Not Good!

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Today there was a very interesting article on MSNBC having to do with the US debt hitting the limit and now affecting civil service federal employees pensions.

Treasury Secretary Timothy Geithner told Congress he would start tapping into federal pension funds on Monday to free up borrowing capacity as the nation hits the $14.294 trillion legal limit on its debt.

The debt limit is the amount of money the government can borrow to help finance its operations. The nation has reached its debt limit because the federal government has grown accustomed to borrowing massive amounts of money. The latest estimate shows we borrow 40 cents for every dollar it spends.

Everyone knew that the effects of the ridiculous spending of the government would come to a breaking point some time but who knew they would go as far as to dip into Federal Employees pensions.  

It may be time to move those qualified funds from the public sector to the private sector.

Federal Employee Benefits have always been looked at as a great reason to work for the government but now things may be taking a turn.

Where to look and where to go??

If you are a Federal Employee and want to look into your options, you need to get together with a trusted financial planner who is education in your benefits.

 Now is a good time to look into other vehicles to be sure you have  access to what you have earned when the time comes that you need the funds.

When to Put Money Where?

Are you confused as to when is a good time for which different savings vehicle? Many of us hear all the different ways to invest and save, but the real question is when is a good time for each of them?

There is a simple rule of thumb to go by. The younger you are, the more money you should have at risk and the older you are, the more money you should have be safe. As far as who is young and who is older, you can take 100 and subtract your age. For example if you are 60 years old then you should only have 40% of your money in the riskier investments.

Now once you figure out how much money can be at risk and what amount shouldn’t. Where do you look to put the money? the money that can take on risk should be in some part in stocks in the market.  As far as safe places for the money which should not take on risk there are many options.

You can look at your bank and see what money market rates are and Certificate of Deposits rate are at. But most likely the return is not the highest you can find, sometimes barely staying up with inflation.

A fixed annuity can make sense for an older investor nearing retirement age or one who has already retired, provided he or she has additional assets that are growing faster than the rate of inflation. In this case, the retired investor could purchase the annuity as a way to protect his or her money from extreme market fluctuations.

Almost all life insurance companies sell fixed tax-deferred annuities. But they are typically sold through another division or subsidiary of the company. Life insurance companies are required by law to keep certain assets separate from others. This prevents a catastrophic event in one division from disrupting business in other divisions. For example, the money that needs to be available to pay claims in the form of death benefits is kept separate from money that is invested in equities to pay annuity distributions.

The following features are common to most fixed annuities:

• Guaranteed Rate of Return
• Tax Deferral
• Secure Principle
• Option for Lifetime Income
• Bailout Provision
• Penalty-free Withdrawal Provisions

Holiday Cheer

In times of great holiday celebration with happiness and cheer in the air Americans can’t help but worry about the aftermath of what the season brings.

Everyone loves to give their family a happy holiday season, for many that means going out and spending money on those hard to find gifts your children or grand children have been extra nice to get.

The aftermath is the debt you may incur or the quite January you may have to have due to spoiling your loved ones. But that is the small price many of us pay to see the smiles on the faces of those we love.

But looking towards the future of retirement and not getting that steady paycheck during these times could become a sad reality for many.

 No matter how diligently you plan for your post-career life, surprises can still trip you up. More than likely, that isn’t because you’ve overlooked a nettlesome issue altogether.

Rather, it’s just hard to comprehend how challenging certain aspects of retirement life can be.

A great example is this time of year.

 US NEWS says; many retirees are planning to reduce their holiday spending this year. Seniors are scaling back on the number of people they buy gifts for (30 percent), according to a recent survey of 602 retirees by Principal Financial Group and Harris Interactive. For those they do buy holiday presents, they will spend less per gift (36 percent) or giving handcrafted gifts instead of purchased gifts (11 percent).

Wanting the ability to meet unexpected expenses as well as concerns about the stock market are not surprising in today’s environment. But there is a high cost to keeping retirement savings in these low-yielding products,” said Robert E. Sollmann, Jr., executive vice president, Retirement Products at MetLife. “Instead of compromising their future retirement security, fortunately, investors and financial professionals are increasingly seeing the value of products like annuities.

Some of these vehicles with optional living benefit riders let people invest in potentially higher-yielding assets take immediate withdrawals to help meet unexpected expenses, generate predictable lifelong income, and help protect against market declines. It’s a solution that can help give investors the confidence to put their retirement savings back to work and the flexibility to meet their changing needs.”

Annuities are a great vehicle to think about not only for the great security advantages but also for the incredible flexibility when it comes to what you need and want for your future. As I said before, there are some people who love nothing more than giving their loved ones a memorable holiday season and worrying about how you will do that once you are retired is not a good feeling.

