Financial Idea's Blog

All Annuities Are Bad, Right?

This is a tricky one for most people, and for a couple of reasons.

One is that people like Suze Orman tell us that they are bad, and therefore they must be. Keep in mind that Suze Orman used to have a federal license for the securities industry, and that she let it lapse. The reason for that only she knows, but one characteristic of having such a license is that you are obligated to tell the objective truth or face possible civil or even criminal charges while perhaps even being barred for life from the industry. If you’re not licensed, you can say whatever you want within 1st Amendment rights. Why she says it is a different story which I won’t speculate on.

A second reason this is tricky is because many of them really used to be bad. While it’s not an absolute rule, it’s true in many cases that annuity contracts written prior to about 2003 lacked some of the really great features that are now available. We’ll get to that in a second.
A final reason comes down to how a professional advisor explains them to you, and whether they fully explain the four basic types of annuities, so that, if one is appropriate for you, you’ll know which type best fits your needs.

So, what is an annuity basically? It is an insurance contract, written by an insurance company, and like with most insurance policies, the company is betting that you won’t live as long as you think you might. This insurance contract guarantees either a specified amount of money which will come to you every month for the life of the contract, or it guarantees a minimum income or a minimum withdrawal which you could, but don’t have to, take every month. The contract runs typically for your life and the life of your spouse, but that’s just one of many choices. You could choose a reduced benefit if only your spouse remains, or no benefit, or you could Read More …

Technorati Tags: annuities, annuity, Retirement

What’s Wrong With Getting A Big Tax Refund?

The obvious answer here seems to be “nothing”.  But actually, it’s a big something.

I know many people who tell me that getting a big tax refund is actually a part of their “budget”, because it means they know that every April they can take a family vacation or upgrade their big screen TV or pay off some more debt or whatever it is in their case.

The first bit of honest truth is that these people don’t have a budget.  A budget is something you create and live by, with periodic adjustments, which is intended to keep you living within your means and actually saving and investing for your future as well.  It doesn’t allow for splurging without planning.

(On that note, before you all click the back button in disgust J, it is still possible with a budget to take a family vacation and upgrade your TV, you just have to plan for it and allocate a bit each paycheck instead of getting wild and crazy every April!)

Last off topic bit about budgeting, make sure that whatever budget form you use, that it starts with you putting down your Gross Income at the top, and the VERY NEXT THING should be how much you can save and invest.  If that is 10% of your gross income, you have a pretty good chance of reaching some of your goals.  If it’s 20%, you have really good chance of reaching all of your goals.  After that comes taxes, housing, insurance, utilities and everything else.  Most budget forms have taxes and such right after income, with saving at the bottom.  That says “save whatever is left over”, while the message should be “pay yourself first.”  Ok, I’ll get off that soapbox for now.

Why don’t you want a big refund?  Simple, because Read More …

Technorati Tags: tax deduction, tax rebate, tax refund, US finance