Episode Transcript
Speaker 1 00:00:05 This is annuity Straight Talk. Since 2008, your host Brian Anderson, has helped clients nationwide navigate the complex market for annuities With Brian's assistance, hundreds of clients have achieved a profitable and secure retirement. I would know because Brian has answered many of my questions concerning annuities and retirement planning so that you can benefit as well. Let's get started. Here's Brian.
Speaker 2 00:00:48 Hello and welcome everyone to the Annuity Straight Talk podcast episode number 60. My name is Brian Anderson, founder and creator of annuity Straight talk.com. Switched it up a little bit for any of those who like to watch the video. I've changed camera angles, maybe face the camera a little more directly. So you guys see me down a lot of times looking down cause I'm looking at my screen, so gonna get used to this one. I think it's a better shot. We got Buster the meal, deer on the wall behind us and I am framed by the brow times of my elk. I got the head back the elk that I got during Bo season. So it's pretty interesting I thought, I mean it's big so I can't just put it anywhere. I gotta be careful cuz it's, it's un sturdy but it's not as big as it looks because it's real close to the camera and I'm always there, but I'm right in the middle of his brow tie so I can barely reach out and touch it.
Speaker 2 00:01:37 That's how close it is to you. So it is a nice one but it's not as big as it looks here anyway, so a lot of people have asked, they said I wanna see it. So I thought, oh, with that it'll frame the shot today. So episode 60, man, it's been a long road, 60 episodes right now. And so for this one I'm going back to something really basic for people and again I've talked to a lot of people about this is the writing and the videos and all that stuff. It's a way for me to compress time and so a lot of people ask questions via email and if I wrote it out every single time that I'd write the same thing hundreds and hundreds of times, if I have a newsletter forward or a podcast or an example, then it's much easier to do.
Speaker 2 00:02:21 And so it's not that I'm being lazy, it's just that it gets repetitive for me and realize that. But I understand everybody starts from a different spot. So this week I wanted to tell about the question like a lot of people get ahold of me and they'll see a video and hey, that sounds really good. And they'll, they'll say, Well, but I, I don't know anything about annuity. So they don't know whether what I'm saying is true or what someone else is saying is true. Obviously what I say contradicts a lot of other people, they see it a little bit differently than me and I'll just tell you right now that I'm right and they're wrong most cases, but actually in most cases it's just outta context. So what I say, you know what I say for you might not necessarily work the same way for another person.
Speaker 2 00:03:01 Two people can use the same product in very different ways. And so there's, I don't mean to say I'm always right and they're always wrong, but individual preferences and circumstances will dictate a different explanation for why one thing works over another. So, but so this is one. So if you're any of those people say I don't know anything about annuities, this podcast is for you. So I'm going to share my screen and show you cuz I wrote this newsletter out and it's kind of a long one. This idea came from a piece of another newsletter. The newsletter was, annuities are not just for income. Cuz a lot of people think that. And so when you evaluate annuities, you see one deal. A lot of people don't know what all the other pieces are. So people that don't know anything about annuities are typically probably think it's more complicated than it really is.
Speaker 2 00:03:52 That's most, you know, mostly true for even pretty seasoned people that know exactly what they're looking at. But if you haven't done any homework before, that's where you might come into this. I would say 95% of the people that contact me have been to a sales meeting, dinner seminar, a pitch of some sort. And without knowing anything they get this product and they have no idea whether that's, I mean it might be a great deal and I've seen that sometimes it might not be a very good deal at all. And so if that's where you start the ed education process, you need to back up and if possible even forget that you had that conversation. So I'm not trying to be patronizing to anybody about this, but this is pretty simple and straightforward information. If this pops up in the future, and maybe this will be kind of one of the first emails I send to people, Hey, go check this video out and learn about annuities because a lot of people will, for like on my site, they'll see the flex strategy first and think, oh wow, that's really cool.
