, but to also give up almost everything that has built over the last 25 years?
A 90% drop in the stock market is the latest prediction to come from Robert Wiedemer, a much respected economist and author. Before you say, "This guy must be crazy" or "Did he accidentally add a zero behind the 9%?" you might want to consider Robert's past track record. Back in 2006, when some authors and economists were predicting that the Dow Jones would be at 25,000 or more, Robert had the courage to say it was going to drop by 50% in the next couple of years (the Dow Jones gave up approximately 50% from its peak at approximately a couple years later exactly as he predicted). Keep in mind, back in 2006, housing was peaking, the stock market was peaking, people were feeling good, and no one was predicting that the euphoria was going to end.
I personally had the honor to meet Mr. Wiedemer at a conference and I was surprised by the person I met. After reading both of his books, "America's Bubble Economy" (the book that correctly predicted the 2008 collapse) and "Aftershock" (the book that outlines the coming
demise of the market), I expected to meet a fast talking, pessimistic, doomsayer. On the contrary, Robert was a slow, calculated speaker, very analytical, and a surprisingly very optimistic guy. Unlike some of the naysayers out there, Robert wants nothing more than America to prosper, remain a global powerhouse, and for the U.S. to have sustained economic growth. But the bad news is that his unrelenting and unbiased research only points to one direction...down.
Recall that in 2006, Wiedemer, his brother, and their team of economists and researchers, predicted almost precisely the market crash, the housing bubble, and the fall of the banks that were "banking" on Sub-prime and credit default swaps. Their research, although controversial and mostly unnoticed before the 2008 crash, makes complete sense today. To read his book, "America's Bubble Economy" is like reliving the entire housing, mortgage, and stock market bubble over again. Except this time, you wonder how we could have all been so blind to what was going on. How could so many smart people make so many mistakes and let greed take over? How did regulators let it get that bad? How did no one else see this when it all seems so obvious?
Fast forward to today, completely ignoring his recent warnings would be tough to do in our opinion. Last time he was almost 100% correct with his predictions. This time, even if he is half right, a 45% drop is not only devastating, it would most certainly lead to a global depression.
So what does Wiedemer believe is going to lead to a 90% drop in the stock market? He says it all can be traced back to the Federal Reserve and their unprecedented printing. Their reckless attempt to stimulate the economy by "printing massive amounts of money out of thin air" will have dire consequences, Wiedemer claims. "These funds haven't made it into the markets and the economy yet. But it is a mathematical certainty that once the dam breaks, and this money passes through the reserves and hits the markets, inflation will surge", says Wiedemer.
He goes on to say, "Once you hit 10% inflation, 10-year Treasury bonds lose about half their value. And by 20%, any value is all but gone. Interest rates will increase dramatically at this point, and that will cause real estate values to collapse. And the stock market will collapse as a consequence of these other problems." This is a tough argument to fight if interest rates actually do go this high. Robert also says, "Companies will be spending more money on borrowing costs than business expansion costs. That means lower profit margins, lower dividends, and less hiring. Plus, more layoffs."
To repeat, Wiedemer and his team of economists look at all of their findings with no bias. If anything, they would be biased to see some positive news. To go on TV in 2006 and publicly tell viewers who had just witnessed the biggest boom in stocks, who had huge amounts of increases in home equity, all while the economy appeared to be in the best shape in American history that it would all be wiped out is not an easy thing to do. In fact, it is usually followed by ridicule, hate letters, and even severed friendships. The easiest thing to do as an economist is to go along with the herd, keep telling everyone that the market will continue to rise, and that there are very few threats of a recession on the horizon. However, Robert and his team risked it all to do the right thing and sound the alarm. Although people literally laughed at them just a year before the wheels began to come off, they stuck to their research findings and where ringing the alarm bell right up until Lehman Brothers collapsed. After that, it was too late for many.
Shortly after the financial collapse, they issued their second warning, "Aftershock", which vividly describes what is now happening in our economy. To summarize their findings, they don't see any way that all of this global money printing piled on a fragile frame will result in anything other than catastrophe. The prediction is that we will experience a second "aftershock" that will make 2008 look mild. To say Wiedemer has risked sticking his neck out there one more time would be an understatement. As you can imagine, other economists, politicians, and many on Wall Street all try to discredit Wiedemer and his prophesy. However, the scary part is that Wiedemer and his team are even more confident about this prediction than they were about the 2008 collapse. Will this "Aftershock" actually translate to the brutal aftermath of the stock market collapse it foretells? Will we all read this book a few years from now and say, "It was so obvious, how did we not all see this coming" like we can with his "America's Bubble Economy" book today?
