When the Yield Curve is steep, this is a better time to buy annuities. The Yield Curve can be defined a number of ways but I am referring to the difference between short-term Treasury Bills (at less than 1/2%) and long-term Treasury Bonds (hovering in the 4.25% area) - the difference is considered huge.
You can expect an annuity payment (this is not the return rate, however) of about 2-3% above the long-term rate when the Yield Curve is steep like this...so about 6-7%. Again, this is not your return since some of the payment is principal (your own money).
Of-course, in the early eighties, when the Yield Curve was steep but with different numbers (short-term was 5-6% and long-term was 12% during a unique infaltionary period), an annuity payout was about 15% of what you put down.
So, it does matter what the interest rate environment is when purchasing an annuity.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.