Episode Transcript
Speaker 1 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.
Speaker 2 00:00:48 Hello and welcome everyone to the Annuity Straight Talk podcast episode number 78. My name is Brian Anderson, founder creator of the website annuity straight talk.com. I'm here to answer all your questions. I say give me a call. Some people do, so you can do that. 804 3 8 5 1, 2, 1. Schedule an appointment by clicking the top, the schedule a call button, top right corner of any page on annuity straight talk.com. So I'm excited this week cuz got kind of a case study for everybody like to do those. They fall in my lap when I talk to someone who, where you know the options require a little bit more explanation and everybody moves at a different pace. So I'm dealing right now with a highly intelligent individual who, and that what is the case is I and I, I like to brag a little bit because I will tell everyone, my clients are some of the smartest people out there.
Speaker 2 00:01:36 They figure things out and make good decisions. So this person is no different, very intelligent, but because of her, you know, profession required a lot of schooling and all that stuff, she is assuming that this market she doesn't know anything about is as complicated as what she's done for the last 30, 40 years. So long time and it's not the case. These are very simple solutions and the problem really comes when I and I meet a lot of people, they'll have a, they go to a seminar or whatever they make them uh, go to appointment with guy in the first appointment. The guy here, this is the product. The problem with that is then you start analyzing the product and try to figure out, hey, is this what's gonna work for me? Rather than looking back and saying, okay, there's five different ways I can do this or three or two.
Speaker 2 00:02:27 You get the basic, you get your goals lined up with a strategy. So I like to talk about strategy. There's a product that completes that strategy. So understand why you're doing it, get your goals aligned, figure it out first and then go dig into the details of a product when someone throws that at you at the first meeting. That's why I almost never do it. I don't show you an annuity at the first meeting and the reason is because then you get bogged down in the details of the contract and lose sight of the reasons why you're there in the first place. So this one was just a great case study cuz we just did this few weeks ago. Anyway, so I have the newsletter already written. I'm gonna share my screen. Just gonna give you guys a visual aid. If you're watching the video, there's nothing technical about this, it's easier to see, you know, kind of see the bullet points that I made and talk about it as I go through.
Speaker 2 00:03:17 There we go. And this is what the post looks like. It's on the website, not live yet. The interesting thing about this lady, it's pretty awesome, is this is gonna be released on YouTube. This is the second meeting. I talked to her, I said well you have the privilege of inspiring a podcast and so you're gonna get a really detailed look at what this can do and whether she does business with me or not, it's gonna help somebody else. So I wanted to you know, let her know that she is certainly, uh, will help some other people make decisions as well. So, uh, so the title's guaranteed income with or without fees. I covered a topic a few weeks ago. Popular request, I don't wanna pay fees so you don't have to pay fees, income writers kind of a new thing, but we talked about the podcast, safety, growth and income.
Speaker 2 00:04:00 The product review, let's go back, go go to the news or the podcast page. You can see that one. Anyway, it's popular because annuities have gotten a bad rap for their fees. Mostly it's just misunderstood. There's lots of different ways to use an annuity without fees. Set it a lot. I have to keep saying it cuz there's new people as well. So you only pay a fee if it provides an additional benefit that you really want. And a lot of times that one benefit, the most popular one by far is income. You like the annuity, you want an add, add guaranteed income to it. You pay a fee Past several years, a fair number of products with free income rider have come to the market. I've talked about them a lot including the detailed podcast a few weeks ago. I mean if you can get the income writer for free, why would you ever pay for it?
Speaker 2 00:04:40 The reason is because there has to be more benefit. It doesn't make sense any other way. So working on this case right now with Kathy made an appointment a couple weeks ago, seemed she was a little underwater, kind of didn't really know how to do it, didn't get a whole lot of advice from her current asset manager. Uh, I don't know a lot about that relationship. And then she's talked to a couple of the people as well. So I guess those guys, if they know there's a podcast they can probably just cheat and look at my answer. But, so she's 68, retire gonna retire in two years. She's actually not quite 68 but she's 67. Uh, just easier to write it out than to explain, oh she's, you know, but her first call, I learned she had plenty of money to create the additional 2000 per month that she needs to supplement social security at age 70.
Speaker 2 00:05:23 Sure. So she's getting to age 70. There are a lot of ways that she could do this but she doesn't wanna pay fees. So that narrows it down to just a few annuities that would work. I ran the numbers, found out it would cost her roughly 350,000. It was right at the top end of what she was planning to spend. So that's good news. A lot of people will say, oh at 2000 a month and I got 150 grand and it's like no, I'm not gonna work. I think I actually have a meeting coming up this week where somebody has that request and it's not gonna happen. So not quite that bad but, so we scheduled a second appointment, I dug into the options, find what I thought would be the best plan and I knew that if the no fee income contract costs 350,000, I knew she was gonna get a fair bit cheaper if she paid a fee but she didn't wanna pay a fee.
