Guaranteed Income: Yes Or No?

Episode 51 July 28, 2022 00:20:13
Guaranteed Income: Yes Or No?
Annuity Straight Talk
Guaranteed Income: Yes Or No?

Jul 28 2022 | 00:20:13


Show Notes

Are you planning your retirement and thinking of using some of your hard-earned money to secure a guaranteed income by purchasing an annuity?

If you’re still trying to figure out this market and find out what annuities to bet your money on, then you’ve come to the right place.

Today, Bryan will help you find out the types of annuities available, the pros and cons of each, and how to choose one that’s right for you.

What You’ll Learn From This Episode:

[5:18] When rates come up, it changes the strategy that Bryan’s been showing to people.

[8:26] The income numbers change; they go up and so does the growth.

[8:55] Bryan shares three different ways you can plan your income.

[11:58] You buy immediate annuities because you don’t want to think about it; you just want that guaranteed income.

[16:54] It takes you a while to get into the insurance company’s pocket.

[19:14] There’s a purpose and a usefulness to every single annuity out there, no matter what company writes it.

Key Quotes:

[3:24] "I’m not making any recommendations to you, I’m just educating you on other possibilities."

[7:15] "I like to set reasonable expectations so we can easily exceed those in a very conservative scenario."

[18:47] "If something changes in your life, we know we can make a change that will benefit you."


