Episode Transcript
Speaker 0 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. Hello and welcome everyone to
Speaker 1 00:00:50 The annuity straight talk podcast. My name is Brian Anderson and founder and creator of all things, annuity straight talk. Then my co-host is a show I'm G out in Kirkland, Washington say hello, show. Hello, everyone. Welcome to annuity straight talk the podcast. Uh, we're getting a lot of good feedback on this. So we want to remind everyone if you like what you hear and you want to get more information, not anyone podcast is going to solve problems for every single person out there, but you might get to an idea of what everybody else sees and what other people are looking at. And then you can start to build the context around what your goals are. So if you liked the podcast, go ahead and subscribe. And that way you'll get notification when everything, when the new ones come out. So we've been a little inconsistent the last few weeks.
Speaker 1 00:01:29 Have we not a show? We have, we've had some technical bugs. We're redoing this episode again, and we owe you all consistency. So look for some improvements and our delivery, I take responsibility. I was the one that screwed up the microphone. So that was my fault, but we're back on track. So in the past episodes we covered, uh, we were kind of developing a story here and we've got one more that's coming next week. And these have all been out in the newsletter on my website, including this one, the writeup, but it's a nice one to listen to, but we, you know, we started talking about guaranteed lifetime withdrawal benefits. And then we talked about growth versus income to kind of introduce different ways of achieving the same result. Correct. And here we are. Now we did look at, uh, a specific product, which was a new one that came out.
Speaker 1 00:02:16 That was a very aggressive income product, that nationwide podcast, and on the heels of that, we're doing this one now. And the reason being that you ran into a case where one of your clients came in and had a special request and that kind of fit right into everything we developed over this past few episodes. It was perfect timing. So why don't you tell us about that? Excellent. So my client, Mary came to me and said she has a diverse portfolio of dividend paying stocks. She's got a pool of safe money. She also has some bonds. It's a mutual fund of bonds. And she said, I'm a little bit concerned about all of the volatility that's happening lately in the markets, especially with interest. And I'm just trying to figure out, can I get consistent income that at what I'm getting or better can the volatility stop?
Speaker 1 00:03:11 And can I be in control if I decided that I wanted to change up this plan, would I be in control or would I not be in control? So I took a step back. And as you know, Brian, in my practice, I work with annuities. I work with many different tools and I said, it sounds to me like what your asking for is a fixed deferred annuity. We should look at something with a GL WB rider. We're not going to use the flex strategy here because her bond fund is generating income right now. And we need something that's going to be income oriented. So I said, this is a way I think we should go. So let's look at our different alternatives for fixed deferred annuities, the case study, you're going to see here. I firmly believe many people across the country are looking at fixed deferred annuities with income riders.
Speaker 1 00:04:05 They're looking to solve an income problem. Perhaps they're going to see a specialist who will show them an array of annuities. Our hope with this episode is that you will walk away taking this case study and be able to have a similar type of analysis so that you do a full 360 and understand all of the aspects that go into income riders on fixed deferred annuities. And this one was easy for you, which is not something. Now, if somebody calls in or schedules an appointment with us, we won't necessarily know as much about you as a Schoeke knows about Mary in this case. And so it was pretty easy for him. They had a rapport that relationship, and you knew exactly what she was looking for, right? And that speaks to the idea of communication and actually really defining your goals. And that's one of the reasons we do all this stuff so that people can consume a little bit of information.
Speaker 1 00:05:00 And then maybe this episode isn't right for you. But boy, the light bulb goes off in your head when you listen to episode eight, whatever it would be, everybody's a little bit different. So that's why there's a there's room for this. But anyway, that's a nice luxury. So when the show says, this seemed like the right router, he's got a lot of backstory that validates his recommendation to do that. Exactly. And I think anyone listening to this podcast, if you want to have that similar relationship where, I mean, Mary came to me about a couple of years ago and we developed a relationship and I shared with her some ideas, some of which she adopted some of it, she didn't, but a good place to start as always, when you're listening to nudity straight talk, go to the website, go to Nudie, straight talk.com, give us a call.
