Episode Transcript
[00:00:00] Speaker A: Hello and welcome everybody to the Annuity Straight Talk podcast, episode number 232.
My name is Brian Anderson, founder and creator of Annuitiestraighttalk.com My name is Nate Lee.
[00:00:11] Speaker B: I've actually been working now with Brian for over a year. I've been on a handful of podcasts. But excited to be back and cover a new topic today.
[00:00:20] Speaker A: Yeah, and we've been playing around in Montana a little bit. Can't say we've taken it all that seriously, but, but we had a good time. I did some fishing, lounging in the sun. We got some smoke in the air from Washington, Oregon and maybe Canada. So obscures the background a little bit, which I'm not super psyched about, but that's okay, we'll do it. So today we're going to talk about something that we get from a lot of clients. A lot of people ask us this stuff and we're going to talk about long term care riders with annuities. Long term care is a big retirement topic and we want to make sure everybody understands, you know, what that means. So it's often used as a major selling point. And we just want to set the record straight and get you guys to understand what, you know, where the benefit is, if there is any, and what you should focus on most importantly. Okay, so, so there are a lot of income products that are popularly sold. You know, the bonus annuities with an income rider bonus and the guaranteed lifetime income. We've talked about those a lot. We've got calculators on the website that show that one of the additions to that is that kind of goes like this. If you need long term care, well, they'll double the payments for five years. Okay.
[00:01:25] Speaker B: Yep.
[00:01:26] Speaker A: It's not true long term care insurance. It's just additional task taxable income. And there are, so there are products that are long term care, right?
[00:01:35] Speaker B: Yeah, there's definitely specific products that are intended, you know, solely for that purpose. But most of the products we see are products that have income and then secondary would be having that long term care doubler as most companies call it.
[00:01:48] Speaker A: Yeah, or LTC Kicker or something like that. Okay, so I don't use it as a selling point, but a lot of people have been presented with the option, we get the call, the time, hey, does it have guarantee or does it have a long term care on it?
And I said, well, we got to explain it. So here's a podcast we can point people to in the future and we'll explain exactly how it is. Okay, so the Standard example is you get your guaranteed income and if you need long term care, they will double the payment for up to five years. But there's two problems with that. And we talk about how long term care actually lasts, right?
[00:02:19] Speaker B: Yeah. Well, first, the average stay is usually going to be anywhere from two to three years once you're in a facility. And these insurance companies are aware of that. So that five year payout, it's great. But all they're doing is giving you your money back at a faster pace.
[00:02:34] Speaker A: Yeah, exactly.
Yeah, I just said, I said accelerated repayment of your own money.
[00:02:39] Speaker B: Okay, but there's a catch.
[00:02:40] Speaker A: Yeah, there's a catch. And the second part of that is that if you, you know, as you take the income payments, the cash value goes down and it goes to zero. And if the cash value goes to zero, then that benefit is not available. Okay. So it's really only whatever money you have in there, in there that's available for, for withdrawal.
[00:02:57] Speaker B: And almost everyone is going to make you wait at least two full contract years prior to turning on that, that doubler or that long term care kicker.
[00:03:05] Speaker A: Yeah, exactly. So you got it. Yeah. You got to own it for two or three years before it's available. So you can't, if you need long term care, you can't go buy it just to get extra money.
[00:03:12] Speaker B: Exactly.
[00:03:13] Speaker A: Okay. So the only real way to benefit from this, we talked about this yesterday, is if you happen to need long term care in the very early years of the policy when there is cash value in the policy. But that would be an absolutely terrible example. And this isn't going to give you any additional benefit, I mean honestly, than having your money in a bank because again, they're just going to give you your own money back. And we have to be honest, long term care precedes death.
So a lot of the contracts have what terminal illness, rioters they might have or waivers where they'll waive surrender charges for long term care, terminal illness, you can check for that on contracts which is the same exact thing. Because if you're in a facility for a couple of years before you pass away, then all you want to do is just go spend your money on the care that you need. And that's essentially the benefit there. Right? Yeah.
[00:03:59] Speaker B: One thing I want to add to that is, I mean, wholesaling for, you know, almost 20 years. When I would explain this to an advisor or agent, it was always, this has to be secondary. If you're going to buy one of these, you know, income riders or products that has to be the primary objective. And then, oh, by the way, you have this long term care writer, that little bit of peace of mind. But that should not be the reason why you buy that product.
[00:04:23] Speaker A: Exactly. So we want to, you want to own it for like the guaranteed income if it happens to have that on there?
[00:04:29] Speaker B: Sure.