Speaker 2 00:04:50 And then they go meet with an investment manager. Annuities are terrible and they don't have the background or the information to decide for them which advice to look at. So this is gonna be my go-to newsletter podcast for anybody who asks the question. All right, so first and foremost, annuities are for protection. If there is something you want to protect financially in retirement, then an annuity is likely a very good tool for the job. Asset protection income, all that stuff. So there are go three types here. So income annuities offer guaranteed lifetime income and protect you from running out of money.
Speaker 2 00:05:29 Variable annuities, no matter what anybody says, they were originally created to protect growth and capital gains from taxes. So it was a tax shelter for anybody who had non-qualified money. They wanted to invest in the stock market. That was the very primary purpose of variable annuities. Fixed and fixed index annuities protect you from market volatility. Now I don't know about you, but income taxes and preservation of assets all kind of sound like what a lot of you guys are concerned about in retirement. Anything else is probably closer related to those. Uh, but there there is more complexity to it as well. So back up again just a little bit more. There are two different types of annuities. It's either immediate or deferred. Every annuity can be classified by either immediate or deferred. So immediate annuities are an exchange of premium for lifetime income payments. You give the insurance company money and they send you monthly, quarterly, annual checks for the rest of your life.
Speaker 2 00:06:21 Uh, and you decide at what frequency you want though. So that is an immediate annuity. In exchange for premium for income payments, deferred annuities allow you to wait until the insurance company starts sending you income payments. So you get to wait a period of years, sometime two years, five years, 10 years during the deferral period your expected income's gonna grow by a factor. So it's gonna be more income. The longer your weight, just like social security is okay, immediate annuities are simple and straightforward with a few internal options that make them more, more desirable. For anyone who doesn't wanna just hand money over to an insurance company like an immediate annuity, if you know a straight life annuity with no guarantee on the back end, it's guaranteed income payment. So if you die in three months, the money's gone. But there are things you can do, period certain you can guarantee it for a period of years.
Speaker 2 00:07:06 Foot protections in there. The most important thing to understand is that deferred annuities are very open ended and offer many options. They all have provisions for guaranteed lifetime income. A lot of people catch this in a contract, although I don't necessarily talk about it in every sales situation. So they have a provision for guaranteed lifetime income, but they all also offer a number of living benefits. A deferred annuity, which I would say most of my clients, 90 plus percent of them just have simple deferred annuities. Doesn't mean they're planning on taking income. You can wait, you don't ever have to do it. So within deferred annuities you've got the variable annuities originally created, the shield market assets, market investments from taxes. Fixed annuities are like a cde you guys, a lot of you guys know what those are. A multi-year guarantee, three years, five years, 10 years, guaranteed fixed rate.
Speaker 2 00:07:53 That's it. If it's IRA money, you don't get any additional tax defer. But if it's better for bank money, the CDs you pay annual taxes, the annuities offer tax deferral, that's what you know variable annuities were good for that. Fixed index and fixed index annuities. Fixed index annuities is just a fixed annuity but it leverages the guaranteed rate. And you say let's go for more on the upside with an index, that's all you're doing there. So your individual preferences direct you toward the product that is best for you. You may be limited by the options you have simply because of who you ask insurance. Guys, I'm an insurance guy. We sell fixed and fixed index annuities and immediate annuities. Investment managers sell variable annuities. Generally speaking, while a lot of 'em are getting into selling fixed products. My goal, no matter what I sell and where I make money, is to make sure you understand, I've probably had several dozen people over the years say, Hey, I've got this variable annuity, I really like this, this, this and this.
Speaker 2 00:08:51 And I say, hey, as long as you understand the product and you know what you're getting into, go for it. You know, do it. I'm not trying to make money, I'm just trying to help that person. They know what they're talking about, they know what they're doing, They've got a product they like, they understand the ups and the downs and they're gonna go for it. I don't need to try to sell them anything. Also, there's some people that say, well I went to Fidelity and ask 'em about annuities when they had this MetLife fixed or they had a fixed annuity and they had an immediate annuity for MetLife and something from New York Life and that's about it. They said they don't really have anything. Now I can't tell you specifically what Fidelity as an asset manager offers as far as annuities. They do have some stuff, but it is limited, right?