Speaker 1 00:05:44 804 3 8 5 1 2 1 hit the green schedule, a call button, piece of cake. People do it all the time, nothing wrong with it. Yeah. We had money that was predominantly in an IRA. So as you point out in the newsletter under the highest annuity payout, everything here is pre-tax. So we're just looking at apples to apples. And we looked at the current bond fund. The amount of capital that she was looking at deploying was 192,000. So it was just a little under 200,000. That bond fund was generating about $7,600 a year in income, about 4% yield. That's pretty good, right? Nothing wrong with that. Given low rates, when a treasury rates around 1.2, that seems like a pretty healthy, so I wouldn't expect if rates stay low, it's probably not going to keep that kind of coupon payment, but that's just again, and it's an excellently run bond fund.
Speaker 1 00:06:36 She's had it for a while and it's just, I mean, it's as bond funds go, there's nothing wrong with it. But again, it meet her objective of going away from bond market volatility. So we looked at four different fixed deferred annuities with these guaranteed lifetime withdrawal benefits. Now, how did we arrive at these four? Well, we used software that says for this amount of money in the state of Washington, what are some of the highest payouts? And so that's where we came up with. For example, as you can see, perhaps on the newsletter, you'll also see in a minute on the screen, we looked at products from a theme nationwide, AIG and Midland national. Now, one thing that right away, we always like to say is, is that Brian and I work with carriers that have distribution models that are direct like Midland national. And we also work with carriers that have an in-between.
Speaker 1 00:07:34 So you are getting the benefit of seeing all the options on the table. And we don't really have any sort of preconceived notion as to where are we going to place the business. We just show all of our options and say to the client based on everything you see here, which one do you think I think would work best for you? That's your, and I think in any case I work on, I typically show a person three or four, sometimes five or more contracts just to verify, Hey, this is why I believe this is the best one for you. And income payouts are pretty simple. Again, if you're just going for the highest income payout, you just run it through the database and it gives you a pops out the number, but there's a couple of different things in, in this case study. I mean, I'll let you do it because you know, Mary better than anybody.
Speaker 1 00:08:17 Absolutely. So let me show you, this is something we came up with right before we went live, but I put a little chart here that shows a comparison of the four different annuities. So we have here on the very left-hand side, we have a little graph showing the income payouts for these annuities and the two top contenders were AIG. And we also had a theme nationwide was also very high. All of them on money of about just under 200,000, we're comfortably at around 11 200 to 11,500 per year. So about a thousand dollars a month. And if this was a race horse, then the top contender actually was a theme at 11 five. And then we have nationwide right behind it. Number three would be AIG. And then number four, bringing up the rear was the annuity from Midland national. So if we were to just so they're all pretty neck and neck.
Speaker 1 00:09:21 So, and with Midland, we were more like $10,000 a year. So if we were to just look at this horse race, they're all doing pretty well. But you know, like in horse races, the one that wins by a nose in terms of income perhaps may win the day. So, but again, they're all in the same pack, but this is how that analysis looked just on annual income per year. Now, if we were to then say, okay, over the first 10 years, why did we use 10 years? Because three out of four of these products have 10 year surrender period times the AIG product in this case had a seven year surrender. But just to keep the analysis apples to apples, we said, what would that income would have looked like over the first 10 years? And it's pretty much extrapolating what we see here. It's just easier to see that the top contenders were a theme and nationwide.
Speaker 1 00:10:13 So those small differences make it a little bit bigger gap. That's why people go for highest income because it adds up over time. Exactly. Now the next example though, here is we have to ask, well, was there a charge for that guaranteed lifetime withdrawal benefit and the one carrier of these four that charges no income rider fee is Midland national. Now there is another carrier out there that doesn't charge fees at all for their income rider. But I believe in this analysis, we were looking at highest payouts and that's why you're seeing these four. But if you're working with somebody who is showing you everything on the table, they might have included other annuities for our purposes here. We're just looking at these four. So we have one that doesn't have the writer that's from Midland. And then we have the cumulative rider fees for the other contracts.
Speaker 1 00:11:04 Then we have a subtotal where we now say, okay, what does that look like if we were to take the annual withdrawals over the first 10 years, and then we tack on the rider fees. If we were to take this and layer this on, what does that look like? And you can see that the highest amount that's been paid out in fees and income were these three contracts. It was something like 140,000 cumulatively over the first 10 years, the Midland contract was more like a hundred thousand that had gone out the door, importantly, the Midland one, because it didn't have fees. That's why the total amount over 10 years, let's just say the a hundred thousand, where's the other carriers, higher payouts, but then fees that go along with it. Right? Well, and the, the, another idea behind that one is that those stacks are higher, but part of the money is in the insurance company's pocket.
