Take a moment to compare Secondary Market Annuities to other safe investments in the marketplace like CD’s, Treasuries, Cash, etc.
CD’s:
CD’s are affectionately known as “Certificates of Disappointment” these days. Yields are so low that you are likely losing ground to inflation. A CD is a place to store cash for a short term- it is NOT an investment in this marketplace.
If you’re in a 5 year CD paying 3%, you should look into a 5 year short term lump sum SMA, whose rates are from 4% to 4.75%.
The comparison is clear- SMA’s pay more and cost less.
Period Certain Immediate Annuities:
Period Certain Immediate Annuities are simply fixed term fixed payout contracts, such as 20 year payment. You purchase a defined income stream from an insurance company, and they hold all the investment risk and must make the payout no matter what.
**I’m specifically NOT talking about lifetime income annuities like Immediate Annuities or Hybrid or Index annuities with riders. That’s another topic entirely explored elsewhere on the site.
Period certain annuities are what defendants ultimately purchase to fund structured settlements. With an SMA, you’re simply buying a period certain annuity, but AT A DISCOUNT.
At current market rates, 20 year period certain annuities reflect an approximately 2% effective rate of return.
With Secondary Market Annuities, a 20 year immediate income deal would have an effective rate of return between 4.25% and 5.25% depending on the deal and the situation.
The comparison is clear- SMA’s pay more and cost less.
Bonds and Treasuries:
Bonds, including Muni bonds, Corporate Bonds, and Treasuries, all carry one critical and terminal risk- loss of principal. As interest rates fall, bond prices go up…… and when rates rise, prices fall.
When buying a bond you are buying the yield. But if you need to liquidate the bonds and the rates have risen, your principal value has diminished greatly. You lose money.
Many people don’t really ‘get it’ when it comes to bonds- they think it’s safe, when really, it’s not.
Instead, consider a high yield fixed investment in an SMA. Secondary Market Annuities offer excellent yields and fixed terms.
The comparison is clear- SMA’s offer a higher yield, without the risk of principal loss.
