Home » Glossary » Liquid

Liquid

An asset is liquid if it can be converted easily into cash without a negative impact on its value. For example, a money market fund is typically liquid while a large ranch property may not be so liquid.

Annuity Criticisms Often Boil-Down to Control of Assets

Annuity criticisms are a dime-a-dozen. 

The majority of financial advisors seem to have some issue with annuities, consumer perception is generally terrible and the financial media often appears to provide a reflection and reinforcement of prevailing sentiment.

There is a case to be made for “control of assets” as the common denominator for both the consumer and financial advisor perspectives.

Control of assets basically refers to the fact that annuities involve handing over money to an insurance company. 

Should You be Less Concerned about Liquidity?

Liquidity or lack thereof tends to be a major concern when it comes to annuities.

Many financial advisors and consumers are reluctant to use annuities because money allocated to annuity products tends to be tied-up and inaccessible for a period of time.  In other words, annuities lack liquidity or are “illiquid.”

In contrast, exchange traded funds (ETF) or shares of IBM stock are highly liquid as they can almost always be easily sold for cash.   

Key Financial Planning Concepts

The following are a few key concepts to think about, look for, or listen to when developing a financial plan:

Information Gathering: This is one of the first steps in the financial planning process.  Your financial advisor should gather quite a bit of information about you and your current financial status.

Should I invest in a variable annuity?

Thanks for reaching-out.

It is generally very difficult if not impossible to provide a simple yes/no answer to this type of question without having much more detail regarding your situation and needs.  That said, here are some things to think about:

Longevity Market Leaps Ahead with Launch of Life and Longevity Markets Association

A group of banks and insurance companies recently formed a London-based trade group called the Life and Longevity Markets Association (LLMA).

The LLMA aims to develop a liquid market for longevity risk that taps into broader capital markets rather than just the balance sheets of certain insurers and reinsurers.

A core focus will be on longevity swaps and making the longevity swap transaction process more efficient.

Longevity swaps serve as a risk transfer alternative to pension buyouts.

Who Really Needs an Annuity?

Warren Buffett does not need to think about an annuity.  While Buffett’s age may qualify him for annuity consideration, his wealth is sufficient to fund any personal income needs that may arise.  Also, concerns such as longevity risk and sequence of returns risk are non-issues for him.

Study Highlights Need for Bonds in Retirement Portfolios

The Center for Retirement Research at Boston College has released a study that highlights the need for a greater focus on the use of bonds in retirement.

The study indicates that 86 percent of households approaching retirement hold a bank account, while only 33 percent own stocks directly and only 7 percent own bonds directly.

The author suggests that the focus on safe, highly liquid accounts that provide a guaranteed return of capital is short-sighted and often risky.

Retirement Income Industry Association Spring Conference 2012

Trending Now

Find Financial Advisors

Click below to find financial advisors who provide annuities and retirement planning services. You may also add or edit a financial advisor profile.
find advisors

Find Companies

Click below to find companies that provide products and services in the area of annuities and retirement planning. You may also add or edit a company listing.
find companies