Speaker 1 00:11:55 Part of it's in your pocket as well. Whereas there's a difference there. So that is what I guess all the cashflow is partial. What the fees are going to the insurance company, plus what's coming out in income payment. And then the last section we have here on the chart basically just says, okay, at the end of 10 years, assuming no crediting, this is in a fixed indexed annuity. We know that if the markets are higher year over year, you're going to get an index credit. We just said, assuming no crediting, what would the account value have been like? And you can see that the residual value of the account was much higher with Midland national. And that was a function of the fact, there were no fees and yet the income per year was slightly less. So on this analysis, if the client said, I want something with no market volatility, in terms of the fixed income investments, I want to be in control.
Speaker 1 00:12:49 I want to be able to change my mind. And she was well aware of the surrender charge schedules on all those matters. We looked at this and said, does this accomplish the objective and the feeling so far as yes, this is hitting the target well, in, in any case, even the lowest case, she's still taking a 25%, 30% increase in income, correct? Correct. Because the bond fund was more like seven. So it has given her more income and every one of those contracts is going to grow. They're going to grow a little bit, at least, right? So your remainder is likely going to be higher in each case. But again, the one without fees is going to be quite a bit higher than anybody else. The story gets even better by the way. And this just shows you that in Mary's case, she has, uh, income sources from other areas, including dividend paying stocks.
Speaker 1 00:13:38 So this pool of capital, there is a way of using Midland's product and picking their increasing income option. Again, there's no fee for that. Now the thing is, is that in year one, the payout is more like 9,000 per year. And remember the other ones were more like 10 and 11,000 per year, but I calculated it out. If we just assumed that a fixed deferred annuity grows at say at the lowest end, it's like 3% per year and that's being pretty conservative. And again, it's a hypothetical. We don't know the way that contract is designed for Midland is if you turn on income right away in the first year and you get a credit of, let's just say 3%, then next year, your income payment goes up by 3%. So if we just said, what would the number have looked like if you had a 3% increase over 10 years and 3% per year, we're now in the realm of 12,000 per year, and that could go higher or lower.
Speaker 1 00:14:41 But the idea is that if you're doing better than the bond fund, and you want that potential for increasing income, if the contract performs and you don't want to a fee, the Midland contract is nicely configured for that as well. And obviously if you're starting with a lower payout, then there's going to be a higher residual value yes. At the end. So if, again, that's where it comes down to what you want. And some people, when I wrote the newsletter, the highest annuity payout is not always the one that people choose. And some people take a lower payout because they are not presented with a better option. And some people choose it for a specific reason. And you know, if Mary takes the lowest paying contract, it's because she's got annual increases, she's got no fees and she's got more control over the underlying asset.
Speaker 1 00:15:30 All things that I like you and me both, I mean in year 10 when the contract is out of surrender. And if that pool of money keeps increasing without any risk of volatility, she can decide, Hey, I'm enjoying this. Let's just keep it going. And so it's a really nice design I would caveat. And Mary knows this, that with the annuity income versus dividends, dividends are like, you know, you can eat the fruit. That's on the tree here. Mary knows it's more like you're eating the tree, but that's where the insurance company guarantees that if you get to the end of your capital with that guaranteed lifetime withdrawal benefit, they'll keep making the payout. So it's a nice, diverse strategy for her to have this pool of money. And she can focus on other things like her grandkids and not worry about the volatility. And it gives her peace of mind at the end of the day.
Speaker 1 00:16:26 Yeah. For people that don't want to have to watch their money all the time, she just knows that every month or quarter annually, however you want to take it. She can get money out of, it was like an ACH direct deposit in the bank account set and forget it's coming every year. You look at the statement to say, Hey, it made 4%. I'm going up. I get more. So it's not a bad deal. It's an excellent deal. And this is why one of the things you and I Brian, both like is we can offer our prospective clients designs like this from a plus rated carriers. And I would venture that again. If you're looking at something like a guaranteed lifetime withdrawal benefit, and you want the total 360 and you want to be presented options that have high payouts and maybe say, you know, what, what if I wanted to forgo some of this high payout and have more control?
