MYGA to SPIA for Total Control Over Your Retirement Income

Episode 138 May 25, 2024 00:13:17
MYGA to SPIA for Total Control Over Your Retirement Income
Annuity Straight Talk
MYGA to SPIA for Total Control Over Your Retirement Income

May 25 2024 | 00:13:17

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Show Notes

Welcome to Episode 139 of the Annuity Straight Talk Podcast! I'm Brian Anderson, founder of AnnuityStraightTalk.com. In this episode, we dive deep into the MYGA (Multi-Year Guaranteed Annuity) to SPIA (Single Premium Immediate Annuity) strategy for deferred income. Is it the best option for you? Let's explore the alternatives and risks involved.

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Episode Transcript

[00:00:00] Speaker A: Hello and welcome to the Annuity Straight Talk podcast, episode number 139. My name is Brian Anderson, founder and creator of AnnuitystraightTalk.com. please like subscribe or comment on any of your favorite podcast platforms or on YouTube. Hit the little bell on the top right corner of YouTube. That way you'll be notified as soon as they come out. Otherwise, join my email [email protected]. if you want to make an appointment top right corner of any page on annuitystraighttalk.com schedule a call. I'll help you figure things out and make sense of your situation. Going to share my screen show you guys the newsletter today. Excited about this myga multi year guaranteed Annuity to SPIA single premium immediate annuity for deferred income. Now this one probably deserves its own podcast just because of there's a little splash out there with other people talking about it. And I did cover a lot of deferred income options recently, and I want to talk about this specifically because it's alternative idea. And I can honestly tell you that this one idea was the main motivation for starting this website. I came upon the idea 20 years ago, almost 20 years ago. I crunched the numbers to see if guaranteed lifetime withdrawal benefits. The GLW talked about them last week if they were really as valuable as the marketing experts were claiming. My first exposure to those was with variable annuities came with a lot of fees, and you had market risk. It's a variable account invested in the stock market. It was also available with fixed index annuities. So in the newsletter you'll see there's a lot of acronyms. I shorten it just to make it easier to type out more acronyms than the us military or federal agencies of any kind. Okay, so the GLWB gave the contract owner guaranteed income in the future regardless of account performance. The income guarantee convinced a lot of consumers to ignore the market risk associated with variable annuities. And good companies were able to manage it. Some were able to manage that risk, some companies, Hartford being one of them, and actually exited the business because they didn't price their variable annuities correctly. So regardless of what happens to that, you get an annual step up, annual increase, like Social Security. You guys, most of you have heard of this stuff, but what if you didn't want to pay the fee? So several of you might remember, early in my career, the first annuities I saw were the fixed annuities with multi year interest guarantees, the mygas that people call them now. Incredibly simple and safe contract with no fees whatsoever. At that time, single premium immediate annuities were, and in many cases still are, the absolute best for maximum income. But you have to start income within the first year of the contract if you want to defer for several years. The GLWB at the time was the only thing available. So I figured out another way to defer income without fees. But everybody I showed thought I was crazy. I get that a lot. Why are you so different? I don't know. So here's an example. Let's say you want to defer income for five years. You get the GLWB quote, you can do it with an FIAs fixed index annuities have the highest payouts. Now, I talked about it last week where if you're going to defer income, it's the highest payout you can get. This is part of the analysis I go through to make sure and verify that it is indeed the highest payment you can get. So back then, the idea was like, well, use a five year myga. Just grow the money for five years, and then when it's done, you roll that contract value, which is a higher value. You're also five years older, so you get a better, you get higher payments on the actuarial scale, switch to a spea, and maximize income with a larger amount of guaranteed money. So you get more money to start with, and you're an older age, so the payouts are going to be higher. So if we look at that today, we have to assume, let's say it's a 62 year old, wants to defer for five years, and we look at a GLWB and then we say, okay, well, Amica is going to grow to this. And then what if you bought a spe at 67, but we're using today's numbers to project what an immediate annuity might pay in five years. And I can tell you it's going to change tomorrow. So we don't know, but we can guess. At the time when I first started doing it, which is why it caught my eye and which is why I started documenting it. And that's what I used to build the website. Initially, we were getting future income that was 20% or more higher than what a GLWB would pay. And you had no fees. You had control over it through the deferral period. Pretty good deal. But unfortunately, a projection is not a guarantee. So it is a good thing that I wasn't a great marketer back then. A lot of people bought my gas from me, and they did well, but no one took it seriously as an income strategy. And I'm glad about that because after about 2009, interest rates were really low and speas wouldn't have paid anything close to what we projected in 2004. And five GLB GLW would have done better. And many variable annuities also had solid performance. So a variable account, the market bounces back, you get step ups that go over and above that guaranteed increase. So they're even higher than the guarantee. So if you're going to use this strategy, you have to be careful. If you consider all variables, and it's not something I'm going to stand up there and say, this is the best way to do it. It is flexible for a period of years and then you're locked in. There's a lot of risks that you have to be, have to consider. I continued doing it in large part when I did get better at marketing, did get people interested in the message. Mid two thousand and ten s, twenty, fourteen, fifteen, sixteen rates were really low. A lot of those people are coming out of mygas, or index annuities, are rolling them into income deals that are great. It made more sense when the rates were actually low because they had nowhere else to go. Side note, when I started in this business, all the old guys that were teaching me how to do it were really excited about 6% mortgage rates. Those guys have been in the business since the seventies, eighties. So at the time people thought, oh, of course, rates are going to go up because they were just used to them always being high. They didn't realize that for the next 1516 years, rates were going to go lower and lower. So