Arguably the most damaging effect of low interest rates is the impact it has on people approaching retirement and looking for more safety. Traditional safe havens such as CDs pay very little interest in relation to the time commitment required. And I’ll admit that selling annuities in this climate is challenging to say the least.
Several articles available have pointed to recent Federal Reserve meetings that indicate plans to keep interest rates near zero through 2014. That means we likely have nearly three years of the same issues to deal with.
The article linked here mentions all objectives behind keeping rates low for the foreseeable future, most notably an attempt to keep long-term rates low in order to spur economic investment and growth. While this may be a useful step toward reversing the economic lull of the past few years it sure doesn’t give the retirement investor a lot of options.
So, how does a person develop a reasonable game plan in this environment? For every individual there is a balance between different strategies and products available to accomplish each goal. Here are a couple of options:
Guaranteed Lifetime Income Products allow you to achieve a base level of guaranteed income in the future. By doing this with a portion of your assets your future income needs are met and additional assets can be used to pursue greater returns with less risk to your overall portfolio.
Short-Term Index Annuities allow you to keep assets safe for the time being with greater potential to outpace currently low interest rates. Short time periods are key so that you are able to reposition assets when the economic climate changes.
Secondary Market Annuities offer safe money yields that stand above historical average interest rate levels. This presents a unique opportunity to achieve substantial growth while maintaining high levels of safety.
These three options show just a few of the ways you can take positive action against the dismal conditions that exist. Just remember the idea is safety in combination with growth. The last thing you want to do is go backwards.
Feel free to call us for a straightforward talk about how you can improve the outlook for your retirement income plan.
Have a great week!
Bryan J. Anderson