Episode Transcript
[00:00:05] Speaker A: 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. You, 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.
[00:00:46] Speaker B: Hello and welcome, everyone, to the Annuity Straight Talk podcast, episode number 115. My name is Brian Anderson, founder and creator of Annuitystratalk.com. Going to talk about today about everything you need to know to buy an annuity.
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One of the very few places where you can get a straight up answer from a real person. Computers are taking over everything, including the information they feed you. And you know, AI only produces information that's as good as whoever put the commands in there. So you want to talk to a living, breathing person annuitystraytalk.com, make an appointment. Top right corner of any page on annuitystraittalk.com schedule. A call name, phone number, what you want to talk about. I'll give you a call. We'll figure it out. Okay? Believe it or not, this subject is, it seems, rudimentary, but a lot of people have questions. I take a lot of pride in the fact that the people I work with are very smart consumers, intelligent people, hardworking, successful. And even the smartest people don't understand the process of transferring money and doing all that. I had one guy who waited five years because he didn't understand this, thought he was going to have to pay taxes to move his four hundred and one K to a traditional IRA at the annuity. Because I cover this with everyone that buys an annuity, then it might as well be available for anyone who's thinking about it or considering it as part of a retirement plan. If you decide to buy an annuity, this is how it happens. It's a transaction process. Going to depend on the type of annuity, where the money is coming from and all that.
So takes you from not owning one to owning one. It's very simple.
All you need to know to buy an annuity. There's a table of contents. I'm not going to go through that now, but we'll touch on each of those as we go through it. So the screen is being shared for anybody watching the video. And there it is. So part of the developing series of all the stuff I added to the website, just the simple basics and all that. First of all, we're going to talk about ownership. When you buy an annuity, ownership is an important decision. It doesn't usually require a whole lot of thought, but once in a while customized to fit a specific plan within a portfolio for non qualified contracts. Money that's already been taxed after tax cash from a brokerage account, savings account, something like that. They can be single contracts. So a single contract, say a husband and a wife either can own it and then you've got a primary beneficiary as the spouse. It gives you all the same options. If the owner dies and the primary beneficiary is a spouse, then the primary beneficiary can either exercise a penalty free death benefit or keep the contract, keep it as their own. Some people still like to have the joint contract as far as passing along annuity benefits. If you take payouts from it or anything like that. Gets into something a little bit different and I could probably do that. It's more of an estate planning topic. So singular joint between married couple. It could be owned by a corporation, nonprofits. I've seen businesses or charities buy annuities and own them as a corporate or a trust can own it as well.
So if it's something that's definitely going to be passed along to the next generation, trust may be a consideration depending on how the rest of that works. Special consultation required if it's a qualified contract, 401, Tsp, Kyog, HR, Ten, any of those things when it goes to the annuity, it's going to be a traditional IRA. If it is a qualified contract, it can only be issued in the name of the person who owns the qualified account. You only get single ownership if it's a marriage, the spouse's, primary beneficiary, same thing stands, it becomes theirs. When the person passes away, the owner passes away. But a spouse cannot be a joint owner on a qualified contract. So big difference between qualified and non qualified assets. For obvious reasons, taxes come into play. That's going to be a topic I cover down the road. Let's see here so non qualified funds is simple. How do you buy it? Three ways the purchase can happen with non qualified funds. You can write a check, just cut a check, write your new account number so you've already done the application, sitting at the insurance company waiting for money. You'll get a contract number, an account number, write a check with the account number in it. Sometimes we do a cover letter. Some people feel safe with that, but I've had no problem with just the check and the account number. But you want to write your account number, the memo line so it gets to the right place sometimes you can put your social on there. They'll be able to identify you that way. Doesn't hurt to include the COVID letter specific instructions I can handle it, I've done this a bunch, but that's the easiest way to do it. You can also do a wire transfer where you can fill out an ACH form with the application. Well, they'll directly debit whatever account you choose. Or you can instruct your financial institution to wire the money to the insurance company under the contract number that you get. Okay. Or you can execute a transfer form, part of the application. We're going to come back to this again. So a lot of you, how do I do this? Well, if you're writing a check or sending a wire, pretty straightforward. Just need the wire, instructions, all that's. What the agent should have, should be able to get from the company, make sure it goes to the right place. We're usually dealing with a lot of money here. We don't mess around. If you do a transfer form, it's part of the application money's. At a brokerage account, you fill out a form with the name of the custodian, be it Fidelity, TD Ameritrade, Merrill Lynch, wherever it is, your account number at that place, and then you got to sign it.