Speaker 2 00:09:30 So that's why this website is probably pretty good for people cuz you're gonna get a fair look at all the different options. Specifically this newsletter, you'll see what is available in the world. Annuities. So mentioned before, deferred annuities deferred to income for a period of time. That income provision is what makes them annuities. So when I said 90 plus percent of the people that I work with my clients have deferred annuities, you have because you have the choice to take that option and many never take it. If you want a know fee contract cuz you don't like paying fees in a fixed or a fixed index interest crediting, then you don't ever have to turn on the income. You can just sit it, let it grow over time, defer taxes, maybe take a little bit here and there if you want. You have the choice to whether to exercise the option or to never take it.
Speaker 2 00:10:12 And a lot of people don't. This is why you find so much flexibility in deferred annuities. The confusion comes from additional riders, which are additional benefits that can be used with a deferred annuities. This is, everybody knows you got bonuses, income, all that stuff. Fixed annuities offer a simple guaranteed interest rate for a number of years and don't typically have additional bells and whistles. But fixed index and variable annuities have several riders that can be added for additional benefit. I'm gonna start with variable annuities. We'll do it one product at a time. It's all kind of the same. So variable annuities all come with mortality and expense fee that guarantee the initial investment against market losses as a death benefit. That is one of the benefits of variable annuities. So if you put a hundred thousand dollars in the market corrects by 40%, you're down to 60 if you cro when that happens, then you're going to your, hes will get the a hundred thousand you put in, you won't suffer market losses on the death benefit.
Speaker 2 00:11:05 So that's, it's actually a pretty nice inheritance tool if you wanna take the risk but not risk the principle to your heirs. So there are additional riders you can attach to variable annuities and these are pretty simple guaranteed lifetime income allows you to take guaranteed income payments for life regardless of market performance. As you withdraw money, the market investment needs to outperform the withdrawals and fees with poor performance. You may well drain the account to zero at some point, but with this rider you will still get your income payments no matter what happens to the market investments, you are guaranteed a set level of income, enhanced death benefits as well. So you've got the mortality and expense fees that protect your initial principle, but if you take money out, that benefit is gonna reduce by the money you took out. You can add enhanced death benefits, which do not, are not affected by income payments and withdrawals.
Speaker 2 00:11:51 Okay? So you could say you put a hundred thousand dollars in, they're gonna give you 5,000 per year for life. And even if you're withdrawing money and paying fees when you die, your heirs are guaranteed to get no less than a hundred thousand dollars. So guaranteed income market participation and guaranteed that you'll pass all the money to your heirs. Those are the three hallmarks of variable annuities and I mean that's a pretty valuable benefit to be honest with you. Ask of an investment manager and they'll tell you you're crazy but you say it's in a variable annuity. Now one thing I forgot to add here, which is gonna go, I'll put in before I do the newsletter, There's also long term care benefits, which is a long term care enhancement to income riders. There's also such thing, it's completely separate topic as long-term care qualified long-term care annuities, which are a very different thing.
Speaker 2 00:12:38 And I've got that one's covered. I looked it up, it's episode five all the way back at the beginning with AHO and I. We looked at long-term care and annuities. So I'll put a link to that in this and I'll add long-term care as a benefit to that. So just additional things. So the care is an enhancement to your guaranteed lifetime income payments. That's something that that should be in there and I don't have it written in there just yet, so don't need to go into too much trouble. This is all covered in a simple guide to variable annuities that I wrote. May 7th, 2021. It was about a five page document. I posted it as a newsletter. I'm not gonna recreate the whole thing. There's a link to it right here. If you wanna go to the newsletter and you can read that. If you're interested in learning more about variable annuities, I go into all of it.
