Episode Transcript
[00:00:00] Speaker A: Hello and welcome everyone to the Annuity Straight Talk podcast, episode number 132.
My name is Brian Anderson, founder and creator of annuitystraighttalk.com.
Welcome you guys back for another week. Case study annuities, helping with inflation going to share my screen, share the newsletter, visual aid for those watching the video and just let you guys know, please like subscribe or comment on any of your favorite podcast platforms or on YouTube. Share it with your friends.
Get the word out. A lot of people helped by this information, and that's the point of doing it. So typical case where I walk through the usual stuff. Working with Paul, want to make sure he understands all of his annuity options. Because of the where his portfolio is and the type of income needs, he has a lot of options at his disposal. So we're just kind of going through it as he gets ready to decide if he wants to make this commitment. And reminder that this business is more about communication than anything else. As long as I know exactly what you're looking for, then I can probably find the perfect solution for you and anyone else interesting. Another case, a guy yesterday. I have to ask the questions. Do you understand this? Do you understand that? What are you trying to get? And one guy kind of seemed like he got impatient with me, and that's fine, I understand. But I really have to wrap my head around your situation, because it's not just one product that can do it, but if you give me an opportunity, I can show you the alternatives. That could be more like more than one way to do it with an annuity. It also could include ways to do it without an annuity. That's always an option, but the point is, it's up to you in the end, and you need to be educated so you can make a good decision, move forward with confidence. A lot of other people ask the same thing. The topic of inflation is a big part of Paul's concerns.
Inflation adjusted annuities don't come for free, and there's no magic solution to fight a devalued dollar in the future.
There's literally nothing you can do. I've preached this forever. You can be flexible with your assets so they get the growth they need. They're in position to take advantage of potential interest rate changes, things like that.
But this is a standard case study, and I can approach it with that angle. If that's kind of one of the first things in explaining the value of the annuity in his situation, kind of talk about the other benefits of how structuring a portfolio the right way can help with inflation in the future. I spent a lot of time this year, a few episodes, talking about how major investment institutions are coming around to the idea of using annuities. You would have been hearing it here for a long time. If you've been listening, some of you have. And this is a pretty straightforward case. But the question about inflation inspired me to share some details as it relates to his first question. So every single case is unique. So this isn't going to be like any other that I've done. He's got a little bit of a spin that's not going to relate to a lot of people, but the general similarities are close enough. Right now he's 63. He would like to retire at 65, but things look a lot better if he waits until 67. And as is the case, and I can imagine I'm the same way. Not everybody's motivated the same way to go to work every day. And the closer you get to retirement, I imagine it could be harder. I'm a numbers guy. You tell me what, what you have and what you want to make out of it, I'll let you know how easy it is or whether it's possible to make it happen. When Paul gave me his numbers from an objective standpoint, I tell him that retirement is possible whenever he wants. He could do it now if he wanted to. So time is money is time. This is similar for everyone. The longer he waits, the better it gets. And the sooner he retires, the more it's going to cost. If he retires now, then it's a bigger commitment to get the guarantees he needs or wants. And the longer he waits, you've got less time to plan for. You've got more money to do it with. He's got enough for either scenario. Now you dig into the details of what he's able to do with his work life and what I can do with the numbers. We were able to get him to full retirement makes it manageable for the numbers and his desired lifestyle.
Not everybody can do it in stages like this, but regardless, it's a good example that shows you why every case is unique and gives me a new topic to discuss with everybody else out there. So it gets you guys thinking about how your situation is unique and it takes. That's where communication comes in. Let me know all the variables and we can probably figure it out. Here's how the case works. He fully plans to work two more years, and so that's not a problem. A lot of times when I see a case, it's like, well, you plan to work two years, you need to work four. I can't tell you to work longer. I just have to figure out what you want to do and how that works. So I don't get very far in telling people what to do. So he plans to work full time two more years. He's saving a fair bit of money right now, and that's typically the case. The majority of your savings comes in the last 510, 15 years before you retire. That's when your income is the highest. Your expenses go down, kids are out of the house, maybe all that stuff. So after two years, he can stop saving money because he'll have, he has enough already, and he's going to save a substantial amount for two more years. Then he can dial back his hours, go more of a part time schedule without sacrificing his lifestyle. He won't have enough money to continue saving, but he's already done because he doesn't need to do that. He's trading money for time and working reduced hours keeps him at his current standard of living. That's the first thing you do when you retire and figure out what your income needs are. Assume that you're not saving money anymore. So take that off the top of what you think you need, and that gets you close to where what your retirement income is going to look like. So current standard of living after two years, just not saving money, and then he can do that for a couple years and he'll quit full time and retire full time. When he reaches full retirement age, Social Security comes into play at age 67, and then he's got that locked. So he waited to get the increase on that. You guys know that I typically say take it as early as possible unless you're still working. And he has a way where he's not going out of pocket to pay for an increase in Social Security. So there it goes. After that's factored in, he's fully retired at 67. He needs a little bit more income just to get him comfortably where his spending levels are and keep things the standard of living the same way it is now. So number one, you figure out the timeline, and then I give him an idea of how best to make up the income gap. The easiest solution is to take about one third of his savings to buy an annuity that is deferred for four years. A third of his money is going to give him about 20,000 per year of income for life. That's a really good value. We look at the alternatives. That's probably the most powerful way to make it happen. I could go into the details of all the other options, but this one's going to be this. It's, the guaranteed income is going to be the strongest play for him. So he gets that extra 20,000 a year on top of Social Security, which is a good, healthy, he's got a solid income, no debt. He can golf or travel as much as he likes what he's currently doing.
