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Posted on June 16, 2017

The Correlation Between Interest Rates and Annuities Weekly Update – 6/16/17

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Many retirees invest in annuities as a helpful strategy for building retirement income.Since fixed-rate annuities can provide guaranteed payments at set amounts, retirees can more easily predict and manage their budget.And having predictable income is highly important to retirees. In fact, 85% of Baby Boomers say that having guaranteed lifetime income beyond Social Security is somewhat or very important to them. [1]

But not all annuities are created equal, and some outside factors affect their performance. For fixed-rate annuities, their distributions directly correlate to the interest-rate environment you were in when you bought the annuity.

Interest rates affect your locked-in payout amounts

When you purchase an immediate annuity, you lock in the size of your lifetime payment based on two factors: interest rates and your age. [2]

If interest rates are low when you buy your annuity, you receive a lower monthly payment. Likewise, when interest rates are high, you receive a higher monthly payment. [3] So knowing the guaranteed income you need each month against how interest rates will affect the annuity’s value is a correlation worth calculating.But remember, the interest rate alone is not the sole factor affecting how much you make in lifetime income payments.

The fact that interest rates can correlate to fixed annuity payouts brings some potential pros and cons.

– Pro: Your payment amounts won’t ebb and flow.

Once you purchase an annuity with a locked-in interest rate, you create a fixedincome amount that you’ll receive for as long as you are alive. Remember: How high or low interest rates were when you bought your annuity connects to the payments you’ll receive.So, even when interests rates decrease or increase as you receive distributions, you’ll continue receiving the same original payout. [4] This can be helpful when interest rates drop, as it will not affect your annuity income.As a result, you can plan for a predictable income amount each month that will not change, which can be helpful when managing your retirement budget.

– Con: You can’t change your annuity’s interest rate.

On the flip side, the fact that you cannot revise your fixed-rate annuity payouts could find you missing out on a better distribution rate. No matter how much you invested or how much interest rates change, you’ll carry your purchased rate for your fixed annuity’s lifetime.So, unlike investments like stocks that you can time against market performance to try gaining more value, your fixed-rate annuity doesn’t offer the same option. If you bought an annuity before interest rates rise, you will not benefit from the increase.

Overall, a variety of financial factors can help guide which type of annuity is appropriate for your retirement-income needs.As a Wealth Management firm in San Jose, CA, if you would like to discuss how our current interest-rate environment could affect annuities or your financial goals, we’re happy to talk.Please contact us at 408-227-2700.



No-Churn Black Forest Ripple

Ice Cream Easy homemade ice cream

Ingredients:

  • 12 ounces cherries, pitted
  • 1/4 cup sugar
  • 2 cups heavy cream, very cold
  • 1 can sweetened condensed milk
  • 2 tablespoons water
  • 1 teaspoon pure vanilla extract
  • 4 ounces chocolate chunks, bittersweet
  • Ice cream cones

Directions:

  1. Combine sugar, cherries, and 2 tablespoons of water in a large saucepan.
  2. Bring mixture to a rolling boil then reduce heat. Simmer until cherries break down and liquid thickens into a syrup, stirring frequently for about 10 – 12 minutes.
  3. Place cooked cherries in a bowl and cool in refrigerator for roughly 15 minutes.
  4. Combine condensed milk, cream, and vanilla in a large bowl. Beat with electric mixer for roughly 3 – 4 minutes, until you form stiff peaks.
  5. Fold the chocolate chunks gently into the milk mixture.
  6. Grab a 4.5″ x 8.5″ loaf pan or a 1.5-quart container that can go in the freezer, and add half the cream mixture.
  7. Spoon half of the cherry syrup on top of the cream mixture.
  8. Continue adding layers of the cream and cherry mixtures until used.
  9. Place pan in freezer until ice cream sets, usually takes up to 4 hours.
  10. Cover frozen ice cream with plastic wrap, and store in freezer for up to 2 weeks.