Speaker 2 00:06:04 So I tried the second meeting, I said well I'm gonna have to talk to her about this cuz you know, what does that fee give you? Right? And this is a great example of what the fee provides. So I wanna see the price difference and ran the numbers. She could do the same amount of income for only 275,000. So a savings of $75,000. Not a small difference but why is there a difference? That was the first question. What, what's the difference? Why can they do it so much cheaper? So there's two reasons. First is the fee allows the insurance companies to pad their reserves significantly so they can afford to keep paying income in case the annuitant lives longer than expected. Remember when you buy one of these things, you're not the only person doing it. There's hundreds of other people doing it. It's a pooled risk for the insurance company and it's an actuarial calculation.
Speaker 2 00:06:47 What's the average life expectancy of someone at your age? You're pooled in with everybody else. Some hit it early, a handful hit it on the dot and some extend it. It's one of the closest sciences that's ever been really settled. These insurance companies have it dialed down millions upon millions of examples to create their mortality tables. They know, right? Anyway. So by taking that fee they're putting into their reserve account and it shores up their reserves over time. And obviously, I mean the insurance companies are in business cuz they're making money doing it. They know what they're doing. So you either pay a fee along the way or you spend more in the beginning to get the same income. So the 2 75 is 75,000 less but you have to pay a fee to get it. The three 50 costs you 75 more but you don't pay fees.
Speaker 2 00:07:34 There's two ways where that's once for maximum income ones for remainder value. We talked about that at the little last podcast. But the second reason there's such a big difference in the maximum income contracts is that other benefits are reduced. So each of the contracts, whether with a fee or without fee, has a residual account value with an growing growth tied to a market index. Both are fixed index annuities with a guaranteed lifetime income rider paying the fee gives you maximum income but they're gonna put lower growth potential on the contract. So they're gonna project a much lower residual value. The longer you live the less chance you have of passing along money to the heirs. So that's, you know, and it depends some people that's a really important feature. That's why the no fee really works cuz there's a way better chance you're gonna leave something behind.
Speaker 2 00:08:19 So pay the fee, you get maximum income, lower growth potential on the underlying account. If you don't pay a fee and you put more money into it, then they can put the focus on because it's a higher premium with less money coming out, the insurance companies managing that with a much higher growth potential. So you have less money coming out plus more growth, you have a better chance for a higher remainder. All right, so I'm gonna share the numbers. Hopefully this point hits home with everybody. It's not that difficult to understand. But we'll start with the guaranteed lifetime income with 1.25% annual fee. This product in particular was in the top three that I got into on the database. Okay? So this isn't just my favorite product. This is a search of her parameters, her age, state deferral, years amount she wants to put in and I get a list of a 200 plus or however many they do.
Speaker 2 00:09:13 I usually look at the top 20. So if the top company is a b plus, then I scroll down until I find an A or an A plus and it can be a few dollars a year that separates. This is not, not usually a big difference. I mean from the top of the list to the bottom is a big difference but okay, so 275,000 in exchange for 24,970 annually for life starting in two years. This one in particular has an additional long-term care enhancement that doubles payments for up to five years if she needs long-term care. So it's got that kicker that everybody likes long-term care. I've talked about this in the past. Long-term care and annuities, this is a guaranteed income contract. It's not projected to grow a ton, it'll grow a little bit but it's maximum income. Remember those benefits don't kick in if the count value goes to zero.
Speaker 2 00:09:54 So typically that's in, you know, in your eighties when you might need the income benefit the most and even when it does kick in, it's just an accelerated repayment your money. So I don't normally sell that but I added it cuz it is true in the contract. Okay, with conservative estimates, I use the fixed account for both of these. So in the income rider, the 1.25 fee, the fixed rate account is 2.5%. I didn't do any fancy remainder calculations with big index yields. I don't like it when people do that conservative estimate. There's projected to be no remainder cash value after 20 years. That's two years of deferral, 18 years of income payments continue as long as she lives regardless. Count value goes to zero and she's still kicking it in her late eighties. She's gonna keep getting income. That's what people like about it.
Speaker 2 00:10:36 Total aggregate income in 20 years of $449,460, 18 years of payments and that increases with every extra payment she lives. The true return of it depends on how you long you live. I'm gonna stop right here for the maximum GI income and I'm gonna tell you I don't always go to this benefit. The true highest maximum income you can earn is with a single premium immediate annuity. But those are only applicable to people that start income within one year. So those are it's immediate income, you can't defer it for two years. And so in this case, because she's gonna defer it for two years plus a little and immediate annuity wouldn't do that. But it's not a huge loss because these index annuities with income writers are typically very close and sometimes beat the immediate income products. So that's again another thing that you have to look at when you do this.