Even though the stock market is trending upwards and we have created 4 million jobs, after injecting $4 trillion into the economy, we should have been well on our way to double digit growth and the lowest unemployment in American history. Instead, millions are still unemployed, and many more have just given up looking. Student loan debt is at its all-time high, negatively affecting almost 20% of all American households. Even after all we just went through, the majority of American's are barely saving more than they were before, and millions have little to no retirement savings in place. The issue is that we never fixed the issues! We are just building a giant house of cards on a fragile frame instead of rebuilding with a solid foundation. Before we hit rock bottom, we created what was supposed to be a temporary fix called TARP, we started bailing out companies, printing money, and created America's addiction to the Fed. It is tough to argue that we didn't need the first round of TARP, but all of the Federal easing has done is to add to our deficit, has helped feed Wall Street's addiction for easing, followed by creating a deficit that can never be repaid.
The facts are that we have printed off $4 trillion at the expense of Americans in the last few years. After the Fed's recent announcement to buy $40 billion of mortgage notes per month, that $4 trillion number is almost guaranteed to rise. At what point do we stop printing and "easing" to make Wall Street happy? Has America become so arrogant to think we can print forever without any consequences? Do we really believe that by tripling our nation's entire money supply in just 4 years will not lead to inflation at some point when we actually do experience legitimate growth? Will the longest bond rally in U.S. history end in the bursting of a huge bubble? Or will other countries wake up one day and realize that the dollar has become worthless after trillions of new greenbacks have been injected into the system? If just one large country like China, Japan, Russia, or India turns its back on the dollar, the rest will be playing "last one holding the rotten tomato loses" and we could see the value of the dollar plummet in a very short period of time. I, for one, hope that everything I have read in Aftershock doesn't come to fruition. But we seem to be making the exact mistakes it predicts that we will make. It is hard for me to read Wiedemer's prediction without agreeing that much of it seems inevitable. And as I mentioned, if Wiedemer is just 50% correct this time, that puts us right back where we were at the bottom of the last financial collapse. Will you be protected?
By Joe Simonds
I am sorry to report that there is no typo in the title above. That is a '9' followed immediately by a '0'. As in ninety percent. As in unprecedented. As in global devastation of capital and equity. So you are probably wondering if this is an arbitrary number I used to garner attention? Unfortunately, no. In fact, it stems from a very well respected economist who accurately predicted the 2008 financial collapse. So please read on...and brace yourself.
To begin, I would imagine many of you are already reading this with a huge seed of doubt in your head. To be honest, I can't blame you. The stock market is not only reaching four year highs, it is quickly approaching all-time highs again. And even though we are still at over 8% unemployment, we have added approximately 4 million jobs back to the economy since the 2008 financial crash. Moreover, there are hints that the housing has finally bottomed, mortgage rates and borrowing rates are at all-time lows, and things really don't seem all that bad with our economy from a 30,000 foot view.
Then where, when, and what could possibly cause an event so tragic, that it could force us to give all of these stock market gains up again? More importantly, what could cause us to not only give up what we have gained back since 2008, but to also give up almost everything that has built over the last 25 years?
A 90% drop in the stock market is the latest prediction to come from Robert Wiedemer, a much respected economist and author. Before you say, "This guy must be crazy" or "Did he accidentally add a zero behind the 9%?" you might want to consider Robert's past track record. Back in 2006, when some authors and economists were predicting that the Dow Jones would be at 25,000 or more, Robert had the courage to say it was going to drop by 50% in the next couple of years (the Dow Jones gave up approximately 50% from its peak at approximately a couple years later exactly as he predicted). Keep in mind, back in 2006, housing was peaking, the stock market was peaking, people were feeling good, and no one was predicting that the euphoria was going to end.
