Episode Transcript
[00:00:01] Hello and welcome, everybody, to the Annuity Straight Talk podcast. This is episode number 235.
[00:00:07] My name is Brian Anderson, founder and a creator of annuitystraighttalk.com creator of all this great information that's going to help you make excellent decisions in retirement.
[00:00:17] Often copied but never duplicated. A bunch of copycats out there, guys that'll be in there for three or four years, take a bunch of my stuff recreated their own, say, oh, I'm an expert. I've been doing this three, four years. I've been doing this since I got out of college. This is my profession and can copy the information, maybe put it into different words, but who else has a backdrop like this with a grizzly bear in the podcast? I'm a Montana guy. I shoot it straight. That's why I named the website what I Did. Please, like, subscribe or comment on any of your favorite podcast platforms or on YouTube to schedule a call with me or Nate. Nate is here doing an awesome job. Everybody likes Nate because he's. He's a lot like me. No bs but hit the top right corner of any page on annuitystraighttalk.com and you can schedule a call and we'll tell you what's up. I mean, I think we had a bunch of appointments this week, and it's just kind of like there's only probably two or three where it's like, well, we really think you should do this annuity. A lot of the people just needed some help. Hey, is what I'm doing okay? And it's like, I talked to one lady, I think it was on Tuesday. Great gal. It's like, I'm nervous about what I'm doing. It's like, okay, like, tell me what. What you got going on and what. What's. What you're working with. And some of the newities she was recommended were right in the top of the market and sounded like the person was taking her that direction. And I just, you know, I blessed it. Hey, go for it. I think you're right. That's exactly what you need. We're not trying to sell everything or everything to every person that comes in. So no agendas, just help you.
[00:01:51] So I talked about splitting annuities four years ago.
[00:01:56] This is a little bit different splitting annuity strategies, but when rates really took off in, like 2022, they started climbing. Because for a lot of my career, for the previous 10 years, rates have been in the toilet. Nobody wanted to buy annuities. I had to really fight to get anything. It's just I didn't really feel compelled to be like, I came up with alternate strategies, different ways of looking at it, short term options because rates were low. That worked out well for a lot of people that worked with me. Okay.
[00:02:29] But I've used this as advice for dozens of people who have a hard time deciding between two different strategies in retirement. Now, this can pertain to annuities versus an alternative like bonds or CDs or even apply to mixing income strategies, portfolio management, however, or whatever the case may be. But the basic point is that my recommendations are not an all or nothing proposition. In the past year, rates have climbed back to some of the highest levels in 20 years, while bank savings and CDs have settled. Now, using an annuity comes with distinct, distinct advantages.
[00:03:10] But when rates are clearly higher, then it is obviously advantageous to use them for at least a portion of your portfolio.
[00:03:18] Now, when I wrote about this four years ago, I was mostly talking about people who are having a hard time choosing between fixed and fixed index annuities. Fixed annuities being the MYGA multi year guarantees, the fixed index being protect the downside, link to the upside and understand that. I had a big email list of people that I had told go short term or wait, wait, wait, wait. And so I got really busy because a lot of people listened to me and trusted me. And when the rates got back to where we had really nice fixed rates, really nice index options and really nice income payouts, people came back and everybody's happy, okay? But a lot of people that bought the fixed index annuities were putting a portion of it because they were still nervous about what the market would do. Now they're not going to lose money, but if the market goes down, then they don't make anything either. So a lot of people would buy the fixed indexed annuity and put a chunk of their money into the cash account because the cash account in the fixed index annuity is the building block. And that's the, you know, the fixed annuities. The building block indexed annuity has just more options. And so I know some people who have never diverted from that strategy. So what they ended up doing with a fixed index annuities, they just turned it into a fixed annuity, a myga.
[00:04:34] But mygas pay more interest. So if that's the case, they should have two separate contracts. Put half of it in the MYGA and half of it in the indexed annuity.
[00:04:43] So you've got a really incredible baseline. So right now MYGA is from a high quality, good Company, not the dog and pony shows, private equity garbage. That's like 6.34% simple interest, right? Good solid mutual A plus companies are right around five and a half percent. You can go a little higher.
[00:05:04] Okay, they're about five and a half. The fixed index. Annuities have growth potential where we've seen in the past year 12 to 15%, maybe higher, but certainly double digits.
[00:05:15] If you blend two contracts, you have a great baseline with plenty of upside potential. Now in the past year or two, I tell this to people that are considering taking this route where they're protecting money, they got free withdrawals. Maybe they use it for an income play, maybe not, but.
[00:05:34] And then. And they'll go either way. Some people say I just like the mygas. I want the guaranteed rate.
[00:05:39] And some people say I want the index annuity because I like that upside potential.
[00:05:44] But if you're in the middle, you can always split it.