And we send that to the insurance company. So they'll accept electronic signatures sometimes. Sometimes they'll take a fax or DocuSign, something like that. It's really easy. A lot of times, if they require a Wet signature when we do the application, I will Ups overnight you the transfer form, put a Wet signature on it. There'll be a envelope and a label or a Ups label already made out to the insurance company. I like to do, again, big sums of money overnight with tracking. Get that transfer form to the insurance company. The agent person selling it should know all of this and handle all of the details. So it's easy. I tell people once they decide to buy an annuity, their involvement in it is about 20 minutes. While we get the information down, I handle everything else.
The insurance company stamps that with delivery instructions, the transfer form, and then they will send it to the custodian, be it Merrill Lynch, Edward Jones, TD Ameritrade, Fidelity. And then the two companies handle the transfer so that custodian will send it to the insurance company with everything written on it, because that's part of the instructions the insurance company has got to include with the letter. So, pretty easy, any of them. There's a lot of different ways to do this, but I got to cover every single one of them. If you're buying a new non qualified annuity with an existing annuity, then you're always going to use option three, which is the transfer form. So if you got an annuity that's surrender free and you got better rates or better terms or different deal at a new company, you're going to use a 1035. It's a tax free exchange of insurance contracts. The annuity at the current place is probably appreciated in value. You don't want to liquidate and pay taxes on that. You'd rather transfer that tax deferred gain into the new contract. Start from there, you'll use the transfer form. Then the two insurance companies will communicate with each other, and the money will go where you want it to go, like, for like transfer annuity to annuity. You can also do life to annuity you can take a cash value life insurance. Did that once this year. Tax free transfer to the annuity. You cannot go annuity to life. You can't take appreciated annuity and go buy a giant cash value life insurance policy. So qualified funds, IRA, Roth is included. Four hundred and one K, four fifty seven Tbsp, et cetera. So these are mostly pretax retirement accounts, but also applicable to Roth IRAs. These assets are not under your control. They're locked up with another institution. It takes the cooperation of the current brokerage company or Custodian. Most custodians are the same. Several require additional steps. So we can just deal with that one transfer form, right? But I know Tsp for certain. And Fidelity, if it's an employer sponsored account, they have internal paperwork you also need to take care of. So if you're dealing with somebody that knows that typically you want these things to move quickly and just be over with. You don't want to deal with stuff for a long time, but you got to know the places where you got to get their internal form. If you wait till the insurance company sends the paperwork, that company is not going to call you. They're going to put something in snail mail. You'll get it seven to ten days later and you're just wasting a whole bunch of time, right? So number one, to understand whether your current custodian has additional steps or additional internal paperwork required, some of those companies will not communicate with another institution like an insurance company or brokerage company. So you have to know if you've got to actually get involved with that company. It rarely happens, but it does. So if you do it correctly, it's a tax free transfer to another qualified account because you never take ownership of the money. There's no 60 day rule where it's 60 day rollover, but simply a tax. It's a like for like transfer again. So again, any of the accounts are going to come a traditional IRA or a Roth IRA no matter what. So a lot of times when I talk about this stuff, I say IRA, but I have a 401K. Same thing. Once it leaves the employer plan, it's going to be a traditional IRA whether you go to annuity or you take it to TD Ameritrade or whatever it is. So just like we talked about with the non qualified brokerage account, it's part of the application you complete. It's easy to do.
