In a question to a financial columnist in the June 2013 issue of Men's Health Magazine, it was asked, "Are annuities a good strategy for retirement planning?"12 percent investment returns with priavate notes

"They're about as useful as cash stowed under a mattress" was the response.  Furthering the answer, it was stated in the magazine that, "Annuities are designed to function like retirement insurance-you fork over the cash now and receive payouts later.  

The problem is that any investment that guarantees income for life also yields minimal growth, says Frank Armstrong, C.F.P., the founder of Investor Solutions, a fee-only registered investment advisory firm."

About annuities, Shaun Cohen, President of Equity Finance, the funding unit of EquityBuild, a premiere real estate firm, remarked that, "Not only is there a low return for annuities, but it is not guaranteed income is the sense some may think it is like a Federally insured bank account.  Do not make that potentially costly mistake!  An annuity is not backed by the Federal government, rather by the strength of the insurance company and then how well funded the guaranty fund is for that state.  According to the National Organization of Life and Health Insurance Guaranty Associations, there have been about 75 major insolvencies since 1991."

Cohen continued, "Financing private mortgage notes is far superior to annuities.  First, the return is much higher.  We have a documented 12% return on private mortgage notes at EquityFinance.  Fixed annuities now are yielding less than half that amount for a 60-year old.  If the private mortgage note is held in a retirement account, the return is also tax free."

"The downside protection is also better, based on my experience and judgment," he furthered.  "When an annuity goes bad, you are looking at the company or the state to make you whole.  If that happens, you are most likely looking at hard economic times for the country.  I believe that will make it very difficult to collect.  By contrast, if there is a default on a private mortgage note, you can seize the property.  If you perform your due diligence in financing a private mortgage note for a single property, you have that protection.  If you are part of a private mortgage consortium with other investors, you should be protected by the diversity in the portfolio of properties in the holdings."

Private mortgage notes are also more flexible, Cohen noted.  "The parties involved in a private mortgage note set the terms.  With an annuity, you purchase what the insurance company is selling that makes it the most money.  In addition, you can buy and sell private mortgage notes, with the profits being tax free if it is in your retirement account.  For annuities, there is a very stiff surrender charge."

"What I find to be the most important difference in an annuity as opposed to financing a private mortgage note is in the most fundamental sense that the insurance company is looking to make money off of you.  If annuities were not profitable, an insurance company would not sell it: of that you can be sure.  But when you invest through private mortgage notes, you are 'the house."  You are the one making the profit as you are in control of the process, every step of the way," he concluded.

earn 12% returns with private notes