[00:04:29] Speaker A: It's their extra. That's why it's free. Because I don't, I think, you know, I don't know this for sure, but my cynical mind is the insurance companies know they're not going to pay anything extra on it. That's why it just comes added to it.
[00:04:39] Speaker B: Okay, well, and that brings up another good point that, you know, these high payouts that we're seeing today on these income products, you're going to get your money back in anywhere from what, 12 to maybe 14 years. Possibly, possibly because of this high payout. And so we just always, I guess take that into consideration because you want to know where is the, the value if you put your money into this contract? Well, it's living beyond 12, 13, 14 years. And what the life expectancy would, you know, table would tell us is most people, if you've got a couple age 60, what, five, one of them is going to make it to age 93.
So if you just stop and think about that, you know, depending on when you're looking at purchasing one of these and then when you're wanting to turn the income stream on, just do the math. Right. And understand, you know, where's your break? Even if you will, when do you get ahead of the insurance company?
[00:05:30] Speaker A: Yeah, exactly. So, yeah, like I tell people, if you're going to buy these products, buy it from the guaranteed lifetime income, live a long time and stick it to the insurance company and. Exactly. And it even goes back to like, you know, Social Security studies that said people with guaranteed income live longer. And then I got challenged on that. It's like it was a fun podcast to do anyway. But yeah, your life is void of stress, so you have less things to worry about if you've got guaranteed income. Okay, so that's our verdict is like you don't buy for the long term care. Buy it for the other reasons. If it happens to have it, then fine. Okay.
[00:05:59] Speaker B: Yep.
[00:06:00] Speaker A: So we got a case study because a nice lady we started talking to last year has got a product. You want to explain a little bit about that?
[00:06:06] Speaker B: Yeah. So I think not to pick on Allianz. It was an Allianz contract that's been in force for what, how many years now?
[00:06:12] Speaker A: Seven.
[00:06:12] Speaker B: Seven Years, eight years. So you know, cash value unfortunately hasn't done very well.
Of course that's what they're going to base your income payment off of. And so she came to Brian and I and just wanted to see what options she had. But her existing contract does have that doubler already built into it.
[00:06:30] Speaker A: Right. And so but if she takes the cash value of what's available, she can go to Nationwide and get over 28,000. I think it's $28,400 per year.
But Nationwide doesn't have a long term care doubler.
And what I told her and she hasn't made a decision and that's fine. But what I told her is that she could get an extra 8,000 plus a year. But the long term care rider, that was, you know, the income paying 20,000 a year with alliance, if she got the best deal on that, needed long term care in that window of time, okay, the most she could possibly get out of it would be $100,000. Well, nationwide is going to pay her an extra $8,000 a year. That means she's going to get an extra hundred thousand dollars out of that in 12 and a half years whether she needs the long term care or not.
So that was our advice. You're going to get it whether you need long term care or not by switching and getting more income. So don't hang on to it just because it's got a doubler that may or may not pay off.
[00:07:28] Speaker B: And I want to circle back to something you already said, but having that terminal illness, you know, waiver or long term care waiver allows you to access your money.
And more often than not, I think you and I both would recommend doing that versus, you know, continuing to, to look at a doubler just because, well,
[00:07:47] Speaker A: and look at the Nation, the nationwide contract, 28 a year, that cash value is going to drain quick. But if something terrible happens in a year, five, she needs long term care, there's probably a waiver available in the contract where she can get that, you know, get that benefit out. I've even had a contract that didn't have a terminal illness waiver or a medical waiver. And it's, I'm not guaranteeing this, but cooler heads often prevail and sometimes a company will say, yeah, okay, we'll relax the standards. In this case I have it happen one time but I've never had to try it. And I'm not saying buy it based on that, but just understand that you can, without all these bells and whistles, you can get everything you want or the same value. The idea is to go for the highest level income.
[00:08:30] Speaker B: And I will say that one thing that differentiates Brian and I at Annuity Straight Talk is what we know there's better options out there and we know there's other products that can accomplish, you know, what you're trying to do when it comes to this without sacrificing, you know, either income or growth potential or legacy planning. And that's where oftentimes we, you know, people just are selling a product with a little gimmick, but we know that the value isn't necessarily there.
[00:08:56] Speaker A: Right. And I like, and I guess the whole thing for me is to avoid. I want something that works for you and works for me. What doesn't work for me is that you get 12 years down the road and for some reason need to be institutionalized in the care facility and you realize that there's no, there's no additional benefit there or it's very small, there's a little bit of cash value left. So when a lot of people come to us, they, they are not explained the fact that hey, this isn't going to run out when you're most likely to need it. It's not going to be there. Okay. So yeah, so that, I mean that pretty much covers, I think we beat that horse to death. But real quick, a note on the typical, like the true long term care annuities and how they work. You want to talk about that?
