Guest Post: Is Investing In Annuities A Smart Idea?

The world economy is yet to recover from the overwhelming effect of the recent financial meltdown. Consequently, everyone but the most sophisticated investors is apprehensive about venturing into the wildly fluctuating and volatile financial market. Under the circumstance, annuities have become important due to the safety they offer to common people. However, annuities can be a tricky proposition and are certainly not for everyone. Let’s discuss in detail.

What are annuities?
Annuities are basically income generated from capital investment. If you buy an annuity then you either need to pay a lump sum or make a series of payments to the insurance company. In return the company agrees to make periodic payments beginning immediately or at some future date. Annuities can be of various types like fixed, variable, immediate, deferred etc.

Why should you consider annuities?

• Most annuities are lifetime contracts which mean you would receive paychecks as long as you live. This will give you peace of mind because you need not fear that you will outlive your income.
  
• Inflation can have a devastating effect on your finances. Fixed annuities protect you from inflation. The money you receive will keep up with the cost of living. This assurance of safety comes for a price though. Either your starting payments will be low or the initial investment cost will be higher.
  
• One of the best features of annuities is principal protection. It is guaranteed that you or your successor will get back at least the amount of money which you invested in the annuity. To ensure this it is obligatory for the companies to keep cash reserves. Many states have a guarantee fund of $100,000 in case the company becomes insolvent.
  
• IRS code 403(b) states that if you are an employee of an educational institution, non-profit institution or self employed minister then you can use your wage to contribute to supplemental retirement accounts called tax deferred annuities. Most annuities are tax deferred in nature. This means that you don’t have to pay taxes when you invest in a tax-deferred annuity. You will
  be charged only when you start receiving payments from it.
  
• Annuities are virtually life insurance policies. So you can nominate beneficiaries. Also, probate can be avoided when beneficiaries are declared.
  

What are the disadvantages of annuities?

• Annuities trap your money for a long period of time without offering any choice of withdrawal. Forcible early withdrawal will result in a 10% penalty being charged by the IRS. So if you are a young man then deferred annuities might not be the best investment option for you.
  
• The safety offered by the annuities comes at the price of low returns. Annuities are surely not the right choice for you if you are dreaming to become rich quite quickly. By investing your money in fixed annuities you forgo the opportunity to earn more by investing in assets that fluctuate in value. This is where bonds and mutual funds have an advantage over annuities.
  
• Many financial experts opine that annuities are not flexible as investment vehicles. If you have some extra money to invest then you have to purchase a separate annuity. It cannot be added to the existing annuity.
  
• Annuities are extremely intricate things and it is very important for you to understand them really well. Otherwise, you might end up purchasing the wrong annuity which will not at all serve the intended purpose.
  
• Annuities can be costlier than other similar investment options owing to the fact that they are insurance products sold by insurance companies.
  

Annuities are often effective as a supplemental retirement program. They can be a quite reliable investment option for old people. However, they have some serious drawbacks and are not very suitable for young investors. So keep in mind the above points and consult a financial advisor before you try your luck with annuities.

About the Author
This guest post was written by "David Brown". If you are interested in writing a guest post, please contact PF Stock at the Email address listed in the sidebar.

Disclaimer: The information provided here is not meant as tax or investment advice. I encourages readers to consult with a tax or financial adviser if they have specific questions about investing or annuities.

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PFS

Guest Post: 5 Smart Tips to Stick to Your Personal Budget

We human beings have never been too comfortable with the concept of budget. Living within restrained finances surely doesn't look like a very lucrative proposition to us. However, we must grudgingly admit that budget can play an instrumental role in helping us to maintain financial stability. Budgeting is a great vehicle to avoid scary things like debt. But remember that sticking to your budget is far more difficult than making a budget. Here are some tips that will help you to follow your budget:

1. Motivation plays a big role when it comes to sticking to a budget. If you don't know why you are on a budget or you don't have enough motivation then you are bound to deviate from your budget sooner than you imagine. It will help if you write down your reasons for being in a budget. Are you trying to pay off your debt? Is budget your tool to build a secure future? Have a glance at what you have written whenever you are tempted to spend more. Remember the consequences if you don't follow the budget. Surely you will get the much needed fuel.
   
2. Stay away from credit cards. Remember that there is no such thing as responsible use of credit cards. It will be virtually impossible to stay within the budget with credit cards beckoning you to spend what you don't have. Moreover, the interests and fees charged do not help you at all. You might consider keeping credit cards in places which will not remind you about them easily. However, use of credit card may be inevitable at times. In that case you should plan the expenses in advance. That would stop you to buy impulsively which can certainly result in unwise spending.
   
3. Budgeting does not mean that you need to live a miserable life. If out keep out expenses like watching movies, picnics, dates etc. then your life will be no more than a rudimentary existence. Sooner or later you will drop your budget and will be back to your normal life. Your target should be to eliminate regular expenses like eating out on a daily basis etc. Remember that budgeting without fun is not a practical thing because you won't be able to live up to it.
   
4. Make sure that you are not the only person in your family who is on a budget. It will make no sense if you are saving money with your life but your family members are spending with ease. This way you are fighting a losing battle. Budgeting should be a coordinated effort. Discuss with every single family member about his or her responsibility. Only a joint effort of the whole family can make your budget a grand success.
   
5. Make it a point to keep regular tabs. If you don't check in regularly then you won't realize you are off the track until it's too late. It is very difficult to come back once you are derailed. So make sure that you check your position at least twice a week.
   

It is very important to stick to your budget as it will keep your finances under control. But at times following the budget seems quite difficult. So remember the above points when you start living on a budget.

About the Author This guest post was written by "Jack Reed". He writes on various financial topics with a special focus on bankruptcy. If you are interested in writing a guest post, please contact PF Stock at the Email address listed in the sidebar.

Crude Oil Video

I've recently been able to embed videos into my blog thanks to the folks at INO.com (pronounced "I know"). The first video is about crude oil. If you came here looking for a live feed of crude oil gushing into the Gulf of Mexico, then you're out of luck. I am referring to technical price analysis of the crude oil market. You can view this video without leaving PFStock.

This short video talks about the move-up in crude oil prices this past week. The presenter, Adam Hewison, shares two conflicting indicators, and identifies which one he thinks will prevail. I think you'll find this video technically interesting as well as educational.

For more trading ideas, visit the Trader's Blog

When I viewed the video, I noticed that it appears a bit grainy unless you view it in full-screen mode. The embedded video also seems to slow down the loading of blog pages slightly. So, I'll try not to publish more than one video at a time. Please Email me, or leave a comment if you have any difficulty viewing the video.

Disclaimer: I am an affiliate and member of INO.com. Although I have been able to make money using their MarketClub product, no guarantees can be made. All investments involve risks, so please consider your objectives wisely before investing.

PFS