I personally had the honor to meet Mr. Wiedemer at a conference and I was surprised by the person I met. After reading both of his books, "America's Bubble Economy" (the book that correctly predicted the 2008 collapse) and "Aftershock" (the book that outlines the coming
demise of the market), I expected to meet a fast talking, pessimistic, doomsayer. On the contrary, Robert was a slow, calculated speaker, very analytical, and a surprisingly very optimistic guy. Unlike some of the naysayers out there, Robert wants nothing more than America to prosper, remain a global powerhouse, and for the U.S. to have sustained economic growth. But the bad news is that his unrelenting and unbiased research only points to one direction...down.
Recall that in 2006, Wiedemer, his brother, and their team of economists and researchers, predicted almost precisely the market crash, the housing bubble, and the fall of the banks that were "banking" on Sub-prime and credit default swaps. Their research, although controversial and mostly unnoticed before the 2008 crash, makes complete sense today. To read his book, "America's Bubble Economy" is like reliving the entire housing, mortgage, and stock market bubble over again. Except this time, you wonder how we could have all been so blind to what was going on. How could so many smart people make so many mistakes and let greed take over? How did regulators let it get that bad? How did no one else see this when it all seems so obvious?
Fast forward to today, completely ignoring his recent warnings would be tough to do in our opinion. Last time he was almost 100% correct with his predictions. This time, even if he is half right, a 45% drop is not only devastating, it would most certainly lead to a global depression.
So what does Wiedemer believe is going to lead to a 90% drop in the stock market? He says it all can be traced back to the Federal Reserve and their unprecedented printing. Their reckless attempt to stimulate the economy by "printing massive amounts of money out of thin air" will have dire consequences, Wiedemer claims. "These funds haven't made it into the markets and the economy yet. But it is a mathematical certainty that once the dam breaks, and this money passes through the reserves and hits the markets, inflation will surge", says Wiedemer.
He goes on to say, "Once you hit 10% inflation, 10-year Treasury bonds lose about half their value. And by 20%, any value is all but gone. Interest rates will increase dramatically at this point, and that will cause real estate values to collapse. And the stock market will collapse as a consequence of these other problems." This is a tough argument to fight if interest rates actually do go this high. Robert also says, "Companies will be spending more money on borrowing costs than business expansion costs. That means lower profit margins, lower dividends, and less hiring. Plus, more layoffs."
To repeat, Wiedemer and his team of economists look at all of their findings with no bias. If anything, they would be biased to see some positive news. To go on TV in 2006 and publicly tell viewers who had just witnessed the biggest boom in stocks, who had huge amounts of increases in home equity, all while the economy appeared to be in the best shape in American history that it would all be wiped out is not an easy thing to do. In fact, it is usually followed by ridicule, hate letters, and even severed friendships. The easiest thing to do as an economist is to go along with the herd, keep telling everyone that the market will continue to rise, and that there are very few threats of a recession on the horizon. However, Robert and his team risked it all to do the right thing and sound the alarm. Although people literally laughed at them just a year before the wheels began to come off, they stuck to their research findings and where ringing the alarm bell right up until Lehman Brothers collapsed. After that, it was too late for many.
Shortly after the financial collapse, they issued their second warning, "Aftershock", which vividly describes what is now happening in our economy. To summarize their findings, they don't see any way that all of this global money printing piled on a fragile frame will result in anything other than catastrophe. The prediction is that we will experience a second "aftershock" that will make 2008 look mild. To say Wiedemer has risked sticking his neck out there one more time would be an understatement. As you can imagine, other economists, politicians, and many on Wall Street all try to discredit Wiedemer and his prophesy. However, the scary part is that Wiedemer and his team are even more confident about this prediction than they were about the 2008 collapse. Will this "Aftershock" actually translate to the brutal aftermath of the stock market collapse it foretells? Will we all read this book a few years from now and say, "It was so obvious, how did we not all see this coming" like we can with his "America's Bubble Economy" book today?
Even though the stock market is trending upwards and we have created 4 million jobs, after injecting $4 trillion into the economy, we should have been well on our way to double digit growth and the lowest unemployment in American history. Instead, millions are still unemployed, and many more have just given up looking. Student loan debt is at its all-time high, negatively affecting almost 20% of all American households. Even after all we just went through, the majority of American's are barely saving more than they were before, and millions have little to no retirement savings in place. The issue is that we never fixed the issues! We are just building a giant house of cards on a fragile frame instead of rebuilding with a solid foundation. Before we hit rock bottom, we created what was supposed to be a temporary fix called TARP, we started bailing out companies, printing money, and created America's addiction to the Fed. It is tough to argue that we didn't need the first round of TARP, but all of the Federal easing has done is to add to our deficit, has helped feed Wall Street's addiction for easing, followed by creating a deficit that can never be repaid.
