Sandy asks…
pension per year business and marketing?
This is a question for my coursework , How much would tom need to secure an annual retirement income of £18,000 if he were to retire at the age of 65
Pension per year = Annuity rate/100,000 x pension pot
I dont know hwo to do it?
Summer answers:
You’re missing two vital bits of information – how old Tom is now and what the annuity rate is!
If you assume he is 65, and are allowed to make your own assumptions about the sort of pension he will buy (eg whether he’ll want to leave provision for his widow if he leaves one, whether the pension will increase once it starts being paid), have a look at:
http://www.pensionsadvisoryservice.org.uk/tkflow/Flow.aspx?f=TPASOnlineAdvice&template=TPAS_Template_new&xsl=dtree_new
You can get a detailed answer and it’ll look impressive on your coursework that you know where to look!
John asks…
rates of return for bonds and annuitys?
I hope you can tell me the current RORs and the traditional ROR over the past 10 years for the different types of investments.
U.S. Govt. Bonds
Tax Free Municipuals
Mutual Fund Bond Fund
Mutual Fund Conservative Equity Fund
Mutual Fund Growth Fund
Variable Annuity
Fixed Annuity
Equity Indexed Annuity
If possible please tell me the risk of the investments. Thanks!
Summer answers:
You are asking a very lot. You need to do your own research.
Steven asks…
What is the annual rate of return on this annuity?
Lincoln Life Company offers you an annuity contract that will pay you an annual payment of $45,000 for the next 10 years. The cost of this policy is $300,000. What is the annual rate of return on this annuity?
(I have the answer 8.14%. I want to see the work.)
Summer answers:
The correct rate for your problem with payments at the end of the year is in fact 8.144%, as per my trusty online annuity calculator. Here are a couple of articles which have the formula for this calculation and I hope you can understand them:
http://www.ehow.com/how_4924636_calculate-annuity-flat-interest-formulas.html
http://en.wikipedia.org/wiki/Annuity_(finance_theory)
http://www.moneychimp.com/calculator/annuity_calculator.htm
Sharon asks…
Should a retiree buy an immediate fixed annuity in today’s low interest rate environment?
I’ve been looking at this type annuity for a long time now and I’m having a hard time reconciling myself to the fact that I’d be stuck with today’s historic low interest rate for the entire term of the annuity! If it weren’t for that glaring fact I would go ahead and get one provided I could get some answers to some of my questions about tailorng the annuity to my particular situation!
Summer answers:
There are variable annuity products on the market that will guarantee payouts in the first several years (often 10 years) of the contract at a certain level. Many of these guaranteed payout levels are higher than fixed annuity rates right now.
There is a cost to protect and guarantee things, and annuities do demand you to stick with the product, etc. Definitely get the facts and make sure all costs are understood up front.
Chris asks…
If the interest rate is negative, present value of an annuity due would be?
If the interest rate is positive, the the present value of an ordinary annuity will less than the present value of the annuity due.
What would happen opposite?
Summer answers:
Where would you think a “negative” interest rate would happen. Either the savings interest rate is positive or it is zero; they don’t take away money from an annuity. It’s not like stocks, for heaven’s sake.
Nancy asks…
How much must you invest today in order to have your retirement annuity if the annual interest rate is 6%?
You plan to retire in 15 years, and you want to have an annuity of $50,000 a year for 20 years after retirement. You want to receive the first annuity payment at the end of the 15th year from today.
Summer answers:
This is a 2 part problem. We work backwards to find the answer. First we know we want 50,000 a year for 20 years at 6% interest rate. Looking in my annuity table, I find the I have to divide 50,000 by 0.08718456 giving 573,496. Now again working backwards and again looking in the annuity tables but in a different table this time, I find that I have to divide 573,496 by 23.2759699 giving 24,638.98. That is the amount you have to invest each year for 15 years. I am not sure if that is your question or whether the question is what lump sum what you have to invest today in order to obtain the specified result. In the latter case you would need to invest 573,496 * 0.41726506 = 239,300
Maria asks…
If annual interset rates are 10 percent. which of the following values will be the greatest?
A. the future value of an annuity after 4 years, if 100 dollars is deposited annually
B.the future value of a 100 dollar investment after 3 years
C. the present value of an investment that will be worth 100 dollars after 2 years
D. the present value of an annuity that will pay 200 dollars a year, at the end of each of the next 4 years
Summer answers:
A. 100[(1.1)^4 - 1]/.1 = $464.10
B. 100(1.1)^3 = $133.10
C. 100/(1.1)^2 = $82.64
D. 200[(1 - (1.1)^-4)]/.1 = $633.97 = greatest
Donald asks…
What is the best investment option for money that has been inherited by my minor children?
A family member passed away last year and left $5,000 dollars to each of my children. The money currently sits in an annuity, something that I am not familiar with other than a brief internet education. Is there a better, and more productive way to invest this money that will enable it to potentially grow at a better rate than the annuity?
Summer answers:
First of all, that’s a nice gesture by your deceased family member.
Typically an annuity is an investment vehichle where you can’t receive the money until you are of retirement age which doesn’t make sense in the situation you described. I am guessing that your relative had the money in a variable annuity (probably an IRA) and then named your children as beneficiaries.
I would recommend taking your paperwork to an investment company that has offices in your town (Fidelity, Charles Schwab..,). Let them look it over and find out what kind of account you can put the money in for your children. At that point I would recommend conservative investments and keep the money in your childrens’ accounts until they are adults.
Hope this helps.
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