Cashman and Barron's Magazine for

Cash Cow here to chat with you about an interesting article I read in Barron’s Magazine this past weekend. I was happy to see that this hard-core investment magazine recommends our “bland” immediate annuity for guaranteed income needs. But as feathered friend, Earl E. Bird mentioned in “Do You Know Your Annuity Products? Part 4 of 4 – Immediate Annuities,” an immediate annuity might be the the only investment for “true” income guarantee. Yes you do lose access to your lump sum amount, but you then can count on a locked-in income stream for the rest of your life.

But do you buy an immediate annuity when thirty-year treasuries are yielding 2.9 percent? I’m all for locked-in income, I’m just wary of rates spiking down the road.

The most intriguing annuity product listed in the article is a concept called “longevity insurance.”  Longevity insurance is nothing more than an immediate annuity with age restrictions. So instead of the income starting immediately after purchase, you lock in an income amount starting at age 85 or twenty-years after purchase depending on the insurance company’s product.

Here’s the catch: If you die prior to the income date, your heirs receive nothing. The income stops at death as well. In a nutshell, if you’re healthy and have good genes, buy this product to help pay your routine medical bills. But are Americans really buying longevity insurance?  Not really.  It sounds good until the buyer hears that the money flies the coop on an early death. And what about inflation concerns? That’s a risk if you ask me. An income stream locked-in for twenty years? Here’s another example where insurance executives put the cart before the horse. There is no market for “twenty-year-from-now” income products.

Pay it Forward:

Barron’s mentions several sophisticated income options in their article “Reeling in the Yields.” Investments like Master Limited Partnerships, Equipment Leasing, Real Estate Investment Trusts and High-Yield Bonds. All worthy ideas, but remember, the more complicated the more chance of an investment hiccup. As always, keep it simple.

Earl E Bird

I'm Earl E. Bird and I am very concerned about saving for my senior years. I am amazed at the stumbling blocks that exist when saving for retirement. That's why I take my time when making decisions on building my nest egg.

More Posts - Website - Twitter