Our throwback this week is to a newsletter Nancy wrote at the end of summer thirteen years ago. That August in 2004, NASA launched it's Mercury probe, MESSENGER, which became the first spacecraft to orbit the planet closest to our sun (though it was a seven year journey to reach Mercury). Now, in August of 2017, many people in North America will be in the path of a total solar eclipse (though this will be much shorter than the Mercury probe's journey--less than two minutes). Enjoy this look back in time!
I'm a "what if" kind of person. When I pack for a vacation, I'm always thinking "What if?"
What if it rains? What if it turns cold? What if we want to go to a nice restaurant? What if we go rock climbing?
I don't just have a Plan A. I have Plans A, B, C, and D. My thought processes look like a complicated decision tree with numerous branches to cover any situation.
I hedge every step of the way, always looking ahead and planning for an entire set of possibilities. When I noticed my neighbor's tree was dead, I called my insurance agent to determine a course of action. No, the tree had not fallen, but it might. And it might fall on my house. I had to be prepared.
I think this all comes from my aversion to surprises. I can handle anything, as long as it is on my list of "the expected," but I come unglued when the surprising happens. I try to anticipate the curves which life can throw and have a plan for how I can handle each one.
Of course, I'm reminded of the joke... Do you know how to make God laugh? Tell him your plans.
With one year CDs at less than 2%, investors are looking for ways to beat these numbers. Many are turning to fixed annuities.
Annuities were designed for people in high tax brackets who could afford to lock up their money for a long time. This does NOT fit the profile of most senior citizens, but they are the market that insurance salesmen target. Many annuities have insurance policies attached to them, and fixed annuities are the only type of investment offered under an insurance license.
Annuities entice many with the promise of fixed payments, but this comes with hefty surrender charges which prevent you from getting full use of your money before 7 to 9 years. Annuities are expensive, with some of the higher commission rates out there. Annual mortality and expense ratios add to the expense of ownership.
Many companies offer "teaser" rates to pull in investors. Rates are, typically, reset each year, so these teaser rates will go away.
Guaranteed rates, fixed payouts, and an insurance package make annuities seem like the perfect answer. But, the surprise comes when you need to tap into the money. You're better off sticking with Plan A!
--Nancy's New Perspectives Newsletter, Volume 37, July, August 2004