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Flight #53, Bonds are Sexy Again, and So is Giving!
Season 1 Episode 53
Pilot News
Question From The Flight Deck:
Q: Are all annuities Crap?
A: Annuities are NOT investments; they are Insurance income products, and most of them are sold as something they are not - again, not investments! People that hate annuities compare them to investments - life insurance is used when people die. Annuities can help people that live too long or need mortality credits to decrease anxiety or smooth out the journey.
LEFP is not licensed, nor makes commissions on annuities, but we do sometimes recommend them through third parties. Find someone who does NOT make commissions on annuities but believes that they are sometimes necessary and EVEN helpful as a part of a financial plan. 2022 was the number one year of annuities sales in history.
- Contingent Deferred Annuities: CDAs, Retire One - "Constance"
- No changes in taxation – Roth IRA, Taxable brokerage account
- Remain invested in Mutual Funds, ETFs
- Turn off anytime...
A CDA acts as a sort of "risk wrapper" for your IRAs, Roth IRAs and taxable brokerage accounts, but the insurance portion is unbundled from the underlying accounts so that investments in ETFs and mutual funds may be covered. The amount of income you receive from the CDA (your coverage base) is calculated from the total of your initial investment, and will not drop below that amount, no matterwhat the markets do. In fact, your coverage base may go up, and those annual income payments can range from 3% to 6%. Keep in mind that excess withdrawals CAN impact your coverage base, however.
The CDA's income payments trigger when you need them and are paid by the insurance company for the rest of your life, even after your assets are depleted.
https://www.financial-planning.com/news/2022-was-the-best-annuity-sales-year-in-history
https://awealthofcommonsense.com/2023/03/talk-your-book-lifetime-income/
Q: Should I own bonds?
A: There are two reasons to own bonds.
- Decrease recovery time in your portfolio: TYPICALLY, (not 2022) bonds act as ballast. During a recession, Treasury bonds act as a flight to safety, plus Fed may lower interest rates which may cause bond prices to increase. See JPMorgan Chase Charts.
- It's all about the math...50% decline in your investment dollars requires a 100% increase to get back to even.
- $100,000, 50% loss = $50,000. 100% gain = $100,000.
- A 25% decline in stock prices requires
- $100,000, 25% loss = $75,000. 33.3% gain required to get $100,000.
- https://www.hughcalc.org/getback.php
- Then why would anyone be 100% equity???
- It's all about the math...50% decline in your investment dollars requires a 100% increase to get back to even.
- There is actually yield, interest now. T-Bills
- Annuities, higher
- CD, Money Market higher
- Long-term investors are better off after bond price declines and interest rate increases from 2022
Main Topic – Tax-Efficient Giving Strategies
- When to use a Donor Advised Fund - https://www.morningstar.com/articles/1039795/pros-andcons-of-donor-advised-funds
- Pros:
Published on 2 years, 9 months ago
- Pros: