Episode Transcript
[00:00:00] Hello and welcome everybody to the Annuity Straight Talk podcast, episode number 243. My name is Brian Anderson, founder and creator of AnnuityStraightTalk.com coming to you on location from South Central Kansas. A lot of you guys know it's been a couple years, but I like to do this from time to time. Come see some friends, do a little deer hunting. Enjoy. Really good friend who's got a private ranch out here and kind of lets me run free on it. A lot of ground, a lot of cows, a lot of deer. Beautiful sunrise, sunset. Kansas is very underrated this time of year. I don't care what you have to say. The weather, the weather's always beautiful. It's, you know, been getting into, you know, the low 70s and it's nice and cool and crisp in the morning, nice and warm outside. But I'm here in the shop and the shop stays cool and I like that. So please like subscribe or comment on any of your favorite podcast platforms or on YouTube. I've got a great message for you today. Something that is new to the industry as far as I know that not necessarily available to the public, but we've had it running live for a few weeks now. Several people have tried it, but we've got full GLWB annuity income illustrations for anybody that wants to come in and have full disclosure and see how a contract works without the pressure of somebody trying to sell you something. So we do sell annuities. We would love to earn your business but you deserve the chance to like kind of look at it in a no pressure environment.
[00:01:21] So I am going to share my screen and do this kind of the old fashioned way. We're going to talk our ways through this. So you guys know we've talked about it a lot, a lot of technological advances this year and you know, one of them has been, you know, we did the income calculators last year and we always felt like, you know, we could show you the guaranteed income numbers and people like that. But we, we want to be able to you to take something with you if you're comparing a recommendation from someone else or you know, no matter what you're trying to do, right, you have something concrete to look at and say, hey, this is actually a good representation of what the product will look like. So you asked, we delivered. This has been one of the most common requests in the life of the website.
[00:02:14] Hey, I want to, I just want to see how it works.
[00:02:17] And a lot of people ask me for the details. Hey, can you Run this illustration and I have to ask more questions. I don't even know if it's appropriate and I don't have the time that's required to do that for every person that just asks.
[00:02:33] It takes a lot of time.
[00:02:35] I do need to make money to make this worthwhile. This has cost me money to put it out there. So at the end of the day, if I don't sell annuities, I don't do this anymore. Okay, now you guys can do it on the website without making an appointment and have the report delivered directly to your email. Okay, Run a quote for guaranteed lifetime income. Get a full illustration for the top product with all the material details. Okay, so I'm going to run an example at the end and I'm going to show you how it works or I'm just going to show you one of the printouts. Okay.
[00:03:03] So I like to tell everybody that the income is the bottom line, but there are more details to a contract that you need to understand.
[00:03:12] You've got to evaluate all of those while deciding which path to take.
[00:03:17] Number one. Which, like number one, is, does the annuity work? Is it what you need? Is it what you want? And then to decide which of those products would be most suitable and make you the happiest over time. So I'm going to go through the list of contract details. If you walk through it correctly, then they're not as complicated as as you think they are.
[00:03:40] And a lot of people ask, well, I don't know what questions to ask. Well, I'm going to give you the material details of this and that will give you a good starting point. So you can do this with confidence and not feel like you're planning for retirement from a defensive mindset. Okay.
[00:03:54] Number one is how stable is the insurance company?
[00:03:57] Extremely important to me. But lots of people buy annuities from, you know, mediocre or substandard rated companies.
[00:04:07] My list of available contracts is at the very top of the market and might exclude some that are a little bit higher. But I filter them for financial strength because I'm only going to sell what gives me confidence because I have to sleep at night as well.
[00:04:22] I'm not going to ask you to make a lifetime commitment to a company that I have to worry about. And don't listen to anyone who says a state guarantee fund will save you. Search the newsletter page if you want to learn more about that. Just hit the search bar. State guarantee, right? How safer annuities, all those things, all these episodes are in there. If you Figure out how to look for them. Okay, next one. Is there a bonus? Okay, the bonus is a teaser on the income products. It only affects the amount of income you're going to receive. So don't be distracted by a large bonus. A lot of people come to me and say, oh, I understand, I'm going to buy this because it's got this 20% bonus. Well, that's where you say the bottom line is the income. Because a product without a bonus might have a higher payout rate. And that's when you look at the bottom line. That's what it is. Okay?
[00:05:07] At times it is critical to have a bonus if you're replacing another annuity.
[00:05:12] So it can be a deciding factor. Maybe you take a lower, lower payout with a bonus just because you need to get out of something that's not performing for you.
[00:05:21] But usually only in those cases. Otherwise it's just a number used to calculate income. It does not tell the whole story. A lot of agents are out there saying, oh, buy this, it's got a 20% bonus. Who cares which one is going to pay you the most income, right?
[00:05:35] The annual rollup rate.
[00:05:37] This tells you how much your income will increase for every year you wait.
[00:05:43] It works just like Social Security. Everybody understands that the annuities are the same. If you wait, you get more. And this will tell you exactly how much it increases the longer you wait. So just like the bonus, it does not tell the whole story. There's a lot of agents that explain this as if it's a growth rate on your money and it is not. I was like, oh, this is guaranteed 10%.
[00:06:06] That means your income increases 10%. It does not mean that your cash value increases 10%. So you got to keep that in mind. Okay, what is the difference between income value and account value?
[00:06:18] The income value, right, that's what they use to calculate the income. Includes the bonus and the annual roll up rate for every year you wait.
[00:06:27] That is used to calculate guaranteed lifetime income when you decide to take it. The account value is the money you put into the contract plus however it grows and the fees are subtracted from that. Okay, and then finally, what is the payout rate? These are all factors that determine income.
[00:06:45] This is a percentage based on your age and single versus joint. If you buy it at 60, but wait till 65, that payout rate goes up along with the roll up rate until you turn the income on.
[00:06:57] Okay?
[00:06:59] Now one thing that's important that's not shown in a lot of other illustrations, we decided to disclose that because there's a difference in how the fee is calculated. In some products, the contracts with the highest guaranteed income all have a fee, but some of them do it differently. Some charge a percentage of the income value. That's the guaranteed rollup that high. That value goes big and sometimes it's a per, a lot of times it's a percentage of that value, but taken from the account value and others charge a percentage of the base premium so it stays level and it's, you know, not over time, does not amount to as much, especially in a deferral period.
[00:07:35] There's no other illustration software, not from a company that I've seen or anybody else that offers it, that's going to show you the fee, but it affects the account value.
[00:07:44] We're going to disclose everything and I think that's a big part of it. If that turns you off, well, at least it's not a surprise to the people that buy it from us because we show you what it is.
[00:07:53] Otherwise you don't see it in the illustration. And then you say, wait a second, what's that? I never saw that.
[00:07:58] Which would you rather have? You want to know it now or do you want to find out the hard way? So, surrender term. Surrender terms are mostly set at 10 years. That tells you when you can get all the money out of the contract without a penalty. Now if you use the contract to its intended purpose, which is, you know, say income in two years, three years, five years, seven, whatever it is, then it doesn't matter because the, you know, you're using the income rider on the product. So it's within the parameters of, of the purpose. Right.
[00:08:29] But for some people, if plans change. So I've had some people that will say, well, I thought I'd take income in four, but we don't really need it. Let's defer it more.
[00:08:38] As you get closer to that surrender term, you might look at it and say, hey, you know what, this has worked. We had that backstop, but we want to do something else with the money. So that just tells you what your options are. Okay.
[00:08:48] And then a lot of people ask and this is not, you know, the best thing to do with the contract, but can I access the money before I take income? And yes, you can. Penalty free withdrawals are listed as part of the contract. Now if you, if you take a free withdrawal before income starts, or if you take a free withdrawal in excess of the income that's guaranteed, it will decrease the amount of future guaranteed income. So you have to be careful and typically that's not advisable. But again, if plans change, if you decide not to use the income, whatever it would be, hey, let's just liquidate a little bit of that contract for whatever expenses we have. But understand it will decrease the projected income in the future.
[00:09:29] Will the contract grow? A lot of people ask that. Your contract has cash value equal to the initial premium. That's how much money you put into it. It is not guaranteed to grow and there is a fee. So on the illustration, we show a zero percent growth scenario. That's what's guaranteed, okay? And you'll see the cash value declining by the fee every year. If there's no growth, it's very important to understand that the guarantee is in place regardless of account performance.
[00:09:57] So no matter what, you have guaranteed lifetime income.
[00:10:02] Now, every contract is going to grow a little bit of it. Some grow pretty well.
[00:10:06] We're going to give you the option in the illustration to put a hypothetical growth rate which is just, I recommend say a 4 or 5, maybe 6% would be, you know, a good result.
[00:10:18] We don't like the illustrations that will show you an index that is back tested to produce 15% returns to show guaranteed income plus all this cash value out in the future.
[00:10:28] Seen dozens and dozens of people who are disappointed to realize that is not reality. So we want to give you, you know, we recommend you use a conservative yield. They're not built to grow a ton, but they will grow a little bit. Okay, and then how do I know what my beneficiaries will receive is a big question. So long and short of it is your beneficiaries will receive the full account value when you pass away.
[00:10:52] All right? So if you don't, if you haven't taken income, it's just the full account cash value is the death benefit to your heirs. When income payments start, the cash value decreases because the income payments are coming out, right? And a lot of people say, well, I want the guaranteed income, but I don't want to lose the money.
[00:11:12] Like, well, tell me an account that exists anywhere else where you can take the money out and still have money in the account.
[00:11:21] Banks don't work like that. Brokerage companies don't work like that. IRAs don't work like that. If you take out money, you have less there, right?
[00:11:29] But death benefit assure ensures that you get the full value of the contract. It'll pass the cash value to your heirs if you don't live long enough to collect the income.
[00:11:39] So it's a declining value once you start taking income, but there will be a residual there for your heirs. And hopefully, like I tell everybody, the way to profit the most from the contract is to live a long time and stick it to the insurance companies.
[00:11:51] Okay, so the information for all of these contract features is available with the new illustrations on the website and it constitutes all the questions you need to ask. When you work through contract details methodically, you will find that they are not as complicated as most people think. Now it comes becomes really confusing because a lot of agents, they'll offer, they'll say, oh, the roll up, it's a guaranteed 10% or hey, there's a 20% bonus on this and they lead with that. And then it's up to you to kind of like jump in and try to figure out where that fits in and how. Like this is going to put it right in front of you, all of it. Right?
[00:12:28] So we take it as far as you can go and we're going to finish things off with our clients. As top of the class financial professionals, we know how these products work and all of our clients know more about the products they buy than many of the agents who are trying to sell annuities. Right. So let me show you real quick on the, this is on the video and I will look at one of the illustrations that I did. Just a sample deal. Okay.
[00:12:54] So on the top of it what happens is you will be given the option on the GLWB calculator. It's right on top of the website. You know, show income quotes. Let me show that real quick on the video. All you gotta do is like income quotes. There's annuity income, glwb, right.
[00:13:11] You set your source of fund, IRA or non ira, either know the dollar amount or you can solve for required premium. And then you go through the process and you put in personal details which is simply, you know, singular joint and age of the person. And you want to put in your email so you can get the illustration.
[00:13:30] So I'm going to look at this illustration. So what you can do is you can look at this and you can say, all right, well in this scenario, which was a 60 year old deferring to 65 joint life income, you look and American General had the highest payout, good company to work with, solid a rating, you know, part of aig, all that stuff. And we, you take that and you can take the next product and you can compare those two. Okay, so American General versus Midland National.
[00:13:59] In this scenario, American General wins. You can see that neither one of them have a Bonus and. But the payout rate is. And American General has a roll up every year. What does it say right here? 10% of. Oh, no, no, no. That's free withdrawal. Sorry.
[00:14:19] So 12% simple interest. So 12% is what that 250 will roll up. Simple interest.
[00:14:26] So that's 30,000 a year on the income value. And then they're going to put a payout rate of 7.2%.
