Episode Transcript
[00:00:00] Hello and welcome everybody to the Annuity Straight Talk podcast. Episode number 185. Climbing right up there.
[00:00:07] My name is Brian Anderson, founder and creator of annuitystraighttalk.com following up on last week's episode about the changes in immediate income, how much better it is than it used to be, why more people are getting into it, or finding it easier to certainly commit and justifying it as a very solid move and retirement portfolio.
[00:00:28] Please like subscribe or comment on any of your favorite podcast platforms or on YouTube. Schedule a call if you want to talk to me.
[00:00:35] Top right corner of any page on annuitiestraight talk.com when you make an appointment with me, you get to write some notes telling me what you want to talk about.
[00:00:44] Some people have a few questions and some people just give me some basic information.
[00:00:51] I've actually had some people put, put a lot of information in there, which is fine, whatever you guys want to put in there, but just kind of give me an idea of what direction to take the conversation.
[00:00:58] Maybe prep a few ideas that I have or might have for you as well. And then I got a couple recent questions, recent appointments.
[00:01:08] Right off the bat I knew, hey, that's a podcast. One of them was last week, right when I was doing the previous episode. And I thought, oh wow, I maybe should talk a little bit more about deferred income.
[00:01:18] So a lady got on my calendar and put everything else in and hey, meeting notes. What do you want to talk about during this appointment? She said she was exploring.
[00:01:25] Want to know if it was a good idea to take part of a 401k and buy an income annuity before retirement. A few years before retirement. Some people plan to wait until the last minute, but yeah, some people get it ahead of time and some do it at the last minute. The sooner you do it, the cheaper it is. If you do it early, it's going to cost less to hit your income goal. You get annual income increases every year you wait.
[00:01:50] Some people misstate this as the yield. It is not is an income increase. Everybody knows how Social Security works.
[00:01:58] If you wait, it increases by a certain amount. That's the same thing with these annuities.
[00:02:04] So if you do it before retirement, then you get several increases and it takes less to hit your income goal. So now I didn't get a chance to understand this lady situation, so I can't make a recommendation. But it's one of those times when I looked at it and I, I don't know if she should do it or not, but Just out of the meeting notes, I could tell, like I knew exactly what direction I was going to take her and say, here's the benefit, this is what it's going to cost and this is what it's going to give you. And then it's her decision. But we talked about the immediate income increases last week. So those who have bought deferred income in the last few years are getting some incredibly good deals.
[00:02:38] So rather than talk about just the payouts, let's look at it in a different way. On a side note, the lady who made the appointment didn't show up at the scheduled time. So I will never know. And when I said I don't know what I would recommend to her, didn't get a full chance to understand her information, I called, got her voicemail, left a message. Now sometimes people are busy doing something and call back in five or six minutes, no big deal.
[00:03:00] Sometimes people email me ahead of time. It's my least favorite thing about making myself publicly available.
[00:03:08] And that's as disrespectful as you can possibly be.
[00:03:12] Now this happened to be mid morning Friday, no other appointments on my calendar. If I didn't have something scheduled, I would go off and enjoy the summer in Montana that ruined my entire day for something that didn't even happen.
[00:03:26] And it's not just what it does to me. It also takes that spot away from someone who actually might be serious or mature enough to actually make the commitment. Now if you don't want to meet, you don't have to meet. It's fine if you even up to the last minute, if something comes up and you want to reschedule, you can always email me. That's perfectly fine. I understand things change, but when you don't show up, ah, I just, I don't like it there, I said that. I probably didn't keep having to say it, so it seems to happen more often these days. But just don't make an appointment if you're gonna show up. So the earlier you buy annuity income, the cheaper it is. And a lot of cases, much, much cheaper. So I talked about the immediate income, payouts last week and $100,000 purchase. It was 7.14% for a 65 year old couple. And generally speaking, everyone's different. But top of the market, that income is gonna increase 10% for every year you wait.
[00:04:19] Every contract is different.
