The guys who run insurance companies must be complete fools...
Right now, insurance companies can only earn about 4% on their cash (10-year Treasury bonds pay less than 4% interest). But when you buy a guaranteed investment contract from an insurance company, they promise to pay you up to 7% a year for life.
So insurance companies are essentially earning 4% but paying out 7%. Please explain to me how losing 3% on every dollar you bring in makes sense... You can't explain it! It doesn't make sense.
Who in their right mind would guarantee you 7% a year worst case – for the rest of your life – and give you even more upside potential? Only foolish insurance companies. Here's how it works...
With some guaranteed investment contracts (also called variable annuities), you will make 7% a year even if the stock market goes down... And you can make even more money if the stock market goes up – for the rest of your life.
I saw my lifelong friend Jeff Winn in Orlando over the weekend. He deals in these products. I'm no expert here, but it sure sounds worth looking into soon. Jeff said these guarantees are starting to change... right now.
He said John Hancock, for example, started watering down its annuities a few months ago. Other insurance companies have followed. Jeff guesses that by this fall, most insurance companies will lower their guarantees down to 5%.
The insurance companies have to do this. Heck, they should have done it YESTERDAY. But they haven't... yet.
My suggestion: Take advantage of the fools... and do it quick... before the terms change. Collecting 7% for life is an unfair deal – in your favor. (If you're worried about inflation, you can often pay a little more for a "keeping up with inflation" benefit.)
These annuities can get complicated. Each one is tailored for your particular situation. So I can't say which is best – there isn't one – as your needs are different from your neighbors'.
Here are a few things to keep in mind...
· When you buy an annuity, you have between 10 and 30 days to cancel the contract. This "free look" period gives you a chance to opt out.
· Choose a variable annuity that will guarantee your payouts will never go down... but leave plenty of upside for your payouts to increase.
· Choose an annuity that will give you payouts for life, not over a fixed term. This will give you maximum peace of mind.
· Add a "death benefit," which guarantees you and your heirs get at least what you put into it.
· You can put as much as you need to cover your basic retirement expenses (after your existing pension or Social Security), but you should still keep plenty of money outside of your annuity to have funds on hand.
Again, depending on your age, your needs, and even what state you live in, your choices and guarantees are different.
Few Americans have considered variable annuities... But they're an incredibly safe solution for lifetime income. Unlike stocks or mutual funds, there's no guessing about how much income you'll have or when you'll get your money.
You can step up and secure your financial future right now by taking advantage of the insurance companies' foolish guarantees today. Do it and lock in the high returns for life... before they're gone.
You could also give Jeff a call. He's happy to answer your questions or give you a second opinion on anything you've gotten from your own broker. You can reach Jeff at 800-432-4402 or jwinn@iaac.com. Jeff and I go way back... We have no financial relationship. I've just known him for 20 years and trust he'll treat you right.
P.P.S. True Wealth readers can find my full write-up on exactly how these annuities work, eight things to look for, and a step-by-step guide on how to get started. The report is called Guaranteed Income for Life. If you'd like to check out the report, but you're not a True Wealth reader, click here for details on a risk-free trial subscription.
This week, we check in on an old friend... our "cheat sheet" on the world's economy.
Long-time DailyWealth readers know that rather than read government employment reports, we like to chart economically sensitive assets like "Dr. Copper" and Intel for a read on the economy.
For instance, back in early April, when doom and gloom dominated the headlines, we pointed to the rising share price of Intel as a sign the economy was getting "less bad." Months later, the news finally caught up with the market and said semiconductor demand was stabilizing.
Intel is our "high tech" indicator. Today, we check in with our old "high horsepower" indicator, Cummins (CMI). CMI is the world's biggest independent producer of large diesel engines... the kind that power dump trucks, bulldozers, over-the-road-trucks, oil pumps, and electrical generators. If Cummins is doing well, it's safe to say the world is building, digging, and hauling.
Back in January 2008, we flew a red flag in response to a severe breakdown in Cummins' share price. We don't have to remind you what happened later in the year. Nowadays, Cummins is more of a green flag. As you can see, the stock is enjoying classic "higher highs and higher lows" bull-market behavior. Sure, there are plenty of problems out there, but we have to mind the market... which is saying, "Let's fire up those engines and get to work."
Don't Trust the New Rally Until You See This Signal By Tom DysonMonday, July 27, 2009
Russia represents everything stock-market bulls are in love with: Growth in third-world consumption, scarce commodities, global trade, and cheap labor.
The Dollar Should... Rise? By Dr. Steve SjuggerudFriday, July 24, 2009
There's got to be some reason to buy the euro... How about because it's cheap relative to the dollar? Wrong again! And this is the one that really gets me...
This Precious Metal Is a Great Buy Right Now By Dr. David EifrigThursday, July 23, 2009
Right now, you would need 71 ounces of silver to buy one ounce of gold. This difference in value is wildly out of step with centuries past. And it's not going to stay that way...
The Last Cheap Asset Class Today By Dr. Steve SjuggerudWednesday, July 22, 2009
So the recession is over. No doubt about it. The Script nailed it. Now that it's over, you won't believe what goes up next...
