Today's Cash For Tomorrow's Income Stream (Podcast)

by: SA For FAs
Summary

I previously commented on the dilemma of one who has too much cash and not enough risk-based investments, yet is deterred from investing because of high valuations.

I suggested that buying stocks meeting the standards of the best value managers would be logical, as it would reduce cash levels and presumably skirt the valuation problem.

However, a reader wonders if an annuity purchase would address the “too much cash” problem.

I previously commented on the dilemma of one who has too much cash and not enough risk-based investments, yet is deterred from investing because of high valuations. I suggested that buying value stocks would be logical, as it would reduce cash levels and presumably skirt the valuation problem. However, a reader asks if an annuity purchase would address the “too much cash” problem. I explain how it actually might do so.

This brief podcast (5:31) suggests that, for those who do not expect to receive the same risk premia in the coming decade as we’ve seen in the past one, it could make sense to use current funds to purchase a future income stream you want in place anyway as part of your post-retirement allocation.

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