Ken Himmler.com

The recession is on everyone’s minds these days. If you are retired or nearing retirement this adds to the concern and stress. I recently wrote an article about the key points you need to know about how the recession effects your retirement.

Eventhough this is a difficult time for everyone, there are tips and techniques on how to comfortably retire in the midst of a weak economy: View the article here   http://www.financialadvisormatch.com/community/articles/1115_retirement_and_the_recession_what_you_need_to_know.html

We have seen quite a bit of financial destruction and deception from the banks and the large financial institutions. Many people are starting to questions will we have the same fallout with insurance companies. Many of you know that I attended a conference in the beginning of January to learn more about the state of the insurance industry. At that time I listened to the insurance company executives talk about the problems they were going to have. Their problems were not so much centered on losing business but more of too much business. Many of these executives were worried with the crash of the stock market and the low yields on CDs and bonds people would flock to annuities in unprecedented numbers.

They were concerned with not only how they would handle the investment of all the influx but how would they handle the necessary staff needed for all the additional business. It seemed as though the general contention was to put a limit of the amount of business that they would accept. They also talked about reducing some of the benefits to reduce the amount of inflow. In the last two weeks we have now seen quite a lot of change from the insurance companies. Here is a small list of some of the changes some of the big players are making;

1) Reduction of maximum issue age they are willing to accept.
2) Reduction in the amount of maximum investment by any one person or family.
3) Reduction of the upfront bonus. Example: A certain company reduced their upfront bonus from 10% to 8%
4) Reduction in the cap on the annual earnings.
5) Reduction in the rider benefits. Example is: A certain company was giving a 8% guaranteed income rider for 10 years. They have now reduced this to 5%
6) A limit on the total amount of the business they will accept: Example: A certain company had set a limit on the amount of new money they would take in 2009 to nine billion. They hit six billion in the first three months of 2009. They are now setting monthly maximum limits. The problem with this is we just wait in line and send in the money and they may send it back because they have hit their maximum.
7) Only new money accepted. One of the costs of the annuity company is when they will facilitate the moving of money from brokerage accounts, Bank CDs, or other annuities. Some of the larger companies are now putting this task on the client and will only accept an annuity application with a physical check.

I felt it important to update everyone on this recent development. My opinion is that in today’s environment of low CD rates, volatile markets and unknown economic horizons annuities still play in important part of a pre-retirement or retirement plan.

In your lifespan you will encounter three phases. The accumulation phase, the pre-retirement phase and the retirement or distribution phase. Annuities play an important part in the pre-retirement and the distribution phase. I am still a big believer that only under certain circumstances should annuities be used for younger people – ie in the accumulation phase.
 

The government’s bailout money is not up for grabs. Large insurance companies that qualify for the government’s bailout money have made applications. So far Hartford life, Prudential and Metropolitan are some of the ones that have made the application. They may be eligible for billions that may help bolster their corporate bond positions. Most insurance companies make money on the spreads that they get from buying corporate bonds and government bonds. Just like a bank makes a spread on the money they payout on Cds and savings accounts versus the amount they charge on loans. Insurance companies make money the same way – on their portfolios.

The problem was when the recession – depression hit many companies either stopped their interest payments on their bonds or outright defaulted. This has put a crunch on some insurance companies that may have been leveraged to highly. This new seed of investment help from the government should help these companies buy up more corporate and government bonds. While it still makes sense to have insurance companies as a part of an overall investment plan it also makes sense to diversify between different companies and different insurance products. You also want to check your state to find out what the actual coverage is in case an insurance company does go into receivership. As an example in Florida the amount each person is covered for is $100,000 for an annuity contract. 

In the ancient past, people all over the world used to seek religious freedom from tyranny and oppression.  They employed numerous methods to attain their spiritual independence and achieve a state that we often call ‘Enlightenment.’  The situation is very much the same for investors today as they struggle to climb the investment ladder and attain their own financial independence. 

Investment strategies are a lot like the various religious paths of days gone by in that all of them are undoubtedly similar while employing different methods to achieve the desired effect.  Every investment strategy requires dedication and a degree of faith, which comes in the form of confidence in your own financial decisions.  Investors are like spiritual brothers and sisters who share advice with each other while walking parallel paths to the much-desired financial independence that everyone seeks.