The facts are that we have printed off $4 trillion at the expense of Americans in the last few years. After the Fed's recent announcement to buy $40 billion of mortgage notes per month, that $4 trillion number is almost guaranteed to rise. At what point do we stop printing and "easing" to make Wall Street happy? Has America become so arrogant to think we can print forever without any consequences? Do we really believe that by tripling our nation's entire money supply in just 4 years will not lead to inflation at some point when we actually do experience legitimate growth? Will the longest bond rally in U.S. history end in the bursting of a huge bubble? Or will other countries wake up one day and realize that the dollar has become worthless after trillions of new greenbacks have been injected into the system? If just one large country like China, Japan, Russia, or India turns its back on the dollar, the rest will be playing "last one holding the rotten tomato loses" and we could see the value of the dollar plummet in a very short period of time. I, for one, hope that everything I have read in Aftershock doesn't come to fruition. But we seem to be making the exact mistakes it predicts that we will make. It is hard for me to read Wiedemer's prediction without agreeing that much of it seems inevitable. And as I mentioned, if Wiedemer is just 50% correct this time, that puts us right back where we were at the bottom of the last financial collapse. Will you be protected?
"Find Out What Your Bank Does Not Want You To Know"
ANNUITIES VS CD’S
"Find Out What Your Bank Does Not Want You To Know"
6 Reasons To Buy An Annuity Instead Of A CD Introduction
As adverse market conditions force more investors into seeking alternatives that will provide more stability and certainty to their retirement portfolios, annuities have, once again, moved to the forefront of the investment landscape. Annuity sales topped $200 billion for the first time in 2011, and are expected to grow by double digit rates as tens of millions of Baby Boomers approach retirement. But, annuities, one of the oldest and most reliable financial instruments dating back centuries, are not without their controversy.
The financial planning community has long been divided on annuities and whether their benefits outweigh the costs. Critics point to high fees and commissions, questionable sales practices, and their unsuitability for older investors as the reasons why they should be avoided. Yet, according to an August 2012 survey by Cerulli Associates, financial advisors reported that clients requested annuities more than any other unsolicited product. And, 92 percent of Baby Boomers who own an annuity report a much higher degree of confidence in their retirement future.
Any debate over the benefits of annuities inevitably invites comparisons to alternatives with similar attributes that may be less costly, or more liquid, and, generally, more suitable for one’s retirement savings needs. Most notable among the alternatives are bank certificates of deposits (CDs) touted for their absence of fees, their safety (FDIC), and their relative liquidity (when purchased in shorter maturities).
Anytime a question is posed as "are XYZs better than ABCs?" it invites controversy especially when it involves a comparison of "apples and oranges". No one will argue against the notion that annuities, or, for that matter, any particular investment vehicle, isn’t for everybody. This presupposes that, using the same rationale in reverse, CDs are also not for everybody. The only way the question can be answered meaningfully is when it’s posed in the context of any one person’s personal financial situation. Only with a good understanding of your client’s financial objective, needs, priorities and tolerance for risk, can you truly make the comparison.
As with any investment, the answer lies not in the investment itself; rather in the way and in the situation in which it is applied. That is the only context in which annuities or CDs can be evaluated. It also requires an understanding of how the investment actually works. While it is true that annuities are more complex than CDs, it is through their complexity that their unique properties can provide unparalleled benefits in the form of tax savings, guaranteed returns, and guaranteed income. But, as with CDs, annuities may not be right for everybody.
