Is It Time to Consider Inflation-Protected Annuities?

The guaranteed payments that annuities offer can help protect investors from troubled times, providing the value of the annuity isn’t being whittled away by inflation.

Many economists are worried about inflation. The Consumer Price Index (CPI), a widely used gauge of consumer spending, decreased 0.3% in May 2012, and core inflation (which eliminates volatile food and energy costs) rose 0.2%. For the one-year period ending May 31, 2012, the CPI rose 1.7% and core inflation rose 2.3%. That places core inflation above the U.S. Federal Reserve Board’s target of 2%.

Inflation can be problematic for annuity owners. That’s because the annuity payouts are dependent on interest rate levels at the time the money is invested.

One way to address this problem is to invest in an annuity that adjusts for inflation. Some annuities raise payments based on changes to the CPI; others raise payments by a fixed percentage per year; and still others increase payments only if interest rates rise by more than a certain percentage by a certain date.

While this may be appealing to many investors, there are downsides to inflation-protected annuities. First, inflation protection can add to the cost of the annuity. Second, inflation-protected annuities may offer lower initial payouts. Third, annuities that increase payments when inflation rises often also reduce payments when inflation declines.

Investors may therefore want to consider other ways to address this problem. One option: Consider investing in several immediate payment annuities at several points in time; this allows you to potentially capture different interest rates. Another option: Invest part of your assets in an annuity and part in stocks and bonds.

Of course, deciding which approach makes the most sense for you depends on your individual financial situation and tolerance for risk; we can help you make the choice that’s right for you.

Annuity guarantees rely on the financial strength and claims-paying ability of the issuing insurer. The IRS may also impose a 10% penalty on withdrawals prior to age 59 ½, depending on the circumstances

Smarter Smart Phones Usher In Cashless Society

Sick of lugging around cash? Don’t worry. The cashless society is just around the corner.

Thanks to smart … and smarter … cell phones, the days of wallets, cash, even credit cards may soon be over. Already customers are flashing their phones to purchase lattes in some Starbucks locations or lumber at Home Depot.

A survey by Washington-based Pew Research Center asked 1,000 technologists and social scientists about the wallet’s fate in 2020. Two-thirds felt both cash and credit cards will have disappeared by then, to be replaced by smart devices. In fact, even now, smart phones hold all the information we need to transact business: payment methods and identification.

Naturally, companies are anxious to transition to the post-cash economy. Both Visa and MasterCard now offer wireless payment options, and the government of Canada is moving away from plastic, as it plans to stop issuing social insurance cards in March 2014.

Meanwhile, Square, Inc. (www.squareup.com) has found a way for small merchants, such as the local hot dog seller or a dog walker, to accept credit cards via a smart phone.

The downside, of course, is concern about privacy and security. The Pew survey found that one-third of respondents felt consumers would worry about the security of their transactions and the misuse of personal data, as advertisers will be able to fine-tune their pitches to customers already predisposed to buy. 

Fixed Annuities May Provide a Bigger Payout

With a fixed annuity, you make a payment to your insurance company and you then receive a “set” or “fixed” payout. While many investors like the idea of a guaranteed income stream, for others the “fixed” part seems just a little too rigid. But that’s not necessarily the case.

All annuities operate in essentially the same way: You sign a contract with an insurance company. You pay the insurance company, and the insurance company then makes payments to you at regular intervals either for a specified period of time or for your lifetime.

From there, annuities differ dramatically. Some annuities have variable payouts, meaning they’re dependent on the performance of a portfolio of assets. Some investors, particularly those nearing retirement and needing some stability, don’t like the sound of a variable payment. Instead they opt for a fixed annuity, which provides a set income.

A fixed annuity payout may seem meager when the stock market is rising and investors with variable annuities are receiving greater payouts. However, fixed annuities may not be as fixed as they sound. For example, some fixed annuities are now available with payments that rise to adjust for inflation. Other fixed annuities allow an investor’s heirs to continue to receive payments if the investor dies earlier than expected.

We can help you determine if a fixed annuity is right for you. If it is, we will also be able to advise you on the appropriate balance of income and flexibility for your financial circumstances.

Annuity guarantees rely on the financial strength and claims-paying ability of the issuing insurer.  The IRS may also impose a 10% penalty on withdrawals prior to age 59 ½, depending on the circumstances.

Gas Prices Rising? Don't Worry - Start Biking!

If there was a simple way to be happier, more active and save money all at once, would you do it? These days you can’t surf your favorite news site without encountering a study showing that those who have chosen bikes over cars are happier and healthier.

The New Economics Foundation, a British-based think tank, has reported that “studies comparing the experiences of commuting by bicycle and car report that cyclists find their mode of transport at least as flexible and convenient as those who use cars, with lower stress and greater feelings of freedom, relaxation and excitement.”

A survey of Portland, Oregon, businesses found that bicycling is the fastest-growing mode of transport for downtown employees’ work commutes, and Canadian researchers found that 66% of people who commute by walking or biking are very happy with their commute, compared to 25% of transit users and 32% of drivers.

But the benefits don’t stop there. By biking to work, you avoid being stressed out by gas prices and, of course, you’re “doing the right thing” environmentally. If you think bike commuting is right up your lane, here are some tips to help you start:

· Ride a bike specially designed for commuting.

· If there aren’t designated bike lanes, stay to the right as much as possible.

· Take the flattest route. Plan it out at www.mapmyride.com.

Summertime…and Outdoor Living is Easy

Summer is back, so what are you waiting for?  Whether it’s the best foods to grill, the comfiest furniture to lounge on or the perfect backyard setup, here’s to getting the most from summer 2012.

The Barbecue

One of today’s hottest trends is stuffed burgers. Create your own by forming patties around fillings like cheese, bacon, even chutney.

Try this restaurant trick at home. Add mesquite or hickory wood

chips to charcoal to add a subtle smoky flavor to meat.

Grilled pizza can become your new go-to dinner. Make or buy your

dough, add your favorite toppings and throw it on the barbecue.

Outdoor Living

As long as local regulations permit it, add a fire pit to your outdoor living space. There’s nothing better than inviting a few friends over on a Sunday evening for a nice, relaxing evening by the fire.     

Outdoor pillows look great on your wicker furniture or patio set. Better yet, they make great floor cushions. You can get them in fun, bright colors and materials specially designed for the outdoors.

They don’t call it an outdoor living room for nothing. Jazz up your backyard space with fun accents. Raid your living room for decorative planters and mirrors. Don’t forget bright linens and unbreakable tableware and glasses for the outdoor dining room.