Every resigning company is different depending on what type of signature they want. More and more we're getting companies that will accept DocuSign or electronic signature. Some of them will just take a fax or a photocopy is fine. They'll do it, some of them really sticky. None of those institutions want to get rid of your money. Some are more user friendly than others. All you got to do is get the first form correct and it's a piece of cake. So as long as you got your account number and the institution, I can go find the address, phone number, fax number, all that stuff, and find their requirements. You don't have to worry about that. So I'll be the one to tell you whether you got a separate form you got to do with the company. When I look it up, I'll say, oh, hey, by the way, fidelity, I already know if it's a six digit account at Fidelity. It means it's an employer plan, and you're going to have to call them and get the form and fill out your own form along with the transfer as well. So talk about that in additional requirements. It's all on the website under this tab if you want to read through it. But again, Annuities, we're talking about large sums of money. It's not just a lot of money, it's the money you have. Right. Remember that from back in my early days in the business. How much is a lot of money? And people are, oh, a million is a lot. 5 million. Well, a lot of money is all the money you have, so even a significant portion of that is a lot of money to you. When money is in the mail, I like to track it.
Had several other payments in the past several years when we were doing structured settlements. The insurance companies send it out regular mail. We have to do stop reissue because the US. Postal service loses. It never gets there. The mailroom maybe screws up wire transfers or overnight shipping. Seem the most professional to me. I don't make the rules. It's up to you. So when it comes to the brokerage company, a lot of them will send it regular mail. Pretty good luck on that. But once in a while, it's like in two weeks, it doesn't show up. Oops, all right, stop payment, reissue the check.
Some will send it overnight and some will do wire transfers. A lot of them now are getting into more quicker transfers of cash. If you don't like the potential of losing track of your money, call the brokerage company, ask how it will be delivered. If you want something expedited like a wire or an overnight label, then typically they're going to charge you $25 or something. You can decide whether that's worthwhile. If it's a problem for you, I like to always say, hey, listen, I'll send you a gift card. There's actually a guy owe one to before it's come out. I do owe one guy a gift card because it cost him $25. I'm like, hey, I'll cover it. I'll send you a gift card. Some brokerage companies will not send money to an insurance companies. They'll just send it to you. Very few cases where that happens. So you're going to get the check, you sign it over to the insurance company with your account number. No 60 day rule, because you didn't actually take ownership possession of it. You didn't deposit it, don't deposit it into your bank account and then send it.
And then some of those companies will make it out to the insurance company, but they'll send it to you. So that's where Ups comes in. I send you a label and an envelope and make sure it gets there quickly. And is trackable. Yeah, buying a new qualified annuity with an existing qualified annuity, it's all the same stuff. Doesn't matter where it's coming from. It's just an IRA to IRA transfer.
So that is about everything you need to know to buy an annuity. You can do it without paying taxes, without liquidating an IRA or even a non qualified contract.
You can do it quickly via wire transfer. Transfer forms are important. It's not always necessary, but that is all included in this and about everything you need to know. So if you guys have any questions about that, then let me know. But that's how you buy an annuity. And believe it or not, like I said, a lot of people have those questions and so something we like to put out there anyway. This has been episode number 115, how to buy an Annuity. If you decide to buy one, please, like subscribe or comment on any of your favorite podcast platforms or on YouTube. Schedule a call with me if you want to chat about it, talk about your options and see if this is a fit for you.
Top right corner of any page on annuitystraighttalk.com, schedule a call. Put your name, phone number, time zone, some notes, what you want to talk about. I will give you a call. Best way to get a hold of me and guarantee your time slot. So thank you again for joining me, but continue developing the basics of these ideas that went onto the website just a couple of months ago, and I'll be back next week for episode 116. Thanks so much for joining me. You guys have a great day, okay, bye.
[00:15:03] Speaker A: You have been listening to Annuity Straight talk.
The proceeding information is for informational and educational purposes only and does not represent tax, legal or investment advice.
The views expressed by guests on this program are their own and do not necessarily reflect the views of Annoyed Straight Talk or its partners. No information presented today should be acted upon without meeting with a qualified and licensed professional.
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