Recipe adapted from Good Housekeeping[5]


Access the IRS Resources for Your Tax Help

The IRS has a variety of online tools available to help you streamline and clarify the tax-filing process. From apps to videos and more, you can access a variety of tools for free. Here is a list of helpful resources.

  • Use the IRS App: You can find a variety of helpful resources, such as paying your refund, by downloading the official IRS app, IRS2Go.
  • Ask Tax Questions: Find the answers you need by using Interactive Tax Assistant and the IRS Tax Map.
  • Track Refund Status: You can check your refund status by using the tool, “Where’s My Refund?“.
  • Check Earned Income Credit Eligibility: The IRS tool, EITC Assistant, can help you identify if you’re eligible to receive earned income credits.
  • Pay Account Online: You can pay any money you owe to the IRS by checking out its payment options.

Other details may apply, and you can find more information on the IRS website.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Tip courtesy of IRS.gov[6]


Tap Into Your Imagination to Improve Your Putt

The ability to imagine the path your ball will take is a powerful trick. By envisioning the effect the terrain has on your ball, you can better anticipate the best path to the pin. If predicting your path on the green is challenging, here are some tips that will help tap into the power of your imagination. To do this practice, you’ll want to be within feet of the hole.

Focus on Distance

Step 1: Look at the hoIe, and imagine the place your ball will be right before it lands there.

Step 2: Place a ball 6 inches away from where you imagine the first landing. Next, place another ball a foot away from where you imagine the first landing. Repeat in consecutive intervals at a foot and a half and then two feet. Continue doing this until you land at the place from where you’re practicing.

Focus on Speed

Step 3: Envision the speed the ball will need to travel your imagined path and sink the putt. You also need to analyze how speed can work against you.

Step 4: Square yourself to the imagined line.

Step 5: Practice putting and using the right speed, by aiming for a coin or tee at the fall line. Putt in such a way that your ball arrives at your identified spot on the high side.

Tip courtesy of GolfTips Magazine[7]


Self Management Tips for Managing Varicose Veins

Completely controlling or eliminating varicose veins on your own isn’t possible. But with some self care, you can help minimize their intensity and even potentially reduce how many you develop. To do so, start following these self-care tips:

  • Start walking: If you don’t already walk regularly for exercise, consider doing so. The movement encourages proper blood circulation in your legs, which can help you manage varicose veins.
  • Be mindful of your attire: Shoes with low heels will work your calf muscles more than high heels, which is better for your veins. Opting to not wear tight clothing around your groin, waist, and legs can also help you improve your blood flow.
  • Avoid sitting with crossed legs: This position can potentially decrease circulation, a direct factor in varicose veins.
  • Add variety to long standing or sitting positions: You can increase your blood flow by changing your position from time to time when sitting or standing for long durations.

Tip courtesy of Mayo Clinic[8]


Alternative Mulch Ideas for Your Garden

Mulching your garden beds is a great way to manage a healthy yard. Mulch can control weeds, regulate moisture, and even keep bugs at bay. While mulch made from wood chips and shredded bark is common, it can really reference anything that covers your garden. Here are some alternative mulch ideas to help you keep your garden healthy and growing.

  • Wine cork mulch: Americans go through nearly 13 billion wine corks each year, many of them being thrown away. But, you can give your corks new life by using them as mulch in your garden. Corks are usually a natural material made from the Mediterranean cork oat tree, meaning the natural properties will do fine as mulch. You can either buy pre-made wine cork mulch or make your own.
  • Newspaper: Give your newspaper new life by turning it into mulch. Newspaper blocks out light, which stops weeds from growing. Only use newspapers printed in black and white, as color ink can contain some harmful chemicals. You can follow these tips to make your own newspaper mulch.
  • Yard debris: You can repurpose all your lawn clippings and plant scraps – like flowering plants – into a mulch for your gardens. And your fall leaves can also spread as mulch. Combine all this debris into an organic compost or simply spread directly onto your garden.

Tip courtesy of Care2.com[9]


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