Episode Transcript
[00:00:00] Hello and welcome everybody to the Annuity Straight Talk podcast. Episode number 184. Beautiful first of July day.
[00:00:09] Big American party coming up this week. I like to tuck out and go to the woods. Avoid the noise because I'm a grouchy old man. Been that way for a long time. Born after my time. Looking forward to sharing with you guys something that many of you may not recognize. Going back looking the early days of the podcast a little bit. For your snapshot of where the market has changed, please like subscribe or comment on any of your favorite podcast platforms are on YouTube.
[00:00:37] Share it with your friends.
[00:00:40] Get it out to people you think it might help because that's what we're here to do. We're just here to help people. And sometimes we sell annuities too. But most people don't buy them from me. They buy them from someone else. Or they decide not to do a lot of. I call it charity work. But it's. It is my chosen profession. I like it. Going to share my screen with you. Give myself a visual aid for this presentation and see what you guys think about this going on four years or it's over four years of podcasts. 184 episodes. Sometimes I take a week off some weeks. This is one of those weeks. It's not even worth like a lot of people, you guys are busy doing stuff. Family barbecues, playing whatever you're doing, camping. A great week for it. But I look at the past episodes for a few reasons. One is to just say, hey, look, we got a whole bunch of information. Another one is to try to fill in gaps, see if I missed anything. A lot of times I'm scrolling through the list to find something that's going to relate directly to a question I get. If I see a question that can't be answered, that's a new episode. But one of the biggest things is a lot of things need to be updated. So I'm going to do that probably in the coming weeks. Frequently asked questions. See where they updated. How things are different. When I saw this one, some of those times I look at those old episodes and say that even doesn't need to be here anymore. There's a few of them that I just got rid of because it's just irrelevant to what we're doing now.
[00:02:02] But this one I saw, I was kind of interested in going through the list on episode number 10 nationwide. Offers a compelling income opportunity. It was a big deal at the time. This is 2021.
[00:02:14] Probably back in I think maybe June or so is. But when we got the 10th episode out, something like that, and it's interesting to me because we had a ton of content ideas then because we could talk about anything about annuities. But why in particular was that episode number 10? Why did that get our attention? And perhaps it's something that got your attention. And right now I do really think that everyone should pay attention to this. The, the biggest thing for me was I hadn't recommended an income product in a long time. We hadn't seen an income payout that high for a long time. So it was a big deal for us.
[00:02:48] So these days it's going to look rather weak, but it reinforces a big point for those who are trying to decide if guaranteed income is worthwhile and annuities in general are better. We all know that, right?
[00:03:00] A lot of the business I've done in the past few years came from people who had been looking at annuities for a while and been on my list for a little bit. When the rates came up, they knew just how good a deal the updated products were. So they could see the difference. They thought, oh wow, now it's a good deal, I'm going to go for it now. A lot of the people that are looking at it for the first time don't realize how much better it is. Is this a good deal?
[00:03:22] Because they hadn't looked at it in the past and obviously people are newly retired and it's becoming viable for people even 10 years before retirement where it wasn't before. And it's not to say that the nation why deal was really good. It was just better than anything that had hit the market in eight or nine years, probably into 2022. Low rates had plagued this business for a long time. We got a nice little bump in MyGas and FIA cap rates and stuff like that in 2018 and 19 that vanished in the COVID crisis and all that BS.
[00:03:52] This website went live technically in November of 2008, but we still had solid rates. And I was, hey, I'm a Myga guy and I looked at these GLWBs and they were pretty dang healthy.
[00:04:04] But with all the catastrophe in financial markets, it did not take very long for that to disappear. Many of you might remember that most of you guys that are looking at retirement have been saving and investing for longer than the average investment advisor has been in the business might remember that NASDAQ didn't recover its 2008 high until 2016. There were eight years of a lot of volatility, a lot of uncertainty. Real estate collapse took years to recover and rates were persistently low starting in about, oh, mid to late 2009 into 2010, it just looked like Ah.
[00:04:42] So during the first 10 years of my career I had to deal with the fallout from two major crises in the financial markets.
[00:04:50] A majority of the guys in the business now didn't necessarily have that. Those who do understand well, the value proposition of what we're trying to convince people is a good idea. But and it's not to throw shade at anyone, but everybody, you guys all learn lessons, Everybody I talk to learn those lessons.
[00:05:05] And maybe it helps to have someone with that perspective. Not that you got to do business there, but just understand, talk to a few different people at least.
[00:05:13] So the pressure that put on me early in my career to become successful even at that time was really just to make a living because I believed in it. I didn't make a whole lot of money, but that environment gave birth to alternate strategies and ideas and the ability to adjust recommendations over time.
[00:05:35] So it sharpened me a lot because without pressure we don't grow.
[00:05:39] So now you have access to all those ideas. And I still try not to push anyone in one direction or another. I just want to make sure you understand there are several ways of doing things with or without annuities, what it looks like one way or the other. So I'm not going to use an annuity. Here's what it looks like. I want to run the risk. Maybe you got enough money, it doesn't matter.
[00:05:57] Don't want to lock it up. We're going to talk about locking it up.
[00:06:00] And then.
[00:06:02] But with annuities, there are other ways of doing it where there's a lot of guys that'll just say, hey, I got a product, you should buy this. This is it. I like the guaranteed income. Now, I didn't always do that. If you've been listening for a while, you know that.
[00:06:14] And so you're going to get a couple different strategy ideas at the very least for me, and then the different product ideas as well.
