Fixed Income Annuities

NH, My tendency is to look at the general economic picture when deciding whether CD's and annuities belong in our portfolio, and not the rates of return. The reason for this, IMHO, is that the most important issue is portolio mix and not how much they pay. For example, I made the decision just before retiring to shift more of our retirement investments into bonds, cash, and annuities over equities, because I felt it was too dangerous to risk our retirement funds. We had over 65 percent in equities before I retired. We now have 35 percent in equities. I intend to keep it at that ratio, no matter what the financial pundits claim about the economic recovery. We can risk 35 percent for losses up to 100 percent, and still not change our standard of living. That's the big picture for us. If anything happens to me, my wife has the equity in our home to retire comfortably. Her net assets will be worth over one million. I doubt she would need that much, and most of our assets will enure to our children. I have always maintained that after financing our children's college education, they are on their own. However, we still have our younger son living at home, and attending college - still working towards his bachelors degree. The best pronouncement I have ever heard on one of my trips from a fellow traveler was "I hope my last check bounces." c.i.

It was generally thought, that these annuities would not fall below 3%, but now it seems that the rates can and probably will fall below 3%.

For people saving for retirement, the fall in interest rates could have significance, especially if their pension plans are tied to annuities.

Many people are now concerned, that they may outlive their pensions.

Back to your equities: 35% is a good amount just to perk the portfolio up.

NH, As you probably know, there are more issues to be addressed about annuities than just the rate of return. Some fees will eat up most of the income at less than 3 percent, and that means not keeping up with inflation. Add income taxes, and you may end up in the negative return arena. c.i.

Of course, I realize that some fees are too high, that's why I choose those firms having low fees.