Many conservative investors choose Certificates of Deposits (CD’s) as the go-to safety component of their portfolio. However, we are in uncharted territory in recent history with interest rates being at sustained, historic lows. This environment has made finding safety and decent growth potential the hardest it has ever been. For short duration (three years or under), CD’s are still a good option for a high degree of safety and guaranteed return. To get that guaranteed rate of return, you need to keep your money with the institution you purchased the CD with for a set period of time. If you take your money before that set amount of time, you may have to pay an early withdrawal penalty. Fortunately, when you look at longer term lengths (three and five years), there are better investment options available. Fixed annuities act much like a CD and have guaranteed rates of return for a specified period. They are tied to the low interest rate environment as well, but the three and five-year time frames are paying on average .5% to .9% higher than CD’s, depending on the company. Some companies will give slightly higher interest rates if you put in a minimum amount, i.e. $250,000 or more. Fixed annuities are backed by the strength of the issuing company, and the more risk you are willing to accept i.e. the companies rating, the higher interest rate you will be able to get. When we look for options for our clients we like to look at B++ or better on the AM Best ratings scale. Just like banks, insurance companies have to protect themselves against investors taking money sooner than anticipated. CD’s have early withdrawal penalties and annuities have surrender charges, which are calculated as a percentage of the value at time of cashing in. Unlike CD’s, some fixed annuities will allow you access to some of your money without penalty. For instance, some companies… | Read More »
Snapple Fact #945 caught my eye during a recent Spring Break family road trip: The Inca built the largest and wealthiest empire in South America, but had no concept of money. I find this aspect of the Inca Empire both fascinating and admirable. At Winch Financial, though we work as money managers, our definition of wealth has always transcended the accumulation of finances. We encourage our clients to build a rich life through careful tending of their relationships, joyful accumulation of memories, generous sharing, community involvement, and healthy lifestyle choices. To maintain that rich life, and to extend it through generations, of course we advocate a well thought-out financial plan that is adjusted frequently to match retirement goals, risk tolerances and time lines. We’re also strong proponents of tactical investment management to protect and grow the assets you’ve earned. But we know that a fulfilling life involves so much more than money. We encourage our clients to nurture their spiritual, creative, physical and intellectual lives as well. Want to feel rich? Take a grandchild to lunch. Volunteer at a shelter. Plan an outing. Call an old friend. Take a walk on a sunny afternoon. Say a prayer. The Incas built an empire that lasted more than a thousand years without any monetary or bartering system at all. It might be time for us to think about making money less a focus in our lives too.