Roofs are one of those things that keeps coming up when I talk with people about home insurance in Texas. This is because roofs impact homeowners and home buyers in so many ways: they can cause the home insurance to cost more, cost less, or impact it in how a weather related claim is paid (see http://50.87.248.161/~wiseinsu/home-insurance-roofs-impact/).
Discovering you’re going to have a baby is one of the most exciting things ever experienced. It may seem like the day will never arrive, but the time passes very quickly in getting the nursery ready, picking out names, getting clothing, finding the right stroller, and beginning to plan what hopes and dreams you have for your son or daughter.
Texans have paid among the highest rates for home insurance for at least the last ten years. Jockeying with Texas for the state with the highest rates have been Florida and Louisiana, while Oklahoma and Washington D.C. have rounded out the top five.
None of us lives forever, but our presence in social media may go on forever after we take our last breath. Planning for what we want the end of our life encompasses many things; wills, medical directives, HIPAA releases, cremation versus burial, and even what kind of a ceremony we may want. I’d like to add one more item to your list, what do you want to happen to your digital assets?
There are two broad types of coverage which can be included in a car insurance policy. Coverage is available to protect you from financial loss if you’re involved in an accident and it’s your fault. Coverage is also available when you’re involved in an accident and it’s not your fault. The first is required by Texas state law, the second is strictly an option.
Last week was National Fire Prevention Week. While the number of structure fires is down by 10% from 2013, there were still over 1.3 million fires reported, or one every 65 seconds. Every 2 hours and 42 minutes, a person dies from a fire, which is up by 13.5% in 2013. There were over 3,200 fire deaths last year, of which, 3 out 5 may have been averted had there been a working smoke alarm in the home. Even where smoke alarms were present, 23% of all home fire deaths were attributed to smoke alarms that didn’t make a peep.
Two huge data breaches made front page news in the past two weeks. Home Depot discovered its systems were compromised in September exposing the data of 56 million credit and debit card holders. The good news, at least for now, is there’s no evidence the personal identification numbers for customer debit cards were compromised.
The straight line winds that struck Dallas last week sheared limbs from trees and blew a lot of trees over. Some had their trunks snapped while others were simply pushed over exposing their roots by the 75 plus mile per hour winds. When the trees fell, they landed harmlessly on a person’s yard, or they landed on the homes they shaded, cars parked in the driveway, or other structures. Seeing the destruction a tree can cause, I was reminded of a claim I saw early in my career.
A storm rolled through Dallas last Thursday with straight line winds between 75 and 90 miles an hour. The rain fell sideways and the wind snapped tree limbs, toppled trees, and knocked out power to 300,000 homes and businesses. 85,000 homes and businesses were still without power as of late Saturday.
Annuity Considerations
Last week, I wrote a post introducing the two basic types of annuities, deferred and immediate, as well as the two ways they can be structured, fixed or variable (see http://50.87.248.161/~wiseinsu/introduction-annuities/). The big question is, are annuities right for you? Some financial writers, bloggers, and advisors hate them, others sing their praises, and yet others are more in the middle. With that in mind, let’s examine what you should consider before buying an annuity.
Fixed Annuities: One of the advantages of a fixed annuity, is that it provides a steady income stream in retirement, you know exactly what you’ll receive each month for the duration of the annuity. There are, however, a number of things you should consider before buying one on that basis alone.
We are currently enjoying relatively low rates of inflation. If inflation begins to rise at a steady rate, it will eat away at the buying power of your steady income, meaning you’ll be able to buy less with each dollar you’re paid. This is the same dilemma many retirees are facing who rely exclusively on social security income.
If interest rates go up, will you be able to take advantage of the higher interest rate or will you be locked in at the current lower rate? If you’re locked in at the lower rate, making a change could subject you to surrender charges which would take a huge bite out of the money you’ve invested in the annuity. If you’re able to adjust to the higher rate, it’s important to know when you may take advantage of them, how frequently this can be done, if there are any fees or expenses that will be charged for the change, as well as any other stipulations that may come back to bite you.
There are some companies advertising fixed annuities offering up to an 8% interest rate. Before buying one, find out if the interest rate is for a year or some other term. Look closely at the fees too; a bigger interest rate usually indicates higher fees and expenses.
Variable Annuities: One of the advantages of a variable and equity index annuity, is that when the market rises, as it has for the past few years, your annuity grows with it. As the market declines, so does your annuity. There is a higher risk / reward aspect which should be examined to ensure it fits with your financial personality.
Variable annuities usually have higher fees and expenses associated with them than fixed annuities, and in many cases, than comparable indexed mutual funds. In a recent Dallas Morning News article by Scott Burns, indexed mutual funds were earning almost 2.5% more with fees averaging half that, or lower, than comparable variable annuities.
In addition, some variable or indexed annuities will have participation fees. In return for guaranteeing a minimum return if the market takes a severe downturn, they impose a cap on the maximum return you can make. For instance, if a similar mutual fund were to earn say 14% for the year, your annuity would be capped at somewhere between 8% and 12% with the insurance company holding onto the difference.
In both cases, survivor and death benefits should also be closely examined. For married couples, what happens to the annuity when you or your spouse dies? Will they be able to receive income from the annuity? Will it be at the same or a lower monthly amount, or will it be paid in a lump sum similar to a life insurance policy? Are you able to leave any unused funds to your heirs or will this go to the insurance company?
Based on these considerations, I do not recommend annuities as an exclusive retirement vehicle for anyone. I believe better returns are available with lower fees in mutual funds, and that a steady income can be achieved with a couple of rental properties. That said, I also believe an annuity can provide one of the pieces of a sound retirement strategy.
What do you think? Share your thoughts, questions, and opinions with us in the comments section of our blog or on our Google + and Facebook pages. I’d love to hear from you!
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