While there is a degree of competition that exists on the stock market, investing for retirement is not a solitary path that you have to travel by yourself.  There are numerous opportunities that you can take to achieve your goal and have a comfortable retirement.  There are online internet communities that offer free investment advice, there are financial planners and financial advisors that can act as teachers and show you the way.  The investment journey of a lifetime begins with the first step, and the most important step is always the next.

As with any devotion, be it religious or secular, investing is a journey that is never truly over.  There is always a new plateau to reach.  One can never truly be at the top of the investment mountain.  There can be much satisfaction to be had when looking at all that you have accomplished and looking at what you can still accomplish in the future.  Your investment journey is never complete.
 

If you are of retirement age, you are no doubt concerned about the stability of your social security benefits.  For a lot of people, their investments only provide a portion of their income and they have to rely on Social Security to help pay their bills.  Kelly Greene of the Wall Street Journal  written an article about how she thinks the present economy is going to affect Social Security in the next few years.

According to the Congressional Budget Office, Social Security benefits are not likely to increase for the year 2010.  This announcement has caused many retirees to worry about their personal financial security for the oncoming years.  Many are wondering if the state of the economy could cause retirees to lose some of their precious benefits that they rely on to pay their bills.

Worried retirees can rest easy tonight, because Ms. Greene cited a statement by Mark Lassiter, a Social Security spokesman in Baltimore, who states that even if there is economic deflation, Social Security benefits will not be cut for the year 2010.  This is good news.

On the other hand, this is a prime example of why investing for retirement is so necessary for the future.  In the best-case scenario, a retiree is able to spend their golden years living off of their retirement savings and investments without having to fuss with the worries that accompany Social Security.  It is ever so important, especially in this era of economic instability, that people take control of their financial lives and make wise investments for the future.  Do some research, become familiar with the common investment terms used in the markets. 

I have said it before, it is YOUR money.  Let it work for you and you will be free of the worries that plague so many today. 

If you have ever done any research into the investment world, you are no doubt aware of all the benefits that come with owning a house.  For the past half-century, it has seemed the best way to calculate someone’s financial standing was to look at how they handled their housing.  For years, experts have been explaining about the benefits of investing in real estate. 

Jack Hough, a financial writer for Yahoo.com,offers a different opinion.  When it comes to investments, Jack says that it is best to pay cheap rent and invest all the money you save into the stock market.  He believes that stocks are more reliable in the long run and that investors will benefit more from stocks than real estate investments, especially during the recession.  “Basically,” he says, “houses produce poor returns…while stocks and other investments produce good ones.”

This may sound confusing at first, but Jack does have some sound reasoning for this statement.  He makes the argument that single-family homes do not actively produce income for their owners.  Houses do not constantly seek ways to increase their value independent of the families living in them.  On the contrary, houses have a way of ‘wearing out,’ which ultimately leads to depreciation in value over time.  Stocks are just the opposite.  Companies are always looking for new ways to increase their value, which ultimately spells success to stockholders who invested in those companies.

Jack lists many other reasons why real-estate investments might not be the best idea for people looking to get the most of their money.  His investment strategies are sound, and his reasoning is logical.  Depending on where you are living, it may be wise to do some research when considering the best housing option for you.  I would strongly encourage you to read Jack’s article for more reasons why renting might be your best investment option today. 

If you are like most people, you are probably a little insecure about how the current economic recession is affecting your investments.  Or, maybe you are unsure about whether or not it would be wise to invest during this period of economic instability.  While your financial concerns may be well founded, it should also be mentioned that now is the best time to be thinking about investing in your future financial security.

The stock market is at the lowest point that it has been in the past several years.  This has many wide spread implications about it, and can be quite a bit intimidating for inexperienced investors.  If you are retired or close to retiring, this could be especially disconcerting as you wonder about the security of your retirement savings.  Ultimately, however, there is no reason why you shouldn’t continue investing for the future.

Money that flows into the stock market helps to stabilize the economy and repair the damage caused by unwise investments made by big business.  Every little bit helps.  If you invest on a broad spectrum, through mutual funds and similar practices, you run very little risk of losing your entire investment as many fear.  Investing in other, low risk venues will help bolster your investments even more.

Time is not going to wait for you.  The less money you have invested, even during this economic recession, the less money you are going to make for the future.  The money that you have dedicated toward your retirement savings will continue to make money for you now will continue to make money for you through the rest of the current economic instability and into the future until you need it most.  If you continue to use sound investment strategies then there will be no reason why you would not have enough retirement savings built up by the time you get ready to retire.  Take control of your destiny and make wise investments during this recession.