Traditional asset management strategies focus on a balanced blend of stocks and bonds. Individual managers have various strategies for managing each portion, but students of history learned over 100 years ago in the Industrial Revolution that specialization was the key to unlocking productivity and performance. Why entrust your retirement income needs to a generalist? Why not engage a specialist, an expert in the unique challenge of generating secure, guaranteed INCOME?
Asset accumulation is very different than income maximization….
Secondary Market Annuities offer superior returns and superior safety over the methods of stock-bond generalists. Lets investigate a Secondary Market Annuity to understand why- we’ll use the example of a structured settlement for this example.
Our Secondary Market example starts when an injured party wins their case, let’s assume it’s a worker hurt on the job, and the employer’s insurance pays a settlement. Rather than a lump sum, the injured party gets a series of payments over many years, and the paying party settles this case by putting a sum of money with another insurance company that backs the future payments. The losing party can close its books and move on, and the winner has its award.
Now let’s assume the winning party decides they want cash now instead of future payments. In most cases, this change to the court ordered settlement requires a new court hearing, where the court supervises the process to ensure fairness to all parties. The winning party- called the annuitant- sells the future payment stream in this court process at a discounted present value to a factoring company.
A well known factoring company is J.G. Wentworth, who uses direct -to-consumer ads offering cash now for future payments, through aggressive internet, TC, and radio ads with catchy jingles.
The factoring company exchanges cash now for the future income stream, and due to the discounted purchase price, makes a decent profit in the trade. Most factoring companies then bundle or securitize these financial assets into portfolios and re-sell in large blocks to banks, insurance companies, and investors. Securitized portfolios offer high credit, high quality cash flows and are consequently in high demand.
So What? How is This of Value to You?
Court supervised, cash backed payment contracts with highly rated insurance companies are high quality assets in high demand. But in recent years individual investors have obtained access to this marketplace and actively snap up these high yield, low risk, guaranteed payments from the likes of Met Life, New York Life, Genworth, and other highly rated insurance companies
Financially astute investors can benefit with Secondary Market Annuities in the fixed income or low risk portion of their portfolio precisely because of the low risk nature of these assets. Rather than buying corporate or Treasury bonds, or fixed annuities, with low yields, they can obtain the same safety with much higher yield on the Secondary Market.
Let’s look at the Top 10 Secondary Market Annuity (SMA) Facts:
1) Unlike many other kinds of annuities, Secondary Market Annuity payments are contractual guarantees, not projections based on future performance.
2) SMA’s offer higher than average returns on a fixed income portion of your portfolio.
3) SMA transactions are largely unknown to the general public and are not readily available to individual buyers.
4) SMA payments are very secure and come from the highest rated life insurance companies. Some are also available from State Lottery commission.
5) Secondary Market Annuities do not have hidden administrative fees.
6) Secondary Market Annuities are contracts not tied to your lifespan, and can thus offer payments to your heirs after you pass on.
7) All SMA’s require a court approval prior to transfer to you, and are scrutinized in the process.
8) Secondary Market Annuity payments are paid directly to you, not to an intermediary. The payments are direct obligations of a U.S.A. based insurance company. Credit ratings of these companies range from A.A.A to A by Standard and Poor’s.
9) SMA’s can be bought with before or after-tax dollars.
10) Secondary Market Annuities are denominated in U.S. Dollars, therefore foreign buyers should be aware of currency and exchange risks.