The ‘New’ Investment Pyramid: Think in Reverse to Move Forward
The idea of an investment pyramid is based on building the foundation (the bottom) the middle (some risk but higher reward) and the top (high risk and high reward).
The concept is simple, build your base and add the other portions as you work to gain your financial goals. That is the way the investment guys teach it, and for many, the concept has worked. For me I prefer a different look, I prefer to stay at the bottom and enjoy the no risk and lower reward investment options.
The foundation is built with no risk and lower yielding investment options such as US Treasuries, bank CDs, insurance company annuities and other safe products. As the pyramid grows, more and more risk is assumed and with it should be expected more yield.
Here is where I disagree with the pyramid, I want to stay with the safe and secure portion of the pyramid and to help offset the lower yield I will add options such as income guarantees. By using the safe and secure portion combined with income options offered by annuities I can fulfill my financial objectives without the exposure to risk. Successful financial planning is really about income and how to maintain enough cash flow to overcome the future demands of life. By staying with safety, I can realize my goals without the added burden of risk.
Some available options can include:
Life Annuity with a Guaranteed Time-Period:
This insurance company annuity option provides you with a monthly income for the guaranteed period elected and after that for your remaining lifetime. The period selected may be 5, 10, 15, or 20 years. If you should die before the end of the guaranteed period, the insurance company will pay the remaining guaranteed payments to a successor beneficiary or your estate.
Life Annuity with a Refund: This insurance company annuity option provides you with a monthly income for a guaranteed period and after that for your remaining lifetime. If you should die before the total of your annuity payments equals the annuity’s purchase price, the insurance company will pay the difference to a named beneficiary.
Joint & Survivor Annuity for Life:
This insurance company annuity option provides you and a 2nd person with a monthly income while both of you are living. Upon the death of either one of you, the income will continue during the lifetime of the surviving person.
Thinking of your investments not as a pile of money but as an income stream and allowing the use of available options offered through insurance company annuities can provide you with reaching your future goals without exposure to risk.
Consider staying at the bottom of the foundation portion of the investment pyramid with your important retirement money.