Innovation In Retirement Planning

The Best Type of Annuity Might Be Someone Else's

Exchanges for 'sleeping capital' beginning to grow

INDIAN WELLS, CA–(Marketwired – June 08, 2015) – So you've made the decision to purchase an annuity with at least part of your retirement nest egg. You're not alone in your decision.

Figures released on March 25, 2015, available through Insured Retirement Institute, claim a total of 229.4 billion dollars of new money made its way into annuities of one sort or another in 2014.  

Some of the benefits of annuities include, but are not limited to, transferring the risk of outliving ones' money, eliminating potential loss of principal, multiple pay-outs options that include lifetime benefits, lifetime benefits for you and your spouse, lifetime benefits for you and your spouse with a guaranteed minimum number of payments, peace of mind, security, a consistent income stream and a host of other positive investment features.

Difficult Choices

In January 2013 the U.S. Government Accountability Office (GAO), a non-partisan federal agency focused on reducing wasteful government spending, released a report entitled Ensuring Income Throughout Retirement Requires Difficult Choices.

Among the GAO suggestions for consumers approaching retirement were delaying the age when seniors elect to start receiving Social Security payments, and the suggestion that retirees convert pension plans into lifetime income streams as annuities rather than taking lump-sum payments at retirement.

But if you decide to buy an annuity, which company do you buy from and what type should it be? Fixed? Variable? The determining factors when calculating an annuity income stream include, but are not limited to, your age, the amount of your deposit, the anticipated return, when income will start, who is guaranteeing the income, the projected payout period and whether that payout will be guaranteed for life or for a certain period of time. That's a lot of choices.

Discounted Annuities

Here's another choice to add to the confusion, and perhaps the best of all possible choices, according to at least one group selling income streams. Buy someone else's stream of payments or annuity at a discount from its total payout as a means of safely increasing returns over what is currently available in the marketplace.

According to a group of California businessmen this very lucrative investment alternative will now be available on a large scale to individual investors through a new Exchange or Trading PlatformElmwood Capital Partners, Inc. operates the worlds' first Trading Platform devoted exclusively to purchase, sale and valuation of "Income Streams."  

T. Allen Dyer, a risk management and due diligence officer for Elmwood, explains, "There is a large void in the fixed interest investment market, particularly for seniors and other conservative investors who are anxious to find safe alternatives to poorly performing bank CD's, bonds, treasuries and other traditional fixed interest vehicles in order to counteract inflation's drag on their money's purchasing power".

Dyer has been involved in the structuring and marketing of new investment offerings for more than 25 years, and focuses on structuring, marketing and risk identification for new offerings and growth organizations. What he found was that for a variety of reasons people who own income streams like income annuities, workman's compensation payout settlements, structured settlements, lottery annuities and other income streams is that they may need or want to exchange their stream of payments for a lump sum.

This is much the same way that EBay created a liquid market for baseball cards, used apparel and automotive parts

When an investor purchases an income stream from its previous investor and does it at a discount the return can be much greater than what is currently available in the marketplace, a return that is higher than the return being experienced by the previous owner.

Dyer cites a number of recent cases:

  • "We had a gentleman who was receiving payments from an insurance company related to a workman's compensation settlement. He needed to cash out for personal reasons. He had a balance owed to him over the next 5 years totaling $40,000. We found him a buyer and the income stream payments were assigned to the new owner for a purchase price of $30,000. The seller was happy to cash out and the buyer was very happy and will now earn a 9.84% return on his $30,000 over the next 60 months."
  • "Another recent case involved an elderly person who had multiple income streams coming from a number of different sources. She had plenty of current income but very little cash. Her "old school" mentality kept her from borrowing but she did needed some cash. She had a fixed period income annuity from a reputable insurance company that paid $1,169.92 per month with 95 guaranteed payments left. The total pay out for that period was $111,142.40 and she exchanged her income for a lump sum and we have 2 happy customers."

"We have created an auction platform so that buyers and sellers of income streams can meet in a forum that offers complete transparency so that both benefit from this new found source of liquidity.

Just like e-Bay?

This is much the same way that EBay created a liquid market for baseball cards, used apparel and automotive parts, etc. Like Ebay, the Income Stream Exchange does not handle financial transactions or offer advice. Dyer points out that the platform has its own capital and will be "cherry picking" and offering immediate liquidity for those owners who need or want to fast track.

Dyer says these trading platforms or exchanges may be commonplace in the future, he believes, as common and ordinary as the big boards are today. Dyer cites the success of and others like Royalty Exchange. Both have been successful at bringing liquidity and the ability to currently monetize illiquid assets.

The world is changing so quickly and technology advancing so rapidly that we are moving toward globalization and a real world economy where liquidity is no longer desired but demanded. We are seeing immediate opportunities in other countries for application of our model with legislation in Great Britain and other countries where those who have purchased annuities now want partial or complete liquidity from these restrictive income streams.

At the very same time, there are investors looking to exchange their sleeping capital for a safe, fixed return.  Dyer points out that the Company also plans to raise additional capital in a forthcoming private placement.


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