This report provides an in depth look at annuities from several vantage points for a comprehensive understanding of how they work and how they can compare to CDs.. Copyright 2012 - Annuity Think Tank – All Rights Reserved
Reason #1 - Annuities and CDs – A Straight Comparison Annuities and CDs are often compared in the same light as if they were equivalent investments. While they do share several attributes, such as guaranteed fixed yields, principal guarantees, and relative liquidity, they’re separated by some significant differences, and that precludes a straight across apples-to-apples comparison.
| The only basis for any type of comparison between the two are product features. The comparison chart below was constructed from the vantage point of an annuity only because it offers more features that can be compared. Comparison of Annuities with Certificates of Deposit | ||
| Features | Annuity | CD |
| Guaranteed fixed yield? | Y | Y |
| Free from principal/market risk and price fluctuations? | Y | Y |
| Are interest earnings free from current taxation? | Y | N |
| Are accounts insured? | Y1 | Y |
| Are interest earnings reinvested automatically with no current income taxation? | Y | N |
| Am I able to make small additional investments? | Y2 | N |
| Tax liability on Social Security income eliminated on deferred accumulation? | Y | N |
| Liquid? | Y3 | Y4 |
| Flexible? | Y | Y |
| Penalty free withdrawal? | Y | N |
| Funds not reduced by commissions? | Y | Y |
| Does this investment automatically avoid the expense and delay of probate? | Y | N |
| Protected from legal and creditor claims? | Y | N |
| Guaranteed lifetime income with tax advantages? | Y | N |
| Income excluded from Social Security tax calculation? | Y | N |
| Is this investment free of annual fees and expenses? | N | Y |
| 1 Annuities values are secured by state guarantee funds 2 When your Tax-Deferred Annuity is a Flexible Deferred Annuity versus a Single Premium Deferred Annuity; small additional deposits are allowed. 3 Surrender penalties may apply 4 Early withdrawal penalties may apply | ||
Three buckets, many methods to reduce tax
Three buckets, many methods to reduce tax
How do you want to pay tax on your investments?
It is nice to have a choice. However, many don’t realize it is up to you in part how you pay tax on this money.
In general, there are three tax buckets you can have your money in. They are taxable, tax-deferred and tax-free.
Inside of these three buckets can be many types of investment products. An account in a taxable bucket is one you pay tax on whether or not you take the interest. This is non-IRA money and can apply to interest earned on CDs,mutual funds, etc.
If interest for the year is $10 or more, you get a 1099 tax document on all interest and dividends. The good and bad news on these accounts is that the interest rates are so low on CDs that you’re probably not having much taxable income to report. If you depend on the interest from these accounts for income, then that is a bigger issue you may need to address.
The tax-deferred bucket includes traditional IRAs, deferred annuities, 401(k)s, etc. Tax deferred simply means you defer paying tax on it now, but you or your heirs will pay tax on the money later. You can move taxable money into a tax-deferred account if that makes sense for you.
If you are paying more tax than you prefer now, you can defer taxes until a time when you feel you will be in a lower tax bracket. A common use of a tax deferred strategy is using a deferred annuity, either fixed or variable, to postpone the taxable event until later. If your goal is to have more money go to your heirs, you should keep in mind the taxes they may pay on your money. Here is an example.
You have a $100,000 deferred, nonqualified account and $50,000 of it is accumulated interest. When you take withdrawals you’ll pay tax on the built up interest first. If you pass away and your beneficiaries cash it in, they’ll pay tax on the whole $50,000 of interest all at once. This would likely result in a chunk of your hard-earned money going out the window in taxes.
However, you may have the ability to strategically reduce the tax liability over time. If you have tax-deferred accounts, I highly suggest you see what you can do to possibly reduce your tax liability so the tax bubble doesn’t burst one day. Additionally, there are a couple account types that are tax-deferred to you and tax-free to your heirs.
They are Roth IRAs and single premium life insurance policies.
The tax-free bucket can be a good place for some of your taxable money. When you take money out of a tax deferred account like an IRA, you have to pay tax on it now. Once you start taking a required minimum distribution at 70½, you now have more taxable income than you may need or want.
If you have some of your other taxable money move into a tax-free account, that may help to keep your tax bite down. There are a few good strategies to use when it comes to tax-free investments. Each strategy is best left to each individual’s situation.
I do recommend that you meet with your financial services professional to see if and how using the tax-free bucket can help you retain more of your money in your lifetime and after.
Regardless of which of the three tax buckets you are using, it doesn’t hurt to see if you have too much in one bucket or not enough in another.
Your accountant may be able to shed some light on this. He or she can tell you if you have a big tax bite, but your financial services professional can help you design a strategy to possibly reduce it.
Written by Joel Steele For the Courier-Post
Written by Joel Steele For the Courier-Post
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