Links To Ring In 2019

Welcome to our first blog post of 2019! Below are some links regarding financial planning for retirement, financial concerns for college, and general financial education. Hopefully these help shake off the holiday cobwebs and get your year off on the right foot.

Current Events

Our friends at Formula Folios have provided some valuable insights regarding the recent stock market volatility we’ve experienced. They include an excellent quote to steady your nerves as both news headlines and financial markets provide anything but reassurance:

Your success in investing will depend in part on your character and guts and in part on your ability to realize, at the height of ebullience and the depth of despair alike, that this too, shall pass.

– Jack Bogle


While on the subject of volatility and uncertainty in the financial world, one of the instruments people at or near retirement often ask about is annuities. Depending on your goals, they may provide you with certainty that you’ll never run out of money. However, like all insurance products, they are complex and, in general, not well understood by the general public as well as investment and money managers. Fortunately, the New York times has provided an article to explain annuities as simply as possible, as well as a list of questions to ask someone trying to sell you one.

Interest Rates

Interest rates are in the news a lot lately. Headlines about the Federal Reserve raising rates are commonplace. But what does any of this mean, and how does it affect average people like you and me? The good folks at The Street have provided an article explaining the different types of interest rates and why they are so important.

College Costs and Planning

Lastly, on the college front, it’s no secret that college costs are skyrocketing. Tuition inflation is the highest of all categories of inflation, approximately doubling the rate of inflation of healthcare. However, there are some schools here in the United States that are bucking that trend (including one here in Kentucky), and offer students free or reduced tuition. The good folks at Forbes have been kind of enough to provide a list of 75 such schools.

If none of those schools spark the interest of your college-bound children, then you’re probably thinking about college scholarships being a major part of your college financial plan. You aren’t alone. Before assuming scholarships will solve your college cost issues, take a look at this deep dive into the grant and scholarship landscape. Once again Forbes has come through with an excellent in-depth breakdown of the different kinds of scholarships out there and how they may or may not fit within your college plan.

Thanks for taking the time to read our blog and please let us know if there’s a topic you’d like to see covered or a question you want answered. Happy New Year from all of us here at SeaCure Advisors! We hope your 2019 is healthy and successful.


Your Questions Answered

Carolyn Howard, CFP® shares her insights in response to reader questions on Investopedia Advisor Insights:

Q: I have a 401(k) with my new employer; should I roll my traditional IRA into my new 401(k) account?

I was advised to roll my 401(k) plan from a previous employer into a traditional IRA, which I did. I haven’t made any contributions to it since rolling it over, and it has grown very little. I have a 401(k) with my new employer; should I roll my traditional IRA into my new 401(k) account? I feel that if I combine them, my money and 401(k) will grow the most. I was advised to leave my traditional IRA at the company that it is at, so I am not sure what my best option is.

A: You can choose to leave your rollover IRA as is. You have more flexibility in your investment options with the IRA.  You can also choose to put it into your new 401k if you like the choices available for investing.  Having only one account can provide simplicity when making investment decisions.  Your choices are dependent on what you want to do.  The growth on your IRA and 401k are dependent on your investment choices and asset allocation.  If both the IRA and 401k have the same asset allocation and similar funds, they should grow at the same rate.  Your decision is more of a personal decision than an investment decision.

Q: Does the IRS call you and accuse you of fraud and ask you for money?

I received a call from a woman who gave me her name and an ID number informing us that the IRS is charging us with fraud and that we owe them $8,140. We are retired on Social Security and have not owed any taxes for more than fifteen years. Is this a scam?

A: It is excellent that you are asking this question.  The IRS does not call you and inform you of anything.  This is a SCAM.  You can contact the IRS directly and inquire of this information.  This person that called is just trying to steal money from you.  You should be very proud of yourselves for being aware of these kinds of calls.  Keep up your good work.

Update: Police in India have recently arrested several people in connection with this scam.

Q: Should I use annuities as a temporary investment?

I invested in a four-year fixed annuity several years ago to allocate a percentage of my portfolio into a vehicle that was conservative. At the time, it was the safest, risk-free investment recommended by my investment adviser. The annuity is set at 4 percent annually. I am a long-term aggressive investor who makes about 12-15 trades a year. My retirement horizon is between 2-5 years away from now. Is this a safe strategy going forward?

