Displaying items by tag: retirement

Annuities are one of the safest financial securities that exist, but that doesn't mean they are without some risk. Sure one of the biggest risks to an annuity is dying early, but there are other external risks like liquidity. Annuities are among the most illiquid contracts and often come with heavy penalty fees in withdrawals. Additionally, if an annuity company goes bankrupt they aren’t regulated by FINRA, and state and local insurance agencies only cover between $250,000-500,000 in losses. In the current environment, inflation growth is a substantial risk to annuities because it devalues the future payment stream in a fixed rate annuity, and even if the Fed raises rates to curb inflation this will only make it a less attractive yield in comparison to the market.

Finsum: Overall, annuities look like one of the safest securities and variable rate annuities may mitigate interest rate risk.

2021 was, without a doubt, the year of ESG Investing, but 2022 could shape up much differently as the SEC is turning its attention to ESG. There has been a wide amount of attention being given ‘greenwashing’ where companies get favorable ESG ratings despite subpar ESG performance. This is an area the SEC is warning investors about; conflicts of interest could incentivize better scores than are necessarily deserving. These issues were core to the 2008 financial crisis and are at play once again. Also, the SEC is concerned that the following ESG factors may cause a divergence from traditional methods which coil weaken the overall financial system.

FINSUM: A crackdown by the SEC might be enough to spoil the ESG party and could reveal it as the next financial bubble.

Sure the Fed is beginning to taper, and with that comes rising interest rates. However, for the end of 2021, it was the near-zero interest rates that pushed investors out of fixed-rate annuities, and into variable index annuities and RILAs. Fixed-rate annuity sales plummeted in the final quarter while the aforementioned variable products all grew by 10%. Sales in annuities grew by a staggering 16% in 2021, however, a lot of that growth was generated by a much lower 2020 due to the pandemic. Investors will look to shift back into fixed-rate products if rates begin to normalize or hit higher historical levels.

FINSUM: Look for fixed-rate annuities to make a come back in later 2022 because as interest rate hikes are coming and investors will capitalize on relatively higher real rates.

Many individuals overlook the value of a health savings account as they are preparing for retirement, particularly as healthcare costs are rising rapidly. High deductible plans have a number of tax advantages because they grow tax-free and can be used for out-of-pocket expenses well into retirement. Additionally, these HSA accounts come with many of the options and more than traditional retirement accounts and are easily moveable. Finally, these accounts have no rollover cap if funds move to an additional year.

FINSUM: HSAs are a great retirement vehicle, however, chronic investors with chronic illness should avoid high deductible plans that HSAs benefit.

Covid has forever changed lots of industries but one of the most apparent is healthcare. Incidents for the chronic and specifically geriatric population are growing at an alarming rate and will significantly benefit from an increase in at-home care. The current at-home healthcare market is around $3.2 billion but growing at a 13.4% CAGR by projections will move this to a $7 billion industry over the next 4 years. This isn’t limited to just domestic products an aging population is driving rapid growth across Europe and Asia as well.

FINSUM: It makes sense that healthcare will move more at home. Software and digital products will improve the healthcare many in treatment will have access to inside their own home.