[00:09:32] Speaker B: Yeah. So there's a couple of, you know, companies out there. One America, nationwide, Lincoln, Lincoln's got one. I mean they're truly built for long term care. The problem that insurance companies have run into is it's super expensive. And by the time usually, you know, someone's wanting to buy one of these policies, they're a little bit older.
[00:09:50] Speaker A: Yep.
[00:09:51] Speaker B: They're starting to see that. All right. I might need some additional funding to, to cover some of these costs because expenses keep going up and up for any type of care, whether that's in home or in a facility. And so, you know, if that's what you want, that's probably the direction we're going to steer you if that's the, the primary objective. But then it comes back to, you know, are there other things we could look at and evaluate that probably make more sense with your money? And sometimes that could be a MYGA with a guaranteed rate. It could be maybe an income benefit with, you know, just guaranteed lifetime income or a lot of these products we sell, accumulation products, they've got 10% free withdrawal. So you're able to just tap in and take a big chunk out every
[00:10:30] Speaker A: year if you need, you need extra money to pay for something, right?
[00:10:34] Speaker B: Exactly. And then in that, you know, unique situation where you are going to be confined and you know, it's going to be kind of dire where, yeah, I got to get it more my money, that's when you enact that waiver that allows you to take out all of your money without paying a surrender penalty.
[00:10:47] Speaker A: Yep, exactly. And, and that's what I talk about. So, you know, a quick example is, you know, you put $100,000 into one of those policies and it's going to give you 300,000 of benefit payable. It'll say like payable over five years.
So that's 60,000 a year. But those are qualified long term care annuities. So that would be tax free income. That's true long term care insurance. You live 20 years and you don't ever use it, your family's going to get the original principal back and sometimes less, maybe only 80 or 85,000.
So that's what you have to consider. And when we explain it properly, a lot of people decide, hey, you know what, I'm just going to set aside 100 grand, 150, and grow it at 5%. And I'm sure that money will be there, will grow up to a point where we can use it if we need it. Right?
[00:11:28] Speaker B: Yeah. And I think that brings us to, you know, our verdict in almost all situations is, you know, don't buy, you know, a product unless it's specifically for long term care. Don't buy an annuity especially that has income as your primary objective because that's, that's not what it's intended for. And the insurance companies know that.
[00:11:47] Speaker A: Yeah, absolutely true. We're on the same page. That's why he's here, because he's a great resource, has a ton of experience with advisors. He knows how people sell them versus how they should be sold. Thousands of thousands of advisors over the years. He knows the good and the bad. I got ultimate faith and trust in him. If he ends up on the phone with you, you can request him as well. So really good opportunity. We're just here to help people. And no matter what you buy, consider the alternatives. We're going to explain all the details to you so that you really understand. That way you get to choose what you want to buy. We're not going to hammer you for a sale.
[00:12:19] Speaker B: And the last thing I'll add is you know, you've been doing this a long time. I've only been working here for a little over a year. But we're on, you know, lots of phone calls, talking to people all over the country. And you know, one thing we run into is, you know, my local, you know, agent told me to do this and you know, it's great to get a second opinion, but. But I will tell you, if you listen to the podcast and you go and take a time to set a meeting with one of us, we're going to dig into the details and explain to you all those options. But, you know, always give us a chance to, to position it because we're not selling something transactional. It's not like, you know, we're just trying to make a sale off of you. And unfortunately, I've seen that all too often where they sell the gimmick, right. A big bonus or the long term care writer. And you and I, you know, get on the phone with somebody and they go, I wasn't even explaining how that worked. Yeah, they don't get it.
[00:13:10] Speaker A: And, and, and also, remember, if you've got a great deal and you've got the deal in front of you and we know the advisor did a good, good job, we're going to give you our blessing and say, yep, he sounds like a great guy. He did it right, you know, everything. Go ahead and do business with that guy. We don't got to get it from everyone. We're just here to help people. We'll get the stuff that falls for us. We'll get the people that need our help, that need someone to work with. But, you know, we're here to help everybody no matter what.
[00:13:32] Speaker B: Yeah. Okay.
[00:13:34] Speaker A: Hey, Nate, thanks for coming to Montana. It's been a blast.
[00:13:37] Speaker B: Great to be back. Thanks for having me.
[00:13:38] Speaker A: And we'll have you and maybe your dad back later this summer. And yeah, this has been episode 232, long term care Riders on Annuities Income Annuities.
Appreciate you guys joining us this week. We'll think of something good and be back next week for episode 233. All right, you guys have a great day. Thanks again and goodbye.
