As with any investment, there are pros and cons to DCF Income Payments. Take a moment to read through these pros and cons, and move on to FAQ page to see the most frequently asked questions we get from customers.
Remember, DCF Income Payments are used in three distinct ‘safe money’ scenarios- Income Now, Income Later, and Safe Growth. The ‘pros’ for one scenario or investor may be a ‘con’ in another investor. The only important answer is, is it right for YOU?
Fixed Term Investment
Fixed Payment, Pays to Buyer or Heirs
Pros
A fixed yield for a fixed period of time, paying to you or heirs.
Cons
Payment stream has an end date.
Analysis:
With DCF Income Payments, you are making an investment that stops paying when the principal and interest is paid back. This is just like when you borrow money- the loan is closed and the payments cease when you as the borrower pay in full… but in the case of a DCF Income Payment, you are the one receiving the payments from the insurance carrier.
If you need a lifetime income in retirement that you and your spouse can never outlive, you should consider a Lifetime Income Guarantee (AKA LIG) policy, with DCF Income Payments filling in the years prior to the LIG starts.
Alternatively, consider an Immediate Annuity or a Hybrid Annuity with a lifetime income rider. LIG and Immediate Annuities are tied to lifetime(s), and you can not outlive the income. That payout, however, may be lower than a DCF Payment Income unless you live a very long time.
Frequency and Duration of Payments
Absolute Payment
Pros
Payments accrue to the payee/ buyer you specify on your purchase reservation. That may be you, your spouse as joint Tenants, your heirs, your Trust, or your estate. What You See Is What You Get.
Cons
In some states, this may create probate issues.
Analysis:
Create a Trust to be the receiving entity, to skip probate. Plus, nearly all our payment streams use a servicing company to receive the payments, for ease of reassignment or change of payee. Consult your own tax and estate planners regarding Trusts.
Liquidity
DCF Income Payments Do Not Offer Partial Surrender Liquidity
Pros
DCF Income Payments pay out exactly as scheduled, to you or your heirs.
Cons
You can liquidate (re-sell) a DCF Income Payment, but the amount you receive depends on the interest rate environment at the time you decide to sell.
Analysis:
Devote only that portion of your assets that you can safely set aside in a fixed and long term investment. Deal with liquidity with other assets. Know that it is easy to re-sell all the payments, but no easy to get partial liquidity.
Profitability
DCF Income Payments Are More Profitable Than Other Fixed Investments
Pros
Attain a higher yield with your fixed income allocation, when compared to other comparable options such as bonds, CD’s or Fixed Annuities.
Cons
What’s not to like about higher yield payments?
Analysis:
This is self-explanatory. Higher yield fixed income means lower cost to secure your financial future, leaving more left over.
Volatility
DCF Income Payments Have No Volatility
Pros
Self-evident. DCF Income Payments are priced based on current market discount rates. If rates fall, you may have contracts that can be sold at a profit.
Cons
A DCF Income Payment is priced based on current market discount rates. If rates rise, you may face a discount to face value if you are forced to sell, in addition to the legal costs and discount required to re-market a case.
Analysis:
Consider a DCF Income Payment as a “Yield To Maturity” investment. Devote only that portion of your assets that you can safely set aside in a fixed and long-term investment. Deal with liquidity with other assets. If you feel you may have a need to sell and can do so at a profit, having serviced payments may facilitate this sale and reassignment.
Reach out to us if you’d like to:
- Schedule a 1-on-1 video call to discuss your specific needs and situation
- Ask questions about products, carriers, or DCF Income Payments
- Discuss how a DCF Income Payments and newly-issued annuities may (or may not) fit into your portfolio
Nathaniel M. Pulsifer, Owner of DCF Annuities
(800) 246-1932 | [email protected] | Linkedin