my youthful exuberance didn't do me any favors in 2005 when I had no experience to consider all options and possibilities. Now we have some really good potential in both mygas and GLWB's and immediate annuities. So all of them need to be considered. For everyone that looks into deferred income. If I make a recommendation and say, this is the best income you can get now we might say, oh, it's an a company. Some people really want a plus, some people are okay with a. I try to stay away from a minus. B plus, definitely b plus. What's the point? Usually can't do a whole lot better. Why don't you just go with the safest you can get, know that it's covered. So typically in a first proposal, I'll show. So here's the highest income you can get for this period of time or this deferral period based on your particulars, and if they're interested, I say, if you're interested, we'll dig into it and I'll show you how I came to that conclusion. This is how I do it. So peel them back another layer, guys. So last week I had, or, you know, maybe two weeks ago, I got a scenario, and I've seen this a few dozen times in the past year, where someone else was telling them, nope, you're going to do better if you buy a myga and then go get a spea later. They all wanted deferred income. So I ran that through my process and delivered the top results, including the myga to SPIA. In all cases, a GLwb with a fixed index annuity was a best deferred income available. That's why I ran that last week. That's why I talked about it last week. That is, with consideration of this option. These cases were different because someone else told them that they should use a myga in the deferral period, then switch to a spea for income, because that's the best way to go. And if you think I haven't already considered that, then you don't understand the foundations of my participation in this business, in my career. I just take it for granted because it's such foundational bedrock of my career that it's just kind of. It naturally happens in my brain. Okay, so the. Here's the most recent case. 59 year old woman wanted to secure 2000 per month in seven years, something like that. I'm giving you the basic numbers. I'm not going to dig into the absolute details of it. You're going to take my word for it. And I promise you this is true. So go to the database, solve for $2,000 a month, and in her situation, it was going to cost her about $200,000 to do it. Then she's. Then she asked, she said, what if I use a myga first and then go get a spea in seven years? She told me someone else gave her the idea and said, hey, this is the best way to do it. And I figured out, okay, she wants a second opinion. So I showed her the numbers, my gut for spea Myga for seven years, then buy a spea. And we'd have to assume that she was seven years older, but we'd be able to use a start higher starting value because the mic is guaranteed to grow top rated myga. Then assuming she was seven years older when the spea would be purchased, the higher purse purchase amount gave her 1750 per month. Same $200,000 upfront. That's a twelve and a half percent reduction in the income benefit. Then you also need to understand the risk you run if that's the path you take. Several people have asked this. We run the numbers in order for the myga. The myga to spea match that's written is not that great. You're going to have to gamble on a substantial rate increase in the next seven years. If it doesn't work out, then it costs you a fair bit of money. In terms of retirement income, that's a big reduction. I'm in the business of maximizing money. I'm in the business of guaranteeing it. So that risk is a non starter for me. If rates drop a little bit, you're even worse off. Then you don't have the income you want. You do have the money and you have control of it, but could be stuck in a 30 day renewal period with the myga. You got to put it somewhere. Do you have to do a myga again? What? You know, that's a stressful situation. You have to decide if you want to be there and take that risk. So yes, there are people out there touting myga two spea as the best way to maximize income. And in the rare cases it does work, it needs to be checked. If the market switch, it might work again in most cases, but the spread is not there right now. There are a lot of reasons to forego guaranteed income in favor of an alternative strategy. But you can't game the system. You can't out think the insurance companies, some guys are gonna get appointments for it. What they're gonna do is get you in. Hey, this is the best. They're gonna get you in and then they're gonna switch. Oh no, you should buy a Glwb. Never mind. I'm just going to tell you what's the best and you can decide if you want to talk to me so my goods can be used for retirement income. A lot of the reasons to preserve your options, maintain control or adjusting payouts. Discretionary income. Take a little more. Some people just like to peel the interest off, keep the asset intact. It depends. We're talking maximum income. It's a whole different thing. So if anything that you've seen in these newsletters or the videos, podcast, whatever you want to call it, if it's contradictory, then call me on it. I'll clear it up. Happy to admit when I'm wrong, this is something I've been doing for 20 years. Maybe I wasn't the first one to come up with it. Maybe it wasn't the only one to come up with it. But I did come up with it on my own. If you think somebody's taking you down the wrong path, or you want to make sure you see all the options, that's what I'm here to do and do a bang up job for you. So this has been episode 139, my good Espia for deferred income question mark. Not usually. It is a possibility. So if you like this, let me know. Hit the thumbs up on YouTube. Make a comment reply to the email this is going to go out to the email list or whatever. If you got any questions, happy to chat with you. Top right corner of any page on annuitystraighttalk.com. schedule a call. Write your name. You know, pick your time zone. Write your name, phone number, email. You'll get email confirmation. I will call you at the time you request. Did have a string in the last week or so where I was a little off. I was a minute late a couple times, so my apologies. Those people were being minute late. Usually people are more surprised when I'm on time, which is usually what happens. So anyhow, thanks for joining me this week for episode 139. I'll be back with 140 next week. I think I'm going to talk about Roth conversion, so if you want to hear about that, come back and I'll see you then. Okay. Have a great day. Bye. [00:12:20] Speaker B: You have been listening to annuity stray talk. The preceding 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 annuity straight talk or its partners. No information presented today should be acted upon without meeting with a qualified and licensed professional. It is important that you read all insurance contract disclosures carefully before making a purchase decision. Guarantees are based on the financial strength and claims paying ability of the insurance company.

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