Annuity Newsletter

Call Annuity Straight Talk at 800-438-5121 or schedule a call at 


View Full Transcript

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 51, where I'm gonna ramble and rant have absolutely nothing prepared, but I think I can organize these thoughts. I've just had a lot of things coming in that are kind of on this track, current clients, new prospects, new people. So I'm just asking questions, but episode 51, I it's always a toss up what I'm gonna talk about. And I haven't written anything for this one. And you guys know sometimes I write it out first, but this time I didn't, because I kind of had this something, a topic like this kind of planned the last few weeks, I guess I think it's come up a lot, you know, as rates are coming up and that's kind of what what's on everyone's mind. And so I want to talk about, you know, what that means for the strategies I proposed over the years and how thoughts and ideas should be updated and how advice changes based on current environment. Speaker 2 00:01:48 I've said it a lot of times over the years, that my advice has stayed consistent throughout and that's not changing, but I want everybody to know that I don't have an agenda for you. I want to make sure no matter what you do, you get the right strategy. And so I think people throw around the word fiduciary fiduciary standard means you're required to act in the customer's best interests. Suitability standards is a little lighter. It just means that you have to make suitable recommendations for them. So either of those standards is kind of up to, I guess, I dunno every person who's gonna kind of make up their own de definition of what that means. I've, I've seen fiduciaries that do some really ridiculously stupid stuff. And some people that are bound by the suitability standard, like I am, I try to lean more toward a fiduciary approach. Speaker 2 00:02:42 So when I offer it, I show videos and this podcast where I talk about one topic and I have to keep it kind of general in nature. And sometimes I'll go through specific case studies, but it's important that you realize that I'm not making a recommendation to you. I'm just educating you on other possibilities. For instance, today met with a, a nice guy for the second time and kind of went through my spreadsheet and talked to him about different types of annuities. Of course, he'd already spoken to a few people. One gave him an income pitch. One gave him split with a growth pitch, and then he's got a money manager that doesn't do annuities and says, ah, you don't need to mess with those things. So I'm not. And I don't like, I'm not gonna debate the approach. I just like any of those approaches is fine, depending on your preference, what you want to do. Speaker 2 00:03:29 And I'll tell you, I know some people who have almost all of their money in annuities and I've met people who I know will never buy an annuity. And you know, that's a risk spectrum thing. You know, some people just like to know it's all protected and they've been in it long enough and they get it. They understand it. They're not worried about it. And they get good yields. Some clients with the mix of fixed, fixed index, income annuities, all sorts of stuff. So it, it comes down. And again, what I'm trying to do is give you all the options. So I like to think that the people I work with who become clients, many of them become friends as well. I gave them all of the options and laid everything out for 'em and they decided to buy something from me because of that. Speaker 2 00:04:12 So they got to pick their favorite or what, whatever it was. And so that could be a single premium, immediate annuity. It could be a short term, fixed annuity. It could be a longer term index annuity. It doesn't matter. What I like to do is show everybody everything. And so when rates come up, it changes the strategy that I have been showing people you've guys, if you haven't seen the spreadsheet, go back to the flex strategy videos. Three part video series kind of covers everything in retirement, as far as, you know, income and market participation, inflation, longevity, all of it. And it kind of talks about the annuity, the approach with, or without annuities and the different types of annuities you can do. And, and kind of the evolution of my strategy was kind of a balanced portfolio approach and alternating withdrawals to use an annuity the most efficient way. Speaker 2 00:05:03 I'm a huge believer in that, and that has not changed, but what it happens is in anybody who's seen it. I run the annuity column when I have the spreadsheet and I'm not gonna show you anything. You either know it or you don't. If you want to talk about it, you can call me (800) 438-5121 schedule a call on the website, upper right corner says, schedule a call, click it, work through the calendar and find a spot that works for you or on my timeline. So I was going through the options with one guy this morning, and it was interesting to me. He had the immediate annuity proposal and we ran those numbers. Now that immediate annuity is paying a whole lot more this year than it would have last year, cuz rates have come up. And so I put it in my spreadsheet and I compare it to a deferred index annuity. Speaker 2 00:05:46 I didn't change the assumptions on my spreadsheet, even though the income annuity pays a whole lot more. And the growth annuities, the, the fixed rates or the index rates are twice as high as they have been compare apples to apples. I should be able to bump up the growth on the annuity column, but I don't the reason why is cuz I like to set reasonable expectations and I've talked about this a lot before, but the point is to set reasonable expectations so that we can easily exceed those. And in a very conservative scenario, only meet those. So if we create a great plan on very conservative estimates, then we have an incredibly high chance of making that work. If we do the same thing, but we have lofty expectations for the annuity. I've talked about guys who will illustrate index annuities 10, 12, 15% and say, oh, look at what this does. Speaker 2 00:06:41 You gotta look at the index, see how long it's been around are the numbers back tested. And I think the problem with that is if you have a 12 or 15% illustration and average, if I show you that and you don't get it, then we're gonna have some really difficult conversations down the road. So I like to stick in the four to 5% range, same as I did last year, because I thought there was a really good chance. Now your chance of getting four to 5% on an index annuity is much, much higher than it was last year. And that's what changes like. So the income numbers change and they go up what you can get for guaranteed income. And so does the growth. And so my advice is gonna stay consistent. And again, it's