A: Annuities can be useful as a bond alternative especially as interest rates are rising.  If you have bonded as part of your portfolio, the bonds or bond funds could be losing value since bond prices decline as rates rise.  You state the annuity is earning 4%/year.  As you approach retirement, the 4%/year with downside protection during market corrections could be a valuable part of your retirement strategy.  You may consider your retirement goals as you near that target in 2-5 years.  One of the things to consider is your income needs during retirement and the risk tolerance during withdrawal years.  With your “long term aggressive strategy”, you may experience a market downturn during the withdrawal period that could ultimately impact your lifestyle.  You would not have that risk with the annuity.  Consult your investment advisor to review your retirement goals, income needs, and the amount of risk your income needs can tolerate.

Q: What does “period certain” mean on an annuity contract?

Period Certain on an annuity contract can mean a couple of different things.  It could mean that you have a guaranteed amount of time to receive the income from the annuity when you begin taking the income.  You make this decision when you purchase the annuity.    If you should predecease that time frame, your beneficiaries would be eligible for the remainder of the income.  Another common use of period certain is when you buy an annuity and choose at application time that you want a lifetime income with a period certain, for example, of 20 years.  You will be given a lifetime income by the annuity company but if you should predecease the 20 year period certain, your beneficiaries would be eligible for the remainder of the income. You can also choose to receive a lifetime income without a period certain.  You will receive the maximum income payout with a lifetime income without the period certain.  There are options that insurance companies have for the various types of annuities.  Please review them carefully.

To read all of Carolyn’s answers to reader questions on Investopedia, click here.

If you have questions regarding your financial situation that you would like to discuss in person or on a video conference with a SeaCure representative, please contact us and request a free consultation.


The Facts About Annuities!

June is Annuity Awareness Month!  Successful retirement planning requires you to explore all possible sources of income in your retired years as well as to create multiple streams of income for security. Annuities are just one of several income streams that you could rely on, but many individuals do not consider them at all. There is a wide range of annuities that you could choose to invest in, and this means that there may be an annuity product that is right for your investment goals and objectives. With a closer look at what annuities offer, you may see that there is a place in your financial plan for this product.

Fixed and Variable Rate Annuities Are Available
One thing that keeps many people away from investing in annuities for retirement planning is a false belief that all annuities have a fixed rate. Fixed rates sound reliable and secure to some individuals, but they can dissuade those who are concerned about inflation and cost of living adjustments from purchasing them. The good news is that there are exceptional variable rate products available for you to choose from as well, and this means that there likely is a product that you can feel comfortable with.

Product Fees Are Typically Very Low
Some people believe that annuities have very high fees that will unnecessarily eat into your nest egg. The reality is that many annuity products have very low fees in comparison to the fees you will pay with other products. There are some annuities with higher fees. However, these products with higher fees typically have special features that make them very attractive to retirees. For example, you may be one percent higher fee when you purchase some annuities that have a lifetime guarantee on benefits than you would pay for other annuities. The ability to get a guaranteed stream of income for the rest of your life may be worth paying a one percent fee for some people.

Annuities Are Not Just for Seniors
You may think that these financial products are only designed for senior citizens who are retired or almost retired, but this is not the case. Anyone can purchase annuities at any age or stage of life. Some people, for example, will use death benefits from a life insurance policy to purchase an annuity. When used in this way, the financial product can replace a stream of income for a family that was lost when the loved one passed away. These products can also be used by those who retire early and who are too young to collect Social Security checks or 401(k) distributions.

Annuities Provide a Stream of Income That You Can Count on for a Lifetime
Some people are afraid to purchase these financial products because they fear that their nest egg will be consumed by a product that will not last a lifetime. They believe that they can better manage their own personal funds and outpace the performance of these products, but this creates a great deal of stress in the last few decades of their lives. The reality is that some annuities may be purchased with a ten or 20-year term, and it is possible for you to outlive the product. However, there are also products with a guaranteed lifetime payout. This means that you could receive regular income payments from your annuities, and this can help those who are stressed about outliving their funds breathe a sigh of relief and enjoy their retired years with minimal financial concerns.

Your Beneficiaries Will Receive Unused Assets When You Pass Away
It is important that you read the fine print on annuities before you buy them. The wording regarding beneficiaries can vary from product to product. In most cases, annuities that do not have a lifetime guarantee clause do have wording that provides your beneficiaries with all remaining assets after you pass away. This type of clause is not common on lifetime guarantee products. One way that couples can overcome this challenge is to purchase two separate annuities that each provide the income that they need to live off of individually. Some annuities are designed for couples and can pass on to a surviving spouse.

Annuities are not right for every situation, but they may have a place in your retirement planning efforts. Now that you know more about the real benefits that these products can provide to you, you might be interested in asking more questions.  We are here to provide those answers to you.