Mutual funds offer the investor upside potential and full liquidity but are problematic in that they can rapidly rise and fall in value, thus causing stress for the retiree. Nonetheless, they should be considered as a component of a savings plan intended for use in the future and can therefore stand volatility in the short-term.
By contrast, annuities are a risk transfer vehicle and come in many flavors, including variable, fixed, equity index, SPIAs, and more. The insurance industry has become very competitive in this arena and has designed products that now allow lifetime income but do so without the owner or the recipient giving up lifetime income. With the right annuity, any unused value goes to not only spouses but also non-spousal beneficiaries.
Many retirees today are hesitant to use annuities, but annuity is not a bad word – it’s simply a risk transfer vehicle. You are transferring dollars to an insurance company in return for attributes like guaranteed principal, guaranteed rate of return, guaranteed income, or some combination.
D Bryant Retirement Strategies is an independent advisory, meaning we can select from the most attractive indexed annuities without being restricted to a short list of products. That means higher lifetime income for you through your mutual funds and annuities.
An index fund represents an entire index, and it differs from mutual funds in that it doesn’t have what could be called a “stock picker” (i.e. money manager), who selects individual stocks for you. An index fund simply reflects the movement of an entire index, whether that is in the form of large-cap, small-cap, mid-cap, etc. It usually is unmanaged, has lower fees, and historically outpaces mutual fund money managers. At D Bryant Retirement Strategies, we typically recommend index funds as the better option over mutual funds for our clients.
ETFs are a specific index fund that stands for exchange-traded fund. ETFs are traded on an exchange, allowing an active trader to know exactly what price he or she is selling or buying their index fund for (in other words, what the price is at execution). Mutual funds and regular index funds do not allow this because their purchase or sales happen at the end of the business day. ETFs are much more exacting because they are traded immediately. Because of that, they are a more favorable portfolio method. At D Bryant Retirement Strategies, we prefer to focus primarily on the ETF form of index funds.
Everyone knows stocks can decline in value. Many have watched their portfolios decline in the past and are fearful of that happening now. But many people don’t realize bonds can decline in value as well, especially since they’ve been the go-to maneuver for safer investments in the past.
Bonds offer their own set of risks, including purchasing power risk – the probability that a low interest rate will prevent increasing values, which are needed to combat inflation. Also, bonds are a debt instrument, so you’re functioning as a “banker” when you loan your dollars to an entity. That entity promises to pay you back in the form of interest, but that poses credit risks, in which the issuing entity is not be able to pay back that amount one day.
Managing your money deserves attention by the best. You need an experienced team who knows what they’re doing. The D Bryant Retirement Strategies team takes an active approach for our clients by regularly monitoring and adjusting their money investments. Our goal is to manage your money so you don’t have to worry about the future.
Investment and Money Management with Omaha Financial Advisors
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