not telling you what to do. It's showing you two options or three options so that you can decide what you like best. Speaker 2 00:07:32 And this has come up a lot in the past. I don't know, three months, different ways of, of planning for income. You can buy a guaranteed income contract. You can start income. Now you can wait a period of years and it increases every year. It increases. We've talked about those. So if you wait three years, each year, you're gonna get a little step up in what they pay you. You can also buy. So if you take income now and buy an immediate annuity or it's called an immediate annuity, you just give them money to the insurance company and they start sending you monthly paychecks forever. Or you can defer that contract for a while. For instance, if you're, I guess I think a lot of people retire and they might have a severance package or they've got, you know, vacation days, they cash in there's a year or two or even three where they've got a small pension or you know, other. Speaker 2 00:08:20 So it's kind of, they've got a bridge. They retire and they don't really need to dip into their savings for a few years. And in that case, you can pick a deferred annuity where it rolls up each year, or you can just put it in a growth annuity had one person, we ran the numbers on it and he doesn't need the income for three years. And we realized we could put a, a multi-year guarantee a three year fixed annuity. He got 3.8%. It's really good. And he could do the three year fixed annuity. And then when that's done at the end of three years, he could go and he could buy the guaranteed income contract and that strategy. So he had one strategy where he could buy that income annuity, defer it for three years and he would've got $32,000 a year. I think if he grows it guaranteed fixed rate and then takes that money and, and goes and buys an immediate annuity. Speaker 2 00:09:08 At that time, it was, uh, jump up to 41,000 a year. So a substantial increase by doing it that way. If I was a one trick pony, I wouldn't have figured out how to do that stuff and get him more money, $9,000 a year. That's not a small piece of change. That's a, you know, that's a 25, 30% increase. And that's what I say in the videos. I think some of the marketing stuff, 20 to 30% more income by changing strategies, I had the same guy who did that five years ago and grew his money, got to this point, did the calculation again. And he did buy the deferred annuity because he was actually gonna be, uh, deferring into his early seventies. So two clients kind of a same situation, same age when they started, one of 'em was five years older, but was able to do the same strategy, but changed when, and that's the whole idea of the flex strategy is have something that can change if that's what you want, it's all about control of your money. Speaker 2 00:10:14 And that's what I always think it's really important because that was one of the things that they say about annuities. Like, oh, you're gonna lose control of your money forever. And that's true of immediate annuities, but you buy the immediate annuity cuz you don't wanna think about it. You just want that money. You, the guaranteed income, a paycheck every month, it's like being, you're like you're employing yourself. And so everybody looks at these things differently and it depends on where your assets are in relation to your income, whether you have the flexibility to spread things out and keep control of that asset. There are some people that have just enough money to get the income they need. And it's probably the best thing for them to secure the guaranteed lifetime income, cuz they don't have any room to maneuver. There is a risk in money and then buying an income annuity later in that rates could be lower, but they could be higher as well. Speaker 2 00:11:06 And if they're higher, then the numbers are gonna be even more dramatic than they are today. So I don't do the same thing for everyone. I don't recommend the same thing for everyone. I give you a number of options. And so I'm thinking of another guy who's a new client. Who've had a good time talking with in the last, uh, I suppose month or so maybe a month and a half really nice guy and have a good time chat with me. He is a sharp guy used to in the business. I think it worked for Edward Jones for a period of time. So he kind of understands the game a little bit and I always think it's really cool when I can, I've done this before I've had, and I've said this, uh, written about it. I've had advisors say, Hey, I've never done annuities, but I'm retiring. Speaker 2 00:11:45 And I like your approach. I'm gonna buy an annuity for myself. Can you help me out? And I do, of course they wanna make the money and that's fine. As long as you're honest with me, I'll help help you out. I don't care if, if you call me and say, I'm never gonna do business with you, but I could really use your help and then need some advice. I'll do it. That's why I put myself out here and I do all this stuff, but this other guy, he's got a guaranteed income contract and a couple other people tried to sell him another one cuz he had a small income gap to fill and he was perfect for looking at it as a portfolio management tool. Now the index annuities, obviously you can take free withdrawals. You've got discretionary access to the money. You can pick the amount you take. Speaker 2 00:12:20 You can take a thousand a month this year and next year maybe you want 1500 a month or maybe you take 1500 down. You wanna change it to a thousand, change it up and down. The point of that is that you get to accumulate assets over time. So it's very good for discretionary spending in retirement and basic income needs. Usually a steady paycheck is better and you can do both of those, but this guy had a couple of people trying to sell him another guaranteed income annuity, but he didn't really need the income. I mean he needed a little bit extra every month, but it was well within his portfolio value. So we talked about, of course I think he went with a deferred index annuity, really good growth rates on it, man. There, I mean the best rates we've seen in 10 years stock markets where it's at. Speaker 2 00:13:00 I mean, this is the best time I've seen to buy an annuity, all things considered. Plus I also say that because I got almost 20 years experience under my belt. So I know what the heck I'm doing now. Whereas 15 years ago I was still trying to figure it out like you guys are right now. So anyway, so we went to deferred index annuity, I guess I tell the story. It was interesting what he said he was okay. Cuz he was a broker. So he had a variable annuity with guaranteed income on it. That's done pretty well. And the thing is he sold it to himself cuz he was a registered broker at the time when he