[00:05:48] I think it's great to see people figure this out on their own. So I kind of like to plant seeds for everybody. I learn as much from you guys as you do for me because I get your perspective on things. So there are a lot of ways to look at it. Not everyone is looking at annuities simply to park money and keep it safe.
[00:06:06] This also applies to any income strategies. And it doesn't just mean two different types of annuities either. Annuities have some specific vantages over bonds, but you don't always have to replace the entire bond portfolio. And I think it's interesting that I. I don't know anyone that really loves bonds. I love my bonds. I'm sure there's a few people that just really like the bonds. I know a lot of people that hate them. And kind of my opinion or my, like, what I feel is accurate doesn't mean it's fact. Most people only own bonds because they haven't been given any other options. It's like, well, that's what they say. This is what you do, right? A little bit cash, a little bit of bonds. Heaven forbid, a bond fund. Talk about that. We all know, and I'm not telling you to get rid of your bonds.
[00:06:51] First of all, the fixed annuity, the myga is a whole lot easier to use than bonds are.
[00:06:57] And let's say, let's. For comparison purposes, let's say that the interest rate is the same on the bond and the annuity annuities will typically be higher than a bond. The bond, you've got to have a big long ladder. All that stuff okay, so the bond, they both pay equal interest, but the bond is going to be limited to the coupon payment is all you're going to get out of it.
[00:07:21] The fixed annuity won't fluctuate as interest rates change. And you can take 10% of the value every out, every year without penalty. So the annuity has a greater ability to relieve pressure from the security side of a portfolio. When markets are down in value and you don't have to go build a 15 year bond ladder, several dozen different bonds continually manage, continually replace, continually. Shopping one annuity makes your life a whole lot easier. The yields the same, you got more liquidity. Why not let the insurance company on the bonds? You get the guarantee that they produce after they take their spread and life is good and easy and very safe. All right, so do you want all of that?
[00:08:02] Do you want half of that? Do you want a quarter of that? It's easier telling you. So the next example is a scenario where the income is important or the baseline of the overall plan. If you're trying to generate income, let's assume a bond portfolio has a blended yield of 5%. And you go out and you put half a million dollars into 60 different bonds because you don't want to be too risky, right? And they range in maturities from 2 to 18 years or whatever they do. Okay, that. So if it blends out the yield to 5%, then you're going to have about 25,000 a year in cash flow.
[00:08:36] So a multi year guaranteed fixed annuity would do the exact same thing.
[00:08:41] But an income annuity would produce about 8% or more annual income. So instead of 25,000 a year, that's $40,000 a year. A bond or a MYGA would retain. The cash value is if all the interest is withdrawn. But the income annuity would pay interest and principal. So you see a declining value in the asset.
[00:09:01] There's a trade off. Some people skip the income annuity because of this, foregoing the powerful income stream that takes a lot of pressure off their portfolio. If the income you need is greater than what the bond portfolio produces, then the annuity is the better. Better is a better option than selling stocks or bonds that may be devalued because of market changes or changes in interest rates. So if you're not sold on the idea, hey, split it up. Most people who do this come back later and buy more annuities because it's easier as life goes on. We want things easier.
[00:09:35] Okay, now you can split annuities for growth and split annuities with other assets. It provides different types of growth potential, latter time periods and diversified income. In the past, I know that people have passed on annuities because they think it's all or nothing. What it isn't. The best retirement plans are put together incrementally. So you take baby steps to make it happen and make it perfect.
[00:09:59] So, and I always tell people that my first recommendation is going to be what I see as the optimal plan.
[00:10:07] If that doesn't work for you, then all you have to do is tell me.
[00:10:10] Not everyone follows mathematics directly because we can't perfectly project those.
[00:10:17] And that's okay. I understand that. What feels good is also important. What makes you happy is also important.
[00:10:23] Doesn't mean that mathematics have to be optimized in all those cases. So in that case, that's communication. You say, yeah, I get that. But no, no, no. I don't like that. I wasn't thinking that much or I was thinking about this and that. Tell me and we can alter it and adjust it. So splitting things up to create slight but definite improvements is what most people commonly do.
[00:10:48] Speak up and I'll help you create a bulletproof retirement plan. Get in my calendar. If you want to have a reasonable discussion with someone who's going to put your interest first.
[00:10:57] It's the top right corner of the page, any page on annuitiestraighttalk.com, schedule a call. Guys, this has been episode 235, splitting annuity strategies. Open your mind.
[00:11:08] There's lots of options. None of them have to be all or nothing. And a lot of the investment managers or even other annuity guys are like, like, no, no. All of it here, all of it here. It's not hardline. I'm just trying to educate so you, so you can figure it out. So there you go. I appreciate you guys joining me for episode 235. You guys have a great week. And if you want to get on the calendar, if I don't hear from you, I will be back next week with episode number 236. Thank you so much for joining me. And you guys have a great day. Okay, bye.
