Wall Street’s Latest Attempt To Create An Annuity: Bond Tents

About syndicated columnists

Syndicated Columnists is a National organization committed to a fully transparent approach to money management. Providing original content aimed at the financial market, their articles are diverse, easy to understand, and targeted to the average reader. These columnists pool and share article information to provide the highest quality experience for their readers.

Beware of bond tents that are disguised to act like an annuity

It never ceases to amaze me to what lengths Wall Street will go to with their products to make them pretend to be an annuity. Remember, all brokers want to do is make changes in your portfolio, for if they can, the more chances, the more opportunities for compensation.

It walks like a duck, looks like a duck, and quacks like a duck, hmmmmm let’s call it a “bond tent.” A “Bond Tent” is a made-up name for marketing bonds; it is a portfolio of mostly short-term in a portfolio.

The concept is this: invest in more bonds for a short period is a strategy to lower the chance of return risk. Called the “bond tent” strategy, this approach allows pre-retirees to increase their asset allocation in bonds and other more conservative investments in the 10 years before retirement, adding that retirees who use this strategy must spend down these bonds in the first half of their golden years and return to their desired asset allocation. In other words, liquidate short-term bond holding to make the retirement funds available.

Wall Street Marketing quote from the Journal: “By relying more on bonds in early retirement, the portfolio’s dependency on short-term (and unreliable) stock returns is reduced.” The downside, however, is that while an extended period of owning low-return bonds may eliminate the near-term risk, in exchange for the near-certainty of a long-term retirement disaster, as even modest inflation over the span of multiple decades can cut the purchasing power of bond income in half. http://blogs.wsj.com/experts/2016/11/27/why-a-bond-tent-can-protect-a-portfolio-in-retirement/

Here is a question, what is their desired strategy? Why not use a SPIA or the free withdrawal from an annuity and forget about bond valuation dropping as it was spent down? Better yet, how about a Fixed Indexed Annuity (FIA) with an income rider attached? Oh yeah, I forgot, how is the broker going to earn continual commissions?

This is Wall Street at its most creative; eventually, they will submit and provide their client’s annuities, that is, once they can figure out how to get paid every year. It is a “duck.”

 

LC, SD

About syndicated columnists

Syndicated Columnists is a National organization committed to a fully transparent approach to money management. Providing original content aimed at the financial market, their articles are diverse, easy to understand, and targeted to the average reader. These columnists pool and share article information to provide the highest quality experience for their readers.

View The Best Annuity Rates Available Now

Annuities are a safe and reliable investment. They can transform your savings into a more predictable income. Speak with one of our qualified financial professionals today to find out how an annuity can offer you guaranteed monthly income for life.

Our unique system of “Pooled and Shared” articles by our authors, our outside contributors, and writing assistants provides efficiency, enhanced collaboration, and greater topic accessibility. This allows for a better utilization of content and productivity while delivering meaningful content to our readers.

Content in our posted articles is deemed to be accurate but topics, facts and laws can change. It is always a good idea to verify facts before making decisions. Always seek authorized and professional advice regarding financial decisions which includes investing, annuity purchases, tax planning, changes in a financial portfolio and retirement planning.

Share This Entry:

In This Article

Protect Your Retirement

Our 20th edition of The Safe Money Guide, the standard of the industry.

Recent Posts

Archives