[00:04:21] Some of them have an 8% increase or a 7% increase in a different payout rate. Don't worry too much about those. The bottom line is the income that it'll pay you. General example, so if these guys, a 65 year old couple waited a year, that'd be about a 7.85% payout. Okay.
[00:04:39] Of the initial investment, they all work a little bit different. But that's the easiest way to look at what the bottom line income is.
[00:04:45] So you can get a 10% increase over a year, but if you wait an extra year, it's going to cost you about 10% more to do it.
[00:04:52] Now the older you are, the higher the payout rates will be. So it's not exactly 10%, but that's there is a cost to waiting.
[00:04:59] And this is something why don't you do it makes sense. This is a great time to do it because if you get it out ahead of time, you can cut a lot of off the cost. If you don't do it, that means the money you plan on spending has to grow about that much for it to essentially cost the same. So if you're going to buy it, say oh, I'm going to wait a year and do this, it's going to cost you 8 to 10% more. And so the rest for it to be the same kind of deal, then your money has to grow by at least that much. You can't get that without risk.
[00:05:26] So it's not only more lucrative by the annuity early, it's also the safest play you can make because that's the worst thing your portfolio does is a piece of it grows by 10%.
[00:05:36] That's not too bad.
[00:05:38] Now what I alluded to this last week as well, it only takes a few years to get a payout of 10% of the initial investment.
[00:05:45] I think in the example with a 65 year old couple, that would be probably four years on that one.
[00:05:51] So that'd be pretty good.
[00:05:53] I looked at one this morning with a lady who's thinking about swapping out an old annuity that's surrender free to see if she can get a higher payout. And she can indeed get a lot higher payout. Now she's going to wait two and a half years till she's got to take RMDs and in two and a half years she gets to a 10% payout of her initial premium amount. Think about it this way. If you wait three years, the income benefit has increased by 30%, maybe more if it's compounded return.
[00:06:20] So you'd need to gain 30% to have the same amount of money to buy it later or the same percentage of your portfolio. It has happened for the past few years, so we have had incredibly good returns. If you were able to stick with it, if you were allocated the right way. Not everybody had that and bonds certainly didn't. That's why a lot of these things. It just makes a ton of sense to replace bonds because bonds can't come anywhere close to doing this kind of thing.
[00:06:46] So people who waited didn't necessarily miss out if they got that yield in the market. But the annuity is going to cost more and then that's just psychological block for a lot of people as well.
[00:06:55] And these current numbers justify it as a beneficial strategy for a real wide demographic of people. Some of the people that I've done business with in the past couple years bought it 10 years before retirement. A lot younger people, just incredible payouts. One contract I sold to a couple that was 50 and 47 years old, wife was only 47. They're going to start taking income in 10 years. When the youngest is 57 years old, the income payout is 13.5% of the initial investment.
[00:07:24] So they'll start taking income and it's probably about eight more years from now and before she turns 65, they're gonna have every bit of their premium back and be in the insurance company's pocket for the rest of their lives. If either person lives into their 90s, it just keeps going.
[00:07:42] Pretty damn good payout for a very low risk asset. We want to be technical.
[00:07:47] Imagine the type of freedom they're gonna have with the other investments. They don't have to worry about anything else because they got it covered when they're just 50 years old.
[00:07:55] So if the lady would have showed up, I would have basically told her this. If you it is a very good deal. If you need or want the guaranteed income in retirement, the time to buy it is when you get the idea it's going to cost less or return far more. However you want to look at it, the sooner the better.
[00:08:08] Doesn't everybody like to get a good deal, spend the least amount of money possible? Sometimes you got to get stuff when it's essentially on sale. If you want to talk about it, you get on my calendar. My name is Brian Anderson. This has been a quick message for episode 185, the Power of Deferred Annuity Income. I appreciate you guys stopping by. Please like subscribe or comment on any of your favorite podcast platforms or on YouTube. Share it with your friends. Send it out to someone that might be able to use the information and top right corner of any page if you want to make an appointment. All right, guys, I'll see you next week for episode 186. You guys have a great day, okay? Bye.
