Brother, Can you spare some yield? -

The heat is on, and the crisis in Europe goes on and on. The world’s economies are running out of steam, and this European pain-in-the-ass debt problem continues. For the last few years, I blamed the Fed and politicians for our low rate and slow economy woes. But the blame has shifted. It’s no longer about a slow economy and the Fed trying to stimulate the country. It’s about the desire for our U.S. dollar to provide the “safe haven” effect.

The “safe haven” effect occurs when money from throughout the world flows to the safest currencies due to global uncertainties. Right now, funds that used to flow to Europe now are moving across the pond. This creates big demands for U.S. Treasuries and lowers our interest rates due to demand. Look at 10-year Treasuries. Their yields have plummeted to around a 1.50%, and may go lower.

Who in their right mind would buy a 10-year Treasury at a 1.5% yield? What about our record-breaking deficits and the trillions of dollars in future Social Security and Medicare payments? How about a 30-year Treasury at a yield of 2.70%? No one thinks it’s a great investment or that the U.S. is in a great financial position, but investment manager PIMCO says funds are flowing to America because the U.S. is “the cleanest dirty shirt” and “the best house in a bad neighborhood.”

With China and the world running out of gas, economists expect low rates for years to come. Who continues to be the big loser here? It’s the American saver. The U.S. saver has been punished for saving for the future. She can no longer live off interest, and she must now tap principal to pay cable and cellphone bills. It might be easier to be broke and qualify for all the government subsidies you could ask for. Such a sad time. And, worst of all, it seems like building a nest egg has never been so irrelevant.

Here are answers to some important annuity questions:

Why do I receive a policy when I invest in an annuity? Because you didn’t buy an investment, you bought a life insurance product that includes features and guarantees that protect the consumer. That annuity policy could be your best friend some day.

Why do banks sell annuity products at their branches? Banks realize the value of annuities. If they didn’t offer annuities, they know they could lose deposits to outside agents or brokerage firms. It proves annuities add value to almost everyone’s portfolio.

I’m 80 years old; do I really need to buy an annuity? The answer is “why not?”  Many Americans are living to age 100 now, which could mean 20 years of tax deferral and/or guarantees. You’re never too old for tax deferral and guarantees!

Should I be concerned about penalty percentages if I surrender the contract? I would be concerned about everything. Some penalties can be as high as 20% at surrender so it’s vital you know your obligations.

Pay-it Forward:

It’s summertime and many post-grads have plenty of free time on their hands. Maybe it’s time to “sharpen the saw” and hone important skills. He can take summer classes at a community college or maybe work as an intern at a local law firm.  I love the idea of devoting time each day to learning on YouTube. You can learn anything on YouTube!

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.

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