Assume taxes and inflation will go up. Low interest rates mean lower income. Deferred annuities are taxed as income eventually. Deferred annuities' guarantees are not worth the price. Indexed annuities reduce growth potential. Combo or split annuities usually provide that a deferred annuity provide growth while the income annuity provides current income. Both contracts offer poor returns currently. Current income annuity payments are low because of low interest rates. Balanced mutual funds can provide higher income temporarily until higher rate annuities become available. Currently, income annuities offer a 65-year old about $1,700 per month for 5 years for a $100,000 premium. The portion that will be taxed will be small since most of the income is your own money. Deferred fixed and indexed annuities provide little upside potential in this environment since they rest on low bond yields. A temporary alternative for many retirees is the balanced fund. A low-cost balanced fund can provide income from bonds and growth from stocks just as combo annuities would. The SEC yield of 2.5-2.75% reflects the dividends and interest earned during this period, after the deduction of the fund's expenses. Until interest rates rise, some retirees are using a combination of the interest, dividends and redemptions to fill their monthly income needs. This allows them to maintain the fixed income level they need and grow their nest egg too. Using balanced funds in a portfolio allows retirees to balance their need for income when interests rates are low. They can shift the growth of their portfolio to a balanced fund during the good years in store for the bad years. A balanced fund can provide total returns of over 10% while avoiding the steep drops of the market just as an annuity. You can assure yourself of an inflation-proof income for the rest of your life without giving up control of your assets. Income taxes will increase to pay off two wars, two tax cuts and two bank bailouts. You need to protect your future income!
Cash back powered by RakutenDone