Math discussion and responses

7

Christopher

5/9/2014 4:23:33 PM

1. You need to know how annuities work because many financial planners advise their clients to have them for retirement planning. Do you think that you need them? If so, then how old should you be when you buy one?

 A good age to buy annuities is between 40 and 70 years of age. It depends on the type of annuities you are looking for.  It would be a good investment so you have the extra income upon retirement in order to pay off bills and make life easier with the hope of having a retirement plan of a 401k or IRA. This is in conjunction with Social Security. By having annuities it will help with the cost of living in the ever growing expensive world.

What if you live too long?

Payments will stop at the determined ending period of the annuities. So, you have to your finances beyond that if you plan to keep at least even with the cost of living.

What happens if your investments lose money?

You should not lose money on your investments because it is protected by the insurance company to the point established on your contract.

What happens when inflation hurts your investment?

Inflation can play a major factor in planning for your future and you have to add it into the equation. If, you plan to live only on what your needs are today in 40 years it just won’t work.  If, you need $3.500 a month today then 40 years from now you should double that even if you plan to have everything paid off because inflation could make things much more expensive.

Personally, I began to plan for my retirement early in life. It started when I was 21 at which point I started working for the county and invested in my retirement.  So, at a full 30 years of employment I can retire at age 51from the county but I am also starting a Roth IRA this year to help add a second retirement plan for myself and my wife. My goal is to work until I am age 62 and then fully retire and live off my investments till who knows.

A website a found to have good information was CNN Money.

The website tells about all types of annuities and what to watch for and how to learn what’s best for you.

http://money.cnn.com/retirement/guide/Annuities/

Discussion

Sharon

5/8/2014 5:32:58 AM

Good Day Professor and Class,

1. You need to know how annuities work because many financial planners advise their clients to have them for retirement planning. Do you think that you need them?  Only if you are looking for a steady income once you retire; which most people will want.  If so, then how old should you be when you buy one? I would say between the age of 50 – 75 which is called a pension annuity.

·  What part does the stock market play in an annuity?

“Annuities today have an undeniable appeal. At first glance, they offer a way to restore some financial security to what are supposed to be your golden years. There is even evidence that retirees with regular paychecks are happier than those who rely exclusively on 401(k)s to supplement their Social Security". (Dow Jones Company, Inc. (2013).  If the stock market is doing good, then so will your annuity.

There are three questions that you must consider.

· What if you live too long?

You may be subject to taxes, higher Medicare Part B, supplemental health insurance because of your declining health.

· What happens if your investments lose money?

You can become bankrupt, sell shares or you sustain a loss.

· What happens when inflation hurts your investment?

Inflation hurts your buying power.

·  While you cannot predict the future, what directions would you take to decide on the best way for you to plan?

I would consult with a financial advisor on what type of portfolio that would fit my financial situation.

·  When should you consider making these plans?

You should start to consider making these plans around the age of 25 especially if you plan on getting married and having children.

1.      Search the internet to find an article or real-world application involving annuities that you find interesting and informative. Present this article to the class and explain why you choose the example. Include the URL for the site you used. Do not copy the text in the site verbatim. You should summarize your findings.

The article that I found involving annuities was very interesting.  Glenn Daily one of the top Financial Advisors in the country who made some valid points about annuities.  She talks about how variable annuities are very popular and advised her clients against them because the withdrawal benefits are underpriced.  She then goes on to say that if you set up a diversified portfolio with a 50% equity and 50% bond you will break even.  In comparison, if you invest aggressively, you are faced with a 15% loss with ongoing expenses of 3% per year and a surge charge of 4%. (n.d., 2008-2014).

Reference

Dow Jones. (2013). The Wall Street Journal.  Retrieved from http://onlinewsj.com

N.D. (2008-2014).  Glenn daily on buying annuities and why it might make sense to wait.

 Annuity Digest.  Retrieved from http://www.annuitydigest.com

Sharon