“I missed part of last week’s show where you talked about investing in the stock market but not losing if it goes down. I’m very nervous about my stock market funds and would like to know more, but I only caught the last little bit.”
Yes, we’ve talked about a number of ways to invest without risking loss of principal should the stock market decline. Fixed assets (CDs, fixed annuities, etc.), Fixed Index Annuities (FIA), individual bond portfolios are a few. They all offer protections and they all have pros and cons.
The one you are referencing is a platform known as buffered ETFs. These are Exchange Traded Funds that use options intended to protect investors against losses up to certain percentage amounts over a one-year period. Some protect against losses up to 9%, some up to 15%, and some up to 35%.
These buffered ETFs are relatively recent types of investments. They require an investor become educated in their pros and cons. They require a financial advisor to be very clear they are acting in the best interests of their clients when recommending such an investment.
Since this brief description cannot begin to give someone sufficient information to make an informed decision, please consult with a trusted financial advisor to explore all the elements of these ETF platforms and only invest when you’ve determined it is in your best interest.
“My 20-year term policy ends soon ($150,000 – $334 yearly). I have the ‘opportunity’ to convert to a $25,000 whole life policy for $1,400 a year. Is this a good idea? I do not ‘need’ the insurance but someone suggested it is a way to have untaxable value to my ‘estate’.
I would appreciate your thoughts.”
I think you’ve answered your own question.
You don’t need the insurance. On a strictly financial basis, I would recommend you allow your term policy to lapse. Paying for something you don’t need is a choice you might make, despite the fact that it makes little/no financial sense.
Do you wish to increase the assets in your estate by $25,000? Are you willing to pay $1,400 per year to accomplish that? Does the $1,400 fit comfortably into your budget?
If the answer is yes – convert. If the answer is no to any of these questions – walk away.
“I receive a small trust, so I have ‘extra’ income.
I’m trying to find the best way to use that resource, rather than just deposit in a savings account with the current low interest rates.
Is doubling my monthly mortgage payments a better choice? The amortization schedule shows I can pay off my 25-year mortgage in nine years and the interest savings is nearly $47,000.”
I really like the way you think.
Cutting 16 years of mortgage payments is staggeringly wonderful. Saving $47,000 is outstanding. And these are all “guarantees.” These wonderful results are not dependent on the stock market, tax laws, or honorable politicians (sorry for throwing that one in). Stay on track for 9 years and burn your mortgage!
Just for fun . . . if you’re looking for an alternative . . . and if you’re circumstances permit . . . and you’re not necessarily interested in slow and steady with guaranteed results . . . you might use these “extra” dollars to fund either an IRA or 401(K).
Consistently investing in appropriate growth assets over many (like 9+) years might give you a better financial result than paying ahead on your mortgage. And it might not.
This is a case where it’s really important to know yourself. Which would help you reach your financial goals the best?
“Isn’t holding off on Social Security until 70 the best annuity anyone can buy? It is 100% inheritable by a lesser earning spouse when you die. It bumps up 8% every year for 3.5 years for most. What annuity pays like that? No cost, sales fees, or guaranteed income.
If I spend what I’ve saved until 70 to supplement retirement, is there any flaw in my plan?”
It depends.
I always cringe when financial advice is couched in such certain terms. Everyone’s situation is unique and requires them and their advisors to examine their options carefully before making decisions that will affect them (and their families) for – potentially – decades to come.
If your circumstances permit and God grants you a long life, waiting to collect your maximum Social Security benefit starting at age 70 is indeed a very lucrative option. However, some of your statements are naïve or misinformed.
It is inheritable by a spouse, but only lasts as long as one of you is alive. Should you both – sadly – crossover when you’ve reached ages 69 and 11 months, you will have collectively received absolutely nothing from your Social Security contributions.
To assert that Social Security carries no costs or fees is, indeed, naïve at best. Spend some time understanding what the ‘public servants’ in Washington D.C. have done to the Social Security system and you may decide that the costs have been obscene.
But to follow your premise – savings to carry you through to age 70, excellent health, long life, and passing the income on to your spouse who lives an even longer life – then your thinking is perfect – for you. Just don’t paint with such a broad brush that you believe you’ve found the correct answer for everyone.
I have said many times to many people that we select our Social Security strategy based on our own set of probabilities. We will only know how wise a choice we made on the day we meet our Maker.
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