Variable Annuities and Municipal Bonds
Guaranteed sources of income such as variable annuities and municipal bonds are essential to the senior who wants to ensure investment payouts and diversify his or her retirement portfolio towards less investment risk. Here are the basics of choosing these kinds of bonds and annuities, as well as a quick overview on how they work today:
Variable annuities can be obtained at lower rates if you do not have much in the way of capital. Low-cost annuities such as these can give you a steady income over the rest of your life, although you will need to check if the annuity has a guaranteed minimum payment feature. The annuity works with assets invested in stock, which will curb very low payments that can happen if stocks falter. Stock market conditions can also work to the annuity advantage of the holder, as rising stock usually bumps up how much your annuities pay. Another type of annuity, the immediate annuity, can give you guaranteed amounts that are set for the rest of your life, but hold no possibility of increased payments that is, unless there is an expensive rider that adjusts for inflation.
Basic immediate annuities can require comparatively higher payments, but the fixed payments are based on record-low interest rates. Overall, some financial advisors recommend variable annuities that can be surrendered in a short period, so the combo of rising interest rates and a stagnant market still allows you to shift your cash to a better annuity without having to pay any penalties for early surrender.
Municipal bonds, the workhorse of the investors from the yesteryears, have recently been unattractive to most people because of the possible effects of the national economy (as well as the agencies, states, and local issuers) on their value. This has established a buying frenzy because rates on selected investment-grade bonds now exceed 6% despite low bond prices. Some investment planners recommend going with revenue bonds, a type of municipal bond that has the backing of public agency money. Investors and advisors alike are concerned about how creditworthy these bonds are, but as people continue to pay government agencies what is due, this issue is not as prominent.
Retirees who want to decrease their portfolio risk and add more sources of steady income to their investments should consider variable annuities and municipal bonds. Ensure that you pick your bonds from a stable issuer and your annuities from a reliable provider to diminish the chances of investment loss.
About the Author:
Katherine Smith is an author who specializes in financial topics concerning seniors. Puritan Financial Group gives seniors ways to obtain more substantial retirement profits from municipal bonds. For more information on how Puritan Financial Group can help you, please visit our website at http://www.puritanlife.com.
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