It's an excellent bridge for the final working years. And this is one thing that's important for people to understand. It takes a tremendous amount of stress from his current life because retirement is now guaranteed. He just has to play it out. So he said on the income. Well, is that adjusted for inflation? And it's not.
I'm going to take a side note and say I already talked about this several years ago, an annuity. Well, this is 2018 inflation adjusted annuities. I'll probably link that in the newsletter so you can go back and look at it. I don't need to cover that specifically, but inflation adjusted annuities only cost more, about 25% more purchase price to get the inflation adjustment. So it's not really protection you're paying for it. That's why I don't believe in selling inflation adjusted contracts in most cases. Now, you might if you have the money for it and it gives you a little bit of peace of mind, that's fine. But we're going to do it another way. And that's the power of using the annuity. Using a third of the money now to guarantee all retirement income needs leaves him with a tremendous, tremendous amount of flexibility with his other assets for future growth. If he doesn't ever need to touch two thirds of his portfolio, then the additional growth over time is going to be more than enough for spending adjustments that need to happen as the value of the dollar declines. I've done this in enough cases. I showed everybody that he will have substantially more growth throughout retirement if he doesn't need to dip into his investment portfolio regularly, he's not going to have to do that until he needs to pull required minimum distributions. That'll be six years after full retirement. He'll have plenty of time to plan to make it happen. And he's got enough income and he's golfing and maybe traveling and seeing his kids and all that stuff. He won't have to worry about it at all. So the required distributions that come in his seventies will in itself provide for potential spending increases or continued saving outside of the IRA. If he doesn't need the money.
It's as simple as the case gets when a relatively small commitment produces guaranteed income with the flexibility of major portion of assets being left for growth and future planning opportunities. I'm going to finish that off by saying the best hedge against inflation is a rising stock market. That's where you get your best growth. But you have to have your guarantee set in place in the first place. So if there is a correction, if there is a hiccup in the growth over time, you don't have to worry about it. Now, a lot of people like the run up in the stock market in the past few months. Let's not forget that the previous all time high was January 2, 2022. So in two years and three months, the market's up about a total of 10%.
So that's a little less than 5% per year. Inflation was eight 9% reported. It's still fairly high right now, I think reasonable people realize is actually a little higher than that. So what you need is you need the time and the flexibility to let those assets grow. Nothing has really no asset has beaten inflation in the past two years. Don't bang on the annuity because of it's the annuity that gives you the ability to grow over time. You need to look at a longer period than just two years. Now, if you would have had one of the fantastic six or seven stocks and you quadrupled your money, most people didn't.
If you were just in the broad market indexes of diversified portfolio, you probably did about what the market did. And there's a lot of people that didn't have components of those six or seven stocks. They're actually still down after two years. So that's not a very good inflation hedge either. Flexibility guaranteed. Don't have to worry about it. That's your best inflation hedge over time, leave the majority of your portfolio to grow. That's how you make it happen. Simple as it gets, and I will explain it as many times as I need to, but I appreciate everybody stopping by. I would love to hear your comments on this and how you feel about it. He doesn't need to spend 20% 25% more income to get inflation adjustments. He needs to leave the money alone and let it grow. Over time, it will be available to him. I mean, worst case scenario in the stock market, worst 20 year period in the stock market. That's going to get him to age 83. He'd still double his money.
So if he doubles two thirds of his portfolio 20 years out, he's got his guaranteed income yes, there's room for spending increases there if that's what you need. This has been episode 132.
He's helping with inflation. That's how it happens. It's a byproduct of proper planning to have the growth available that you need. Thank you guys for joining me. Please like, subscribe or comment any of your favorite podcast platforms or on YouTube. Hit the little bell on YouTube to be notified when the next episode is released and let me know what you think about this. It's a simple, easy planning case. Annuities are very easy to get into and very easy to make the benefit or to improve your lifestyle and give you the peace of mind that you want retirement. I appreciate you guys joining me this week. I will be back next week with episode 133. Have a great day.
[00:12:17] Speaker B: We hope you enjoyed today's episode of the Atlas Annuity Podcast. All information presented is for educational purposes only and is not a recommendation to implement any tax strategy, nor is it a recommendation to buy, sell, or transfer any security or insurance products. Atlas Financial Strategies, Inc. Is an insurance only licensed entity and any decisions to buy or sell securities should be discussed with a licensed securities advisor and any tax strategies should be discussed with a licensed tax professional. Past performance of any strategies or products mentioned are not a guarantee of future returns. For any other questions or concerns, please go to www.atlasannuity.com.
