Contact Information: leonee@vzw.blackberry.net
By Edward Leone Jr. DMD MBA CFP RFC
In a previous blog, I discussed the desire of many—those particularly in retirement, to create an income flow. Of the options presented, one was annuities. There has been so much sales pressure regarding this product that I thought it worth some time to share further information. Annuities do offer life time income flows, some tax benefits and principal protection base on the financial soundness of the vendor. Annuities do also limit return potential, access to invested funds can be a problem and fees can be high. These factors must be considered before a commitment is made to an annuity product. For those who want an alternative to US Treasuries due to very low yields, products such as Pimco Total Return ETF, SPDR S&P Dividend ETF and Shares Floating Rate Bond ETF may be worth investigating based on suggestions from FA-mag.com.
It is very important for readers to be aware of the variety of tax benefits which will end as of the conclusion of the 2013 tax year. Future planning regarding the following tax benefit issues which will be eliminated must be under consideration: home energy efficiency remodels, electric vehicles, state and local sales tax deductions, IRA distributions to charities, mortgage insurance premiums, transit benefits, forgiven debt on home exclusions and the teacher class room credit.
Other bothersome issues revolve around attitudes an philosophies adopted by some central bankers. The concept that inflation must increase to grow the economy is troubling since money is a measure of value just as the number of inches in a yard stick and their value. It is clear that current central bank policies will lead to excess inflation pressures in the future which will compromise currency utility. History has demonstrated this lesson over and over again. The weak dollar policy regarding international currency exchange over past years has some benefits regarding trade balances, but has its costs regarding lack of stability in business cycles and market bubbles involving commodities and real estate. QE 2 will keep interests rates low for government borrowing, but will distort credit markets reducing capital available to business which will expand the unemployment condition. The continued government interference with the business climate in the form of tax burdens and regulation explosions will hurt economic recovery into the future. Each of these issues may appear to have a short term-benefit, but surely has a long-term cost or penalty. We need to move in the direction of a stable currency, moderated tax rates and a lesser volume of rules and regulations.
Another area of concern has to do with the pay back of principal on HELOCs (home equity lines of credit). Many of these loans are reaching the time where principal must be retired. Will this create another real estate bubble?
You the reader, may gain a sense that I am quite concerned about economic factors which impact our lives. There are so many unknowns here that future planning for individuals and family is quite challenged since the progress of acceleration in the business cycle is much handicapped in my opinion.
For The Record:
DJIA 16086.41
NASDAQ 4051.89
S&P500 1805.81
Suggested Reading: “Profiting From Monetary Policy” By Thomas Aubrey
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