Guaranteed return--would you take it?

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Eyesueyou22
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Guaranteed return--would you take it?

Post by Eyesueyou22 » Wed Sep 13, 2017 8:06 pm

This is my first post. Among other assets, I've inherited multiple retirement accounts. I was merging all of them into one inherited Ira. Two retirement accounts which have not yet been merged into the inherited Ira were established in the 80s when this particular company guaranteed all nonstock holdings would make 3.5%. Would you keep that there to ensure you have that guaranteed amount? I have some bonds in my inherited Ira that are over that (over 4%) but that isn't guaranteed forever.

livesoft
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Re: Guaranteed return--would you take it?

Post by livesoft » Wed Sep 13, 2017 8:25 pm

Maybe. I own some TIAA traditional annuity for some of my fixed income allocation from the 80s. It has a guaranteed min return, but that also restricts the most it can return, too.
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Nate79
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Re: Guaranteed return--would you take it?

Post by Nate79 » Wed Sep 13, 2017 8:46 pm

You need to understand what the account is invested in - what is backing the fund and the associated risk associated with it.

Valuethinker
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Re: Guaranteed return--would you take it?

Post by Valuethinker » Thu Sep 14, 2017 9:46 am

Eyesueyou22 wrote:
Wed Sep 13, 2017 8:06 pm
This is my first post. Among other assets, I've inherited multiple retirement accounts. I was merging all of them into one inherited Ira. Two retirement accounts which have not yet been merged into the inherited Ira were established in the 80s when this particular company guaranteed all nonstock holdings would make 3.5%. Would you keep that there to ensure you have that guaranteed amount? I have some bonds in my inherited Ira that are over that (over 4%) but that isn't guaranteed forever.
On the face of it, yes. But as per other posters one really needs to know more about what the guarantee is and who is making it? How guaranteed is it, really?

DrGoogle2017
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Re: Guaranteed return--would you take it?

Post by DrGoogle2017 » Thu Sep 14, 2017 10:54 am

How about keep it as your stable value.

itstoomuch
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Re: Guaranteed return--would you take it?

Post by itstoomuch » Thu Sep 14, 2017 11:05 am

Depends.
So what do you have in retirement assets including SS. Do you have LTCi?
What are your living standards?
IOW what is your risk FundingRatio, riskfree FundingRatio, blended risk FundingRatio?
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

Grt2bOutdoors
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Re: Guaranteed return--would you take it?

Post by Grt2bOutdoors » Thu Sep 14, 2017 11:07 am

As ValueThinker states - on the face of it. But now, let's delve into the underlying credit strength of the guarantor. Let's say today the firm is AAA, but future behavior and circumstances have a funny way of changing things, including a strong rating of financial strength. What is secure today can become more rickety than grandma's rocking chair. IMO, if you lack the time and inclination to understand what is standing behind the guarantee or the guarantor, then at least ensure that you have the ability to liquidate at any time with minimal to no decline in asset value. Here's an example, today the US government is rated AAA, there have been threats of downgrades in the past, but looking beyond that one can see that the US government possesses the extraordinary ability to make good on it's debts as it controls the monetary printing presses and the ability to tax it's debts away if it so chose. That is as good as a guarantee as one can get. Another example - your guarantee is backed by underlying AAA rate US Treasury securities and you have a perfected security interest in those assets. I would accept that as a secured guarantee.

On the other hand, your guarantee lacks those above qualities. The value of your guarantee may be less than meets the eye. One must be prepared for a certain level of risk, depending on that level, you may find it would be appropriate to discount a portion of that guaranteed return.

Good Luck!
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Dale_G
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Re: Guaranteed return--would you take it?

Post by Dale_G » Thu Sep 14, 2017 12:09 pm

Eyesueyou22 wrote:
Wed Sep 13, 2017 8:06 pm
when this particular company guaranteed all nonstock holdings would make 3.5%. Would you keep that there to ensure you have that guaranteed amount?
Please tell us about this "particular" company - and if possible the name of the investment. Investments with guaranteed returns are usually annuities issued by insurance companies, but this could be something different.

Dale
Volatility is my friend

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