bought it and it did really well for him. And so one of his big questions should I get rid of it? And the account value is up. Speaker 2 00:13:38 It's doing well, he's pulled a fair bit of money off it. Cuz he is been draining it for seven or eight years. So like he's seven or eight years into taking nice income payments and he still has way more than he put into it. So I'd say the variable, annuity's doing his job when somebody else wanted to sell him another one and he he's looking at it and talking somewhat philosophically about it. And he said, well, I just don't like the idea of doing anymore because really all the insurance company is doing is giving me my money back and I'm not in their pocket for his case. It was almost 20 years before he actually saw a return on that. Now he had already been through a 10 year process with the variable annuity with good performance. And so he's made some money on that, but I thought that was really interesting that he said it on his own and I didn't say it to him. Speaker 2 00:14:28 So one thing I like about the flex strategy is you have control of the money. You have all of your money on day one. If you go into an income annuity and even the ones where you've got a residual value that residual values reduce there's fees and income value coming off of it, it takes you a while to get into the insurance company's pocket. Usually it's about early eighties. So for, you know, a 65 year old, it's a 5% payout rate, a 70 year old, it might be six. So at 6% payout, it takes you a 16 years to get your principal back in payments. And I don't think there's anything wrong with doing that if you want the consistency and the simplicity of a guaranteed income income contract. But when I first started looking at these things years ago, I scratched my head and I thought, I don't know if everybody wants to do it that way. Speaker 2 00:15:22 And so I started punching numbers just to see if you pull out 5% and you get a 3% growth rate on it after 20 years, you still probably, I don't know, 40% of the money left, which means you could sustain the same withdrawals over several more years. And I think that'd be, yeah. I mean a strategy like that gets you into your early, maybe mid nineties. And then if you want to take the shot at bigger yields, you go with the index annuity and if you do better, you do great. But the cool thing about that is, is like I said, I had one guy that deferred it five years ago and he said, okay, I'm that was good. I'm done with this. Let's roll it in and go find the product. I did the same calculation. What if we deferred again? And then he bought it down the road and all that stuff. Speaker 2 00:16:05 I didn't just take it. And that's what I think a lot of people don't understand. I don't necessarily communicate everything that I process through my mind on an individual case. I make sure you are getting what you need and getting your questions answered. And I, it's not that I'm hiding things from you, but I have it in my head that if something changes in your life, we know we can go make a change that will benefit you. And so that's the, the point of having flexibility and control of your assets in retirement. So guaranteed income or not? Yes or no. It depends. It depends on what you want. It depends on what the numbers say and I'm not opposed to any type of annuity. I'll say it a thousand times there is purpose and a usefulness for every single annuity out there, no matter who, uh, what company writes it, but the objective and why we have to be dynamic with our planning is because a lot of annuities, most annuities are, are meant for very, very specific situations. Speaker 2 00:17:05 Your situation has to fit the annuity perfectly. Don't make an annuity, do what it's not supposed to do. Don't try to get it to do what it's not supposed to do. It's pretty simple, straightforward, and there's a consideration that's unique to everyone and that's how I try to work. That's what I want to do. So I want to thank you guys for joining me for episode 51. I'm open minded I'm available and I do not have an agenda for you. I want to help you figure out this market, find out whether it's useful to you. And if it is create a unique plan that serves your purpose, your needs, whether it's guaranteed income or a deferred strategy, that's a little more dynamic with a little more flexibility that is up to you, but I'm gonna show you both. That's how I do it. So over the next six, eight weeks, I'm probably I'm getting ready for the bow hunt. Speaker 2 00:17:54 That's a kind of a big deal, kind of a once in a, not once in a lifetime, but it's once, maybe every 12 to 15 years. So I'll probably be doing more podcasts, cuz this is a little bit easier for me. I won't be doing as much writing. That's kind of low on the priority list right now it's servicing existing clients is number one, helping new people is number two. Uh, then it goes down to shooting my bow, getting exercise. It's gonna be strenuous. I gotta get in good shape, eat clean food. So I'm working on that. And then below all the prep that I'm doing for that is podcast. And obviously I wanna ride my horse, enjoy the summer, all that stuff. The newsletter is gonna go to the bottom for a bit. Although there might be times we'll just see what happens, but anyway, I wanna thank you guys for joining me. Uh, gimme a call (800) 438-5121 scheduled call annuity straight Subscribe to the YouTube channel or the podcast on any of your, one of your favorite platforms. And I'm here. I'll be back next week with episode 52, I took a little break, but I'm trying to get consistent now. Maybe get ahead of it a little bit, cuz I'm gonna be out in September as you know anyway, everybody have a great week. Thank you for joining me and I will talk to you next time. Okay. Bye. Speaker 1 00:19:17 You have been listening to annuity straight talk. The does not represent our investment. The views expressed by guests on this program are their own and do not necessarily reflect the views in the no information presented should be. I important that you.

Other Episodes

Episode 16

October 07, 2021 00:19:35
Episode Cover

What Should You Do with an Old Variable Annuity?

Brian Anderson, founder of Annuity Straight Talk, has been a leading annuity education specialist since 2008. He has helped hundreds of clients across the...


Episode 33

March 10, 2022 00:22:47
Episode Cover

War is a Racket

When different ideologies, perspectives, and political views collide, it can result in serious conflict, leading to war. A timely example of this would be...


Episode 129

March 15, 2024 00:14:37
Episode Cover

Guaranteed Indexed Annuity Rates

Today, we're diving into cap and participation rates on fixed indexed annuities.  Key Points: We'll start by looking at how cap and participation rates...