My Purchase Structured Settlement

Not surprisingly commission based salesmen have favored the annuity indexed investment funds over all others because of their commission value, not the return they provide the consumer.  The presentation of the indexed based annuity gets the most practice because it pays them the most, not because it’s the best for you.  A lot of people are fooled into the pitch thinking the returns will be almost guaranteed because they are based on the index.  What most people feel mislead about is the actual place the returns are based on.

If you are getting confused do not be, we are going to take a look at a few basic facts about indexed based annuities.  Equity indexed annuities fail to include the dividend gains.  The dividend earnings have made up almost half of all the common stock earnings in the last fifty years.  The gains you would have made in the stock earnings are actually capped, preventing you from gaining as much as you would otherwise.

Equity based annuities are by far and away the most heavily penalized when it comes to taking your money out before the predetermined maturity date.  Money is therefore taken out of your pocket and withheld by the insurance company so they can meet their own margins.

Any time you are making a purchase based on commission sales it is important to know if there are different commission percentages for different products as this will often times affect what you are being sold, this is the case for equity indexed annuities.

While four or five percent are normal commissions these annuities offer the salesmen in excess of ten percent.  When you know the normal commission rate is five percent and you are being charged ten, you know something is up.  The sales guys are so adamant about selling these because they are what is in their best interest not yours.  You bottom line could really see some improvement in these investment types if so much of it weren’t going to the salesmen.

Al lot of people fell they were done wrong by their annuity provider and wonder why they were sold such a shoddy investment.  If you type ‘class action lawsuit’ and ‘equity based annuity’ into google you will find enough results to see a clear picture of the way these investments always seem to pan out.  I would rather purchase structured settlement than have to deal with all the smoke and mirrors of an equity based annuity.

At this point I am assuming you understand the importance of getting out of debt and building a small savings account in addition to an emergency fund.  So the next steps to building wealth is investing and here are some small introductions to investing and building wealth.

Invest 15 % of your household income into Roth IRA’s and pre tax retirement as a way to begin the investment portfolio.  If you invest more than that you won’t have enough to complete the next two steps.  Many people don’t make this investment because they want their cash to go towards college or to pay off the house but your kids college fund won’t feed you at retirement and what good is a paid off house you have to sell because you have nothing else to live on?

College savings plans are often the most common goals among parents many of whom didn’t go to college themselves, so start with a plan and know how much you will need.  You need to calculate what you need to save per month to hit your goal with 12% interest, that way with 4% inflation you are ahead of the curve by 8%.  Never save for college with insurance, savings bonds, zero coupon bonds or any type of prepaid college because those accounts average interest rates so low that you won’t ever earn enough.

The most recommended funds are Education Savings Accounts and 529 plans because of their safety and return.

Paying off your home can be done and you will use all the left over extra money to go into the mortgage.  If you are asking yourself where all this extra money is coming from you should already be out of debt with your small emergency funds in hand and only have fixed expenses, home, utilities, food, gas etc.  So anything you can do to lower those will help your financial goals.  So if you make $55,000 a year you take home about $3,300 per month.  If you are debt free then $900 should go to retirement accounts, leaving you $2,400 for expenses and mortgage.  If you can’t take $2,400 and pay all your expenses including the mortgage and still have $500 left over than you missed a step or your house is too big.  If retirement is right around the corner than consider or even purchase structured settlement.

Saving money is a life strategy and if you aren’t on the boat because you want to keep up with the Jones than you will deserve whatever you get in the end.

There are a few things you can do to increase the interest you are earning on your savings account.  First off let us talk about what kind of account your money is being saved in.  A typical savings account attached to your checking account will offer you less than 1% interest, so even on $50,000 you only make $500 a year in interest.  That may or may not sound like a lot but if you invested that in a mutual fund for the same year you would earn ten times that.  It is not really wise though to have all your liquid cash for month to month or quarterly expenses tied up in a mutual fund, and thus high interest savings accounts were born.

The first thing you need to consider is how often you will want to have access to the cash.  The less often you need the cash the higher the interest you earn will be.  For example you can earn four percent or so on a CD which is a certified deposit.  The bank will require you to leave the money alone for three months at least, if not you won’t qualify for the interest you earned.

If you don’t need the money for a few years or say you have a small seed amount you want invest now to pay for a family vacation when your kid turns 16, or what is more likely you will have an investment goal for when that kid turns 18 – college.  So you start with a few thousand and invest it in a mutual fund rather than a savings account, this way the risk is hedged but still around ten percent, which is two to three times as much as what you would get in a regular savings account.

Then there are the rest of us who just want the best way to invest our cash but still have access to it.  Here is the plan, enroll in an online savings account from ING or any other internet bank and have your paychecks deposited into it, then just withdraw any of the money you need into your regular checking account, its super easy.  What this allows you to do is benefit from a four percent or higher interest rate on all your savings, and still withdraw what you need.  Internet banks are the best place to get a high interest savings account because they don’t have the same overhead costs as your local bank.  If you are looking for other investment options consider purchase structured settlement as a way to go.