[00:14:34] Midland just aggressively increases the payout rate. It's the simplest contract payout to comp or to keep calculate. Because you don't have to do anything except look at the table and apply the payout rate so you can see how those two are close. And then Midland obviously will start. The roll up is on a birthday, not an annual. So like we've got one that we're doing right now where birthdays in January. By the time that contract's issued, they're only gonna have to wait a month before they get their first step up. Okay. Free withdrawals are there. Surrender term. Both of these are 10 years. Okay.
[00:15:08] The fee base is like. Like American General charges it on the income base.
[00:15:14] So as that 250 goes up by $30,000 a year, it's 1.1 of.
[00:15:19] So five years in, you'd be at a 400,000income value on 1.1% would be 4400 bucks per year.
[00:15:28] Midlands is 1.25 of the initial premium. So it stays level. It seems like a higher fee, but it's only going to stay.
[00:15:35] What is that, 2600? I guess the illustration. We're going to show you that, right? I don't have to do that math in my head. Okay, so we're going to look at American General first. And it shows you the individual product terms for each product individually. And then we're going to do the 0% guaranteed account growth.
[00:15:53] Okay. You can see that the account value is not guaranteed to grow. The fee is going to draw that account value down, but the income stays guaranteed. 28,800. In this scenario, your numbers are going to be different. I urge you to go run an illustration. No big deal. You can download your very own report on this. And you see the annual fee grows as the income value grows. And that's a 0% scenario. I put in 5% for the account growth.
[00:16:17] So it shows you the account growing and how that cash value holds up over time. 5% would be a very good scenario for this because you'd have a good residual value well into the income years. It would not run out of cash until age 75. So that's 10 years into it where you'd still have cash value. You would have then collected more than you put into it. And that's a pretty reasonable. Once you take 5% with the growth rate, okay, so Midland national comes in and you can see that same deal product details and the 0% growth scenario. You can see, oh, annual fee 3125. It starts higher, but it stays level.
[00:16:57] So the cash value lasts a little bit longer. And then in the gross scenario, you're going to have an even better result. Same 5%. Both these contracts are capable of doing this. Okay.
[00:17:08] And you can see the cash value actually lasts until age 77.
[00:17:14] That's hypothetical. Again, not anything you should count on. But it gives you a little bit of assurance, you understand that, you know, it grows a little bit, you're going to get your money back and then some in the worst case scenario. We all hope the people that buy this live for 25 years and collect a whole bunch of money.
[00:17:31] So that is what is available on the website right now. I don't know anywhere else that has it, but I'm glad we've got it and a lot of people have been able to use it. I want everybody to be encouraged to go do it. And this is, you know, interesting to see that we are really just getting like all the tools available. Okay? So my goal is to continue to make Annuity Straight Talk the most transparent source for annuity and retirement information.
[00:18:02] Do not forget that we can take this one step further and show you the software that we're working on that analyzes how an annuity affects a portfolio in retirement. The combination of tools on this website will give you more assurance than you will find any anywhere else.
[00:18:19] And we've both been, Nate and I are talking to everybody.
[00:18:23] We've both been in this business for 20 some years and we really grew up in this business as technology was advancing. So we take to it pretty easily. And we're making that available to you guys. All the calculators, all we've got the annuity rates, we've got the calculators, we have more coming and some really, really good stuff, especially with the planning software and all that stuff. So check out the GLWB calculator for quotes from the best companies available.
[00:18:50] We can tell you why we choose these ones over everything else.
[00:18:54] And if you want to have a high level discussion, then all you have to do is schedule a time on the calendar, top right corner of any page on annuitystraighttalk.com this has been episode 242.
[00:19:05] My name is Brian Anderson.
[00:19:08] Glad to have you with us. Want you to take advantage of everything that's available on the website. I'm going to go enjoy some time in Kansas. I will be back next week, but check out that calculator. Download an illustration, let me know what questions you have. Any suggestions are always helpful, but I'm here to help. So give us a call, get on the calendar and we will talk to you soon. Okay, you guys have a great week. Bye.
