My Comments: I have a relationship with a company in San Diego that is my source for new ideaa and products that fall into the category of Long Term Care and other insurance products that are appropriate for many of my clients.

Each week I get an email from them with a Thought of the Week and from time to time, that thought is well worth sharing with whomever it is who reads my blogs. I KNOW as least several people who do.

Here is what arrived this week with minor editing. Many people these days are concerned about where their money is going to come from 10 – 15 – 20 years from now. This describes a potential source.

From Gene Pastula, CFP

We create dozens of SPIA (Single Premium Income Annuity) illustrations per week but only about 1/3 ever get placed in the clients’ portfolio. Having observed this for a few years now and spoken with many advisors, I have come to the conclusion that it is the advisors who are “waiting for the rates to increase”. In the meantime, their clients are receiving less and less interest or accepting more and more risk than they would like.

The typical SPIA is providing a 6-8% annual income, 70% +/- of which is tax-free. That’s better than bonds and will last a lifetime. It’s a personal pension the give the client the most secure, predictable income from any of the assets in the portfolio. And if you are one of those advisors waiting for rates to go up, keep in mind that increases in interest rates have only a partial correlation to SPIA rates since a high percentage of the income is from principal. The way to get the most total money from the SPIA is to start early and live a long time. Waiting for rates to increase just reduces the total time they will receive the income.

Regarding those Variable Annuities; with the expenses and the portfolio restrictions, you cannot be seriously proposing them for competitive growth if you are also including the guaranteed role-ups and income riders. Index Annuities have the same rollups and guaranteed income for half the cost or less and the client will never see their portfolio go down.

Do you wonder why variable annuity sales are down and index annuity sales are up? Clients are buying the same guarantees you sold them in VAs but prefer the assurances of safety of their money that Index products provide. Call Josh and he will answer your questions.

By the way, the Fed met recently: They are going to continue on their path till unemployment hits 6.5% and inflation slows to 2.5%. They predicted no change in rates till 2015. Then what; you think they are going to jump rates to 6% and destroy all the bondholders in the country? Come on!