Safest Money Strategies

As my client sat down and handed me two financial articles his eyes pleaded, "please make some sense out of all of this. I no longer want to risk losing my savings but I don't want to end up with virtually no return on it either." In essence I told him the following.

1. The bank CD is one of the safer places for your savings. I say safer because there is no place where your money is absolutely safe. Inflation can eat up it's value. Too many bank failures along with government monetary problems might effect your savings. Complete Government collapse or even a change over from the dollar to another currency could effect it. The CD's main problem is that, at least lately it has been earning very little interest. The positive is that it is very safe and it returns some interest.

2. Cash value Life Insurance: the negative is that the internal cost of insurance retards the interest return. The positives are that it can be used for savings at the same time as it provides life insurance protection and is as safe as a CD.

3. Regular fixed Annuities: The negatives of this strategy are that there are usually surrender charges if you take more than 10% in a given year ( year 1 through about year 10) and they don't have the potential for growth of more risky strategies. On the other hand They are life insurance products so the principle is as safe as life insurance cash values and they usually produce reasonable interest.

4. Fixed indexed Annuities: The first negative is that they too usually have about a 10 year surrender charge if you take out more than 10% per year. The second is that if the market goes down they will earn little or no interest. Thirdly if the market goes up they usually will not earn quite as much as the growth in the market. The positives: If the market goes down they will not lose money. They may not earn anything but they won't lose anything. second, if the market does go up they earn and lock in a portion of the market. I had a client who made 18% last year and several that made 12-14%, now locked in. That performance isn't typical but it does happen.

5. Life settlements: Many have never heard of life settlements so I'll briefly describe what they are. Many who are now seniors, at one time or another took out huge life insurance policies, maybe as an estate planning tool or to cover a debt for their farm or business. Now they are older. The estate has been settled or the mortgage has been paid. They need cash or just want cash from the death benefit value of their life insurance policy. So, they go looking for a company to buy their life insurance policy. They find one of several companies that do so and bargain with them to get as much as they can selling the death benefit. The purchasing company then allows investors to buy a portion of the difference between what they pay the insurance owner for the life insurance and the total death benefit. When the seller passes away the excess life insurance proceeds (over what was paid for the policy death benefit) are divided as previously alloted to the individual buyers. The negatives of this strategy is that your money is illiquid for a period of time, usually 2-5 years. Secondly, life settlements are not available at all in some states. In others they are only available though an agent who has a securities license. I can only speak for Nebraska where I live. They allows sales without a securities license as do several other states. The positives include a greater return on their money. The company I represent has been averaging in excess of 10% on the money placed in life settlements. The other positive is that the interest return on the invested money is as safe as the life insurance company that issued the insurance policy, as safe or safer than a bank CD.
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