Speaker 2 00:13:22 Okay? Now when it comes to fixed index annuities, you've got the same options as variable annuities. So it's not like I need to go repeat this, okay, you've got enhanced death benefits, you've got guaranteed income, it all costs money. That's where the fees come from in index annuities is a fee for an additional benefit. If you don't want the fee, you don't take the benefit. So it's nothing more than an additional guarantee you placed in the contract. So you with the contract, you could guarantee a principle if you want to add something, Okay, well I, I like guaranteed principle, but now I want guaranteed income, you're that's gonna cost you something, it costs you money, Nothing of value comes without a price. So the main difference between fixed index and variable annuities is simply how they account performs otherwise for all this stuff, it's the same thing.
Speaker 2 00:14:10 So one remaining point of confusion regarding deferred annuities that relate to both fixed index annuities and variable annuities. There is a big difference between contractual provisions for guaranteed income and an additional guaranteed income rider. So earlier I talked about the contractual provisions where every deferred annuity can be essentially annuitized, right? The value can be commuted so that that contractual provision essentially commutes the cash value to an immediate annuity while the guaranteed income writer allows you to maintain a residual cash balance. One comes for free with the contract, that's the provision and the additional writer costs money probably because it's more enticing. Uh, like they added those writers people said, Well I know I can get guaranteed income, but I don't want to let go of all that cash. They wanna see a balance there. So that's where the guaranteed income writer comes in and those, that's why those are two very different things.
Speaker 2 00:15:03 So I've got several, I mean I've talked about the difference between guaranteed income and not in several newsletters and podcasts. One that I did most recently. Guaranteed income, yes or no. Talking about the difference between when to take guaranteed income, whether you want it, whether you need it, all those things. But I would suggest checking out some of those resources looking around on the website, email me if you want some ideas. I can tell you where to look. I will link a couple other newsletters or podcasts in this article so you can go check it out when the email comes out on Saturday. That's when most of you guys will listen to this. So about a week from now, but you guys check that out and I'll add what I can, but I'm not gonna go link 15 newsletter. Nobody's gonna do that. Well, I guess I know a couple people it might.
Speaker 2 00:15:45 But anyway, so if you come up with a request for a topic that hasn't been covered, then you'll have all the benefit of noting that you inspired a podcast that will help a lot of other people. So please send me your ideas, ask technical questions. It may be worthy of a post on its own and I might sit down for 30 minutes and talk to everybody else about it too. So that's where all this stuff comes from. It comes from you guys. As long as I get the opportunity to answer your questions, you guys inspire me to provide information to other people. Anyway, so this is just, again, annuities are for protection. A basic walk through the individual nature of it. The market is not that complicated. Immediate annuities or deferred annuities, you want income or do you want to just protect the money and go elsewhere?
Speaker 2 00:16:28 There's a lot of ways to use either one to do a bunch of different things in retirement and that's why this takes a specialty and that's why it takes so much time to explain all the different options to people. But I appreciate you guys being here. If you want to chat with me, you can give me a call at (800) 438-5121. It's gonna ring on my cell phone. That's the only phone I've got. If I can answer, I won't. So call 24 7 and you may or may not get me. If you wanna schedule an appointment, if you wanna guarantee that I'm available and for you and only for you in a specific time slot, go to the top right corner of any page on annuity straight talk.com and you can get ahold of me there. Check out my calendar and pick a slot. It's super easy. Go ahead and respond to any of the emails I send if you have questions or reach out and let's see if we can help you out. So I want to thank you guys all for joining me on this episode. Quick and dirty, run through the basics of annuities and how they are meant for protection and you decide what you wanna protect. This has been episode 60. I appreciate you guys stopping by and I look forward to speaking with you next week. Okay, thanks. Have a great day. Bye.
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Speaker 1 00:17:48 Have been listening to annuity straight talk. The proceeding information is for informational and educational purposes only and does not represent tax, legal or investment advice. The views expressed by program their and do not necessarily reflect the views. Annuities, his partners. No information presented should be acted upon without it. I guarantees are.