There are many different options with penalty free withdrawals and income rider options with annuity products.

Golden Years Income Strategy

When it comes to determining the best investment strategies for your money, the first thing to consider is why you are investing to begin with. The majority of individuals are investing the money they make now in order to secure their golden years — when they finally decide to give up the rat race and do the things they’ve always wanted to do.

A farmer cultivates the soil to prepare the ground for growing crops, plants the seed, with the hopes of having a good harvest. 

Sometimes crops are lost due to hail, insects, drought or flood.  Just like a crop failure this economy has made it almost impossible to retire unless you’ve got a plan for the future. 

Unfortunately, many investors were counting on those funds to provide income during their retirements. Exposure to invisible market trends, just like the weather, which are beyond the control of the majority of people can result in performance degradation.  For example, about 1 in 3 investors approaching Retirement age had more than 80 percent of their account in poor allocation of assets under management in the recent market corrections.

With the market advancing and declining so rapidly, these days it seems investors are looking for safety and security more than ever, especially after the major stock market corrections witnessed over the past ten years.  Numerous stocks, bonds and mutual funds still have not recovered their losses from that time period. 

Retirees used to depend on certificates of deposit and U.S. Treasury securities to provide a substantial part of their post-retirement income. But these days, they need a new game plan. With yields near historic lows, Treasuries simply aren’t cutting it as the mainstays of income portfolios, and rates on bank CDs are pitiful. The yield on a standard laddered one- to 10-year Treasury-bond portfolio is a skimpy 1.5%.

Where you’re going to make investments and for how long are important when creating a retirement strategy. You should set monetary goals with three strategies in mind short term investments, medium-term investments and long term investments.

Remember the adage about resisting the urge to put all your eggs in one basket.  So there needs to be a balance between aggressive investments (risky, with the potential for big returns) and conservative investments (low to no risk, with lower return). We are taught that balance will allow your money to grow well over the long-term and protect your portfolio against huge losses when the market enters into a slump.  Many consumers are now looking for safety and security without having to sacrifice reasonable interest returns.

Mutual funds are classified into three main categories differ in terms of their risk and reward functions. These are money market funds, bond funds, which also receive the name “fixed income”, and finally, equity funds, which are also called “equity funds”. Let’s take a deeper look at each one of them.

Money market funds can only invest in only certain high-quality, short-term investments issued by the U.S. government, U.S. corporations and local governments. These funds seek to maintain share value of the Fund entitled “Net work asset value (NAV) at a stable level of $ 1.00 per share.

Proceeds of the funds were always lower than the other two types of funds. Because of this, money market fund investors should be aware of “upside risk”.

While bond funds are a bit risky, than those in the money market, most of the time risk can be controlled with greater certainty than shares. Moreover, given the fact that there are many types of Bond funds, their risks and rewards vary greatly. These risks may include credit risk, which refers to the possibility that issuers whose bonds are owned by the fund do not pay their debts; interest rate risk and prepayment risk, which is associated to the chance that a bond be “retired” early.

Finally, there are differences between one stock fund and another. For instance, Growth Funds are focused on stocks that provide large capital gains, Income Funds invest in stocks that pay regular dividends, and Sector Funds are specialized in particular industry segments. Generally speaking, a high degree of risk.

When heading right into retirement, you look for a choice retirement portfolio that will set you up for life and then you look for a fallback investment that will let you survive should something go wrong.  When deciding what to do with a nest egg, consider putting it into an annuity.

Annuities are the only financial product available other than social security that can provide income for any period of time, even a lifetime.  In fact, the largest annuity out there is social security, which pays benefits to those retiring. 

The humble retirement annuity is what gives you that fallback position. Something that can give you a reasonable basic income through your golden years.  Equity annuities offer a good way to manage retirement risk.  The value of an equity annuity is obvious in bad years – they maintain their principal and the earnings obtained in previous years in spite of a market downturn.

All Equity-indexed annuities provide a minimum guaranteed return. Most equity-indexed plans also provide a fixed-interest account as an investment option as well, so when interest rates are high and the market is declining, this account could be used to credit interest to the principal annuity amount.

Equity-indexed annuities have historically provided average returns of seven percent or more. When the general markets perform well, the annuities do well too, and it is not uncommon for interest payments in good economic years to total between seven percent and  ten percent. And if the market drops rapidly, the value of these plans is evident, since they will maintain their principal and the interest earnings gained during past years.

Because of this, retirees who want safe and secure investments without sacrificing good interest rates favor equity-indexed annuities. These annuities offer significant peace of mind to investors, since they know that the investment value cannot decrease.