[00:06:21] But that's not the topic of this is I like to point out the difference between income payouts and tackle the rest of it at another time. So what is the effect of higher rates that we've seen in the last two and a half years? Really probably two, that's almost three is when we started getting really good stuff. So what was it four years ago in that podcast? It was a big deal that a 65 year old couple could get an immediate payout of 5% on a GLWB at the time. That's immediate. Now obviously it's different if you defer. We know that we're going to keep this general straight to the point that even beat single Premium immediate annuity SPIAs.
[00:06:59] Every year of deferral, the income is going to increase. But the point is like what that payout meant, what Nationwide was stepping out and doing is maybe they knew something nobody else did.
[00:07:09] But the idea was it wasn't to say recommend that buy that product, but if it was meant to tell people that we were going to buy guaranteed income, then that was a really good option. You should not overlook that because we hadn't seen anything like that in a while. Hey, we got something that may be worth considering. I still wasn't sold, but that's not the point. All right, again, in the podcast we gave an example of a 65 year old couple after the bonuses added, they can enjoy lifetime income on a joint basis immediately.
[00:07:34] $5,400 per year. I saw that when I was looking for episode. It seemed like a good idea to reevaluate that one. I ran the same product on my calculator for the payouts now. And the same age couple can now get 7,140 annually. That's a 27.5% increase in the immediate payout and it's still competitive with SPIAs as well. Now if you heard me talk about it, you got to shop both sides of it because sometimes the GLWB is paying higher, sometimes the SPIA is paying higher. And then you get into the other details depending on what you want and the basket of benefits you want. So you can't forget to look at all of them. But, but I've got the calculators where you can do it and you don't have to step foot in 12 different offices to see the same thing. So available and free for anybody who wants to see it.
[00:08:19] So one way I've always looked at these products is to see how long it takes to get your original principal back or what's your break even date. The payment stream from 2021 would take a couple 18.5 years to get the initial 100k back. So they'd be 83, almost 84 years old at the time. But today it takes only 414 years.
[00:08:38] So instead of that they'd be 79.
[00:08:42] Okay, again. And some people say that's not great, but 27 and a half is better, way better than it was. And with everybody talking about what's going to happen in the markets and all that stuff.
[00:08:52] Political tensions calling for rate cuts. You never know what's going to happen. Rate cuts again don't necessarily mean that annuity rates will drop. Could lead to inflationary scenarios and all that stuff. I used to recommend a different path in nearly every scenario, but today it's a toss up.
[00:09:09] More people are finding extreme value in the annuity income and it's a lot harder to disprove that it only enhances a retirement portfolio. Done that a bunch of times.
[00:09:19] Gonna have to keep talking about it to remind everybody that's new.
[00:09:23] If this still doesn't seem that good to you, then look at it from a different perspective. Specific ages for single and joint life can change things considerably.
[00:09:31] And deferral years also increase the payments much more than used to be the case.
[00:09:36] So as you defer, that gap between what is now and what was then widens even greater. Back in the day of low rates, it would take 10 years of deferral for someone to get an income payment payout that was 10% of the initial investment.
[00:09:50] Example put 100,000 in, wait 10 years, 10 grand a year. That means it would take another 10 years to get all the money back. So 10 years of 10 grand a year would be 100 grand. You'd be 20 years out. You finally get your 100 grand back, you'd either take immediately take payments for 20 years or defer for 10 and pay 10 before it all came out. It's the same no matter what.
[00:10:10] Now we have much more efficient payment streams with most people getting a 10% payout in six years or less.
[00:10:16] Got one guy who is currently looking at a GLWB can get that kind of payout in less than four years. The contract he's looking at is going to give him more than a 10% payout in three and a half years.
[00:10:28] Pretty wild. Now for reasons like this, and I've talked about it a lot, the investment industry has been converting at a rapid pace. Big guys like Fidelity and Schwab move first. But there are still a lot of individual holdouts.
[00:10:40] How good can a guy really be if he completely ignores an entire asset class meant to serve retirees? I don't care. The guys who say fee only. Oh, I do. Fee only. They've got fee only annuities that fit right into those guys fee structure so they wouldn't be breaking. And the problem is those guys could always sell commission products too. They just can't sell a commission product and then charge a fee on it. They're so dang hung up on charging fees.
[00:11:06] And nobody likes fees, right?
[00:11:08] Anyway, there's fees for income riders, so I'm not. I don't take too big a shot. So now, whether it's just a place to park money or a more sophisticated income planning scenario, I can make the case for nearly everyone to buy an annuity of one type or another. The fact that a 5% payout was good enough at the time to be one of the first pieces of information that was shared in the podcast, that kind of makes me laugh a little bit. Oh, it was sad times. Boy, it was tough. Tough to make a living, tough to justify a lot of things. That's why I was then I was telling everybody, go short term, be flexible, get ready. And a lot of people were able to switch and flop and do new things that are actually a lot more profitable. So it's only been four years, but we've all come a long way. Things are a whole lot different. If you're only seeing this perspective for the first time, then you'd better give it some serious thought because everybody that was around then is seems more eager to pull the trigger. And a lot of new people need that perspective a little bit. Say, hey, yeah, we actually are dealing with some pretty good stuff right now. This has been episode184.5% to 7% income payouts. Annuities have come a long way. Again, my name is Brian Anderson. Please like subscribe or comment on any of your favorite podcast platforms or on YouTube. Share with your friends.
[00:12:19] Let me know what you think and I would love a comment or two or some questions or anything like that would be just great. So I will be back next week with something good and something new on episode number 185. You guys have a great day. Okay, bye.