Speaker 2 00:11:25 This is kind of showing you guys all the steps I go through to make sure I don't wanna waste my time, I don't wanna waste her time. So guaranteed lifetime income with 0% annual fee. Next 1, 350 K premium in exchange for 24,156 annually for life. They both get her 2000 a month. I know they're not identical and I can back 'em down to the penny to get 'em exactly 2000 a month, but she probably doesn't mind the idea of a little bit of extra money with conservative estimates. Again, the fixed account, which in this contract is higher than the other one with conservative estimates projected to be $106,590 remaining in the account after 20 years, two years deferral 18 years of income and the payments continue as long as she lives. Total aggregate income in 20 years of 4 34 plus additional 1 0 6 brings total out to output to $541,398 with continued income for as long as she lives late eighties is a good benchmark.
Speaker 2 00:12:22 Say like hey well she wants to leave money to some someone, right? And on another side, now there's a lot of people that single pay, joint pay, there are a lot of people that play the odds. I'm not gonna tell you which one this is, but some people will take, you know, maybe if they've got insurance, uh, life insurance on the backside will take the single life payment and leave the spouse hanging out to drive cause they're gonna get life insurance. Some people are single and only planned for single retirement and there are actually a fair number of retired couples married for a long time who do separate planning. I've run into it more often than you might think anyway. So we got 5 41 versus 4 49. Talked about the income is not identical if you ignore the slight income difference and the product with no fee comes out ahead because of the remaining cat value, but it costs 75,000 more in the beginning.
Speaker 2 00:13:08 It's not a true apples to apples comparison. Some people would choose to pay less money to produce the income while others will choose to pay no fee, even if it costs more up upfront. Kathy has a choice to make and these are truly the two best options to get the job done. This isn't our money, she's got other money. If she saves money to produce income with a fee, that's a cost savings upfront, right? It creates additional planning opportunities. Other investments you could use that for to grow it maybe even more than what was left in the other projection. It complicates the matter for some people, but it gives you different, uh, planning opportunities. You gotta figure out what that is. Now, one of the reasons some people will take pay the higher amount is one of the largest benefits that we don't talk about a whole lot is people like the simplicity of an income annuity.
Speaker 2 00:13:55 It's nice, it's a direct deposit, it's checking your bank every month. They work like clockwork, tens of millions of examples of insurance companies that nail it every day. Okay? Anyway, so some people like the simplicity and it's worth it and if you have more than enough money, you can afford to pay for the luxury of uh, whatever one you choose. In this case, she might like actually a little bit more income, so she might put a greater amount. You know, she might put the whole three 50 into the product with a fee and that's gonna increase her income by, oh probably, I don't know, more than 25%, right? So instead of 24,000 a year, she'd be like 31 probably. I think I ran those numbers as well. So if you pay more for a contract without a fee, it is all in one investment and that's kind of handy for people.
Speaker 2 00:14:40 So one thing I do with index annuities, we manage that over time. We want to get the most growth possible. I told everybody I take trail commissions that's paid on the contract value so it's in my best interest and yours to manage it for the most growth possible. That's why I stay involved with overtime. But like anything else, it's a matter of preference and I like to explain all the options so each person could come to his her her own conclusion. If you wanna run the numbers with specific to your situation and look at these great rates that we have right now, you can give me a call at (800) 438-5121. I may follow next week. I'm not sure I've got another one written. Uh, there's another one that's a little more detailed example where we actually add another option. Kathy would have another option, but we're starting with the basics first.
Speaker 2 00:15:23 I ran those numbers on her as well and it does work. So we'll see where she is at at this point. But uh, by the time most of you guys see this, then we'll have chatted for the third time and we'll see what she thinks. So anyway, it's all up to you. Incredible rates. Like I've said, higher rates are great, free yield, but it also opens up a lot more options and so you have the luxury of doing it again. That's why you wanna work with me because I'm actually gonna look at them. I don't just, hey, here's the product that I have. There are a lot of people that do that. Oh well yeah, this is the best one BS anyway. Thank you for joining me for episode 78. Guaranteed income with or without fees. Your choice, gotta look at all the options. My name is Brian Anderson. I wanna thank you guys for joining me again and I really hope you guys have a great day and call me if you need something. I'd be happy to help you out and I'll talk to you soon. Okay, bye.
Speaker 1 00:16:30 You have been listening to annuity straight Talk. The preceding information is for information and educational purposes only. Does not represent legal or express and do not necessarily reflect the no information presented to today should be acted upon without meeting with the qualified licensed professional. Its important that all insurance disclosures before G based on the financial strength and claims insurance company.