Speaker 1 00:17:20 This is one of the benefits of giving us a call 804 3 8 5 1 2 1, or get on the schedule, a call button, right at annuity, straight talk.com. No, that's perfect. And I wrote this newsletter a couple of weeks ago and I had somebody, uh, I met with him last year and he, uh, you know, he scheduled an appointment and he said, yeah, I think I'm ready to do that now. And so we looked at the products, which were about the same as they were a year ago, maybe a touch lower, but about the same, he's a year older. So it all worked out about we're very similarly. And he looked at any and he kinda, uh, yeah, I liked the idea. I'm not quite sure it looks so then I'm not sure what to do. So I took him to the growth versus income. That's a couple episodes back.
Speaker 1 00:17:58 And then he looked at us like, wow, oh, I get it. And then we talked about the fees, the control and the discretion over the withdrawals. And for him, that's the route he wants to go. But it's, I only put these things out there and I've been doing it for so long. It's not to tell you what to do. It's just to give you all the ideas and that's, I like your, I like your term, the 360 approach to it completely in agreement. This is something that we're proud to offer our clients is let's show you this. This is an alternative. If you want to stay in where you're at, that's fine too. So this gives you the ability to see everything that's out there in a no pressure environment. Oh, that is perfect. And that's what we're here. We're here to do. So we're good.
Speaker 1 00:18:39 Uh, let's see. So we've got a nice little series going here. I don't know what we're going to do after this done, but what are we going to talk about next week of show? I think next week, we're going to say, okay, for those people who really want to grow their monies and they're not focused on income, what are some strategies they can do there? And so we're going to not have this guaranteed lifetime withdrawal benefit rider. And we're deliberately going to try to swing for the fences to avoid market risk, but grow the capital safely. So it's a completely different strategy, appear, accumulation play. I like it. And that because
Speaker 2 00:19:15 That's what a lot of people are going for. Well, I mean,
Speaker 1 00:19:17 A lot of people are sitting in the market right now, by the time this was published probably next week, sometime the fed is thinking about tapering bond buying. I don't know if everybody understands what's going to happen with that, but it's not usually great news for the markets. People take for granted where their money comes from right now. Think they're all great investors because they've made so much money, but it's been pulling strings and propping up companies for about a year and a half. Now, just my opinion. That's all. So yeah, that'll be, that'll be worthwhile I think, but, uh, I'm looking forward to it and I appreciate you bringing this case to us to show and is Mary happy? Mary is very happy. We're continuing to see if this is ultimately the route for her, but at this point she feels like she has been presented the smorgasbord of options and she's very deliberate in what she chooses.
Speaker 1 00:20:02 And so she's very happy to be seeing what is that alternative. And hopefully the charter has been fulfilled. It's a piece of cake. That's just one more solution from annuity, straight talk and top planning. Good team. I appreciate you bringing that again. A show. I want to thank everyone for joining us. It's been educational. We're going to continue the mission next week. And again, call us (800) 438-5121, or schedule a call green button, any page in the website, check the newsletters on Saturdays, podcasts on Thursdays YouTube channel, right? There's a YouTube channel. If you want to watch the video for anybody that wants to see the charts, but again, the show. Thank you.
Speaker 2 00:20:37 And uh, I want to thank everyone for, uh, the loyal listenership that is continuing to grow and wish everyone a happy weekend. And, uh, we'll see you again next week. Thank
Speaker 0 00:20:47 You. You've been listening to annuity straight talk. The preceding information is for informational and educational purposes only and does not represent tax legal or investment advice. The views expressed by guests on this program are their own and do not necessarily reflect the views of nerdy straight talk. No information presented today should be acted upon without meeting with a licensed profession. It is important that you read all insurance contract disclosures carefully before making the purchase decision guarantees are based on the financial strength and claims paying ability,
Speaker 3 00:21:37 Uh, showcase. Ron G is an investment advisor, representative of insight, folios and sec registered investment advisor. The firm only transacts business in states where it is noticed spiraled or is excluded or exempted from notice filing requirements. Any fee-based financial planning and investment advisory services are offered through his association with insight folios top wedding LLC is not a registered investment advisor and is not another name under which insight folios provide services. Insurance products and services only are offered through top planning, LLC insight, folios Inc, and top blending LLC are not affiliated companies.
