Episode Transcript
[00:00:00] Speaker A: Hello and welcome, everybody, to the Annuity Straight Talk podcast, episode number 217.
Brian Andersen here, founder and creator. I've got Dave with me for part two.
One of my clients who offered to do this wanted to tell you and explain to everybody what his process was. Part one was his research journey. We're going to dig more into the numbers now.
[00:00:20] Speaker B: Here I am two years later after purchasing it. And so, of course, whenever you make a big decision like that, you're like, is that the right call? Because the market's been up, as an example, the last two years. Yeah.
[00:00:31] Speaker A: You asked me last week, what if I would have waited.
[00:00:33] Speaker B: Yeah, what if I would have waited? But it turns out it's still on the positive side for me because when I happened to purchase it, it was a really good time to get it. It still worked out the best, even though the market's been out. Yeah.
[00:00:45] Speaker A: And I don't think. I don't think the market's going to catch it. And we did that because you asked me last week or something like that. Hey, just out of curiosity, he wasn't angry about it, but he said, that market's done well. What if I would have waited? And I did some quick math, which was an educated guess about what it would be, but it would. To replicate what you got two years ago would cost about 30% more today because of those two years.
So if you receive 30% market growth in your assets, then you're. It's a wash if you didn't get. You know, that works. So now it's like, all right, cool. Then at least it was good value for the time that you got it.
[00:01:18] Speaker B: I guess the other thing I would just like. So the whole reason that I wanted to take 20 minutes of my time, because literally I've been doing this for six months. All the things that we've talked about, between taxes and RMDs and all that stuff, it's just been a long, arduous journey to come up with that. And I thought at least if I can narrow people in on what I selected and why, it might help them and give them some tools and things to consider.
[00:01:45] Speaker A: Yeah.
You watch the podcast as well, so you understand to some degree, I don't know if you see everyone or listen to them or whatever, but you understand to see some degree that these are all the little questions that people ask that would be just a small component of all the things that you considered. And I don't want anybody to worry just because they're listening to Dave, who did like this detailed approach to figuring out all these things.
It's very good when you do. It's not necessarily required for everyone, but just sit down and focus on it for a couple of months and you'll be able to figure it out. And I think it's the kind of important decision that deserves that amount of commitment. Really?
[00:02:24] Speaker B: Yeah. And I think it's healthy also to whenever I have something where I feel comfortable with it and I want to hear from someone that's totally against it. And let's see, you know why that is. And there's a gazillion, trust me, YouTube videos about oh my God, annuities are like the worst thing you could possibly do. Never do that. But again, the majority of the ones I saw that were talking like that, it's all about index based annuities. I saw so few that talked about actual just income only annuities. And I saw. I'm not sure exactly why that is such a big hot topic. And they hyper focus on that. Yeah.
[00:02:58] Speaker A: The biggest reason guys want to sell them is the insurance companies pay you a little bit more. They pay you more because it's harder to sell. Okay. To sell it the right way requires deeper disclosures. I spend quite a bit of time talking about them as well because they're complex enough that it takes greater explanation. So when you've got some index annuities that have the guaranteed income rider and we can go through all the little intricate parts of that, but what we want to look at and what's important in those and if all that other stuff works out, wonderful. Right. But the bottom line is what are they going to guarantee to cash flow? You and win.
[00:03:35] Speaker B: Right.
[00:03:35] Speaker A: So you can disregard for the most part all that complex stuff. You want to know if there's something that's going to. Oh, is there some. For some reason, right. Where I had a guy go through a contract last year and he got his annuity and he came to me and he said, aha. I found it on page 41. I found where they're going to wiggle out of this and not pay me. And I was like, all right, I gotta see it.
[00:03:56] Speaker B: Yeah.
[00:03:56] Speaker A: And it was some clause about. It was some death benefit clause that was like down the page a little bit where he had forgot the point of it. But anyway, I was like, it's guaranteed, you're okay.
[00:04:06] Speaker B: The other thing too, I always question myself if this deal sounds too good to be true. Then it's like, how are they gonna make money? I think it's really important to know that these companies are in business for a reason. How do they make money? And so I had heard this on another podcast, and it was just me. There was two things I heard on it that I thought were very helpful. One is, they were saying, look, the insurance companies are looking, statistically, when do the average people die? Right? And that's what they're counting on. And so you've got this pool of people. Some people that die young, see people that die in the middle, some people that die later. And so they're looking at it from the perspective of, look, we're just like, you go to Vegas, right? You're going to have winners, you're going to have losers, you're going to have in the middle. And so they've done the math. So I get that. But if you're on the longer side and you think there's a reasonable chance that you're going to live longer, then you're going to be on the positive end. If your family history is that you typically pass away, well, then maybe that's not necessarily a good thing to do. But like you had pointed out earlier, it's not just about you. What about your spouse? You know, and especially with medicine continuing to evolve and people are just living longer, and that doesn't necessarily mean they're living well. But that's one thing.
[00:05:20] Speaker A: I talk about the spouse, and it's not always the wife. There's one person, one member of each couple who takes a greater interest. Like you did in this. And I'd never, I never talked to your wife, but I assume she was privy to the decisions that were.
[00:05:32] Speaker B: Oh, yeah.
[00:05:32] Speaker A: And you talk to her about it, right? Yeah, but it's interesting. It's always. The person that's not involved in it is always really excited about the guaranteed income because they're like, I don't want to do what you're doing with all of these.
You're telling me there's an easy path where it's just in our bank account every month. I like that. And so I've known some technical guys that come in and their wife would say, I get it, but no, I want this guarantee.
[00:05:58] Speaker B: Plus, the other part too is, and this was a concern for my kids as well, which was another thing that I found that helped me mentally. But what I didn't want to have happen is what, let's say I pass away because I. I do all the numbers and then some yahoo comes along and try sells my wife on something that is not good, and then she ends up putting money in that we don't have to worry about any of that. This money's already set aside. It's already going to be coming in. There would be no reason for her to panic or have to talk to someone that might convince her to do something not so good.
[00:06:31] Speaker A: Keep it all the same. Oh, and believe me, if, heaven forbid, you have an early checkout, Dave, I'm telling you, there will be people coming after her too. Just, it's the way the business works.
[00:06:40] Speaker B: So the other thing I'll just throw out there because I talked earlier about things that I never would have dreamed could cause such an issue, like required minimum distribution. If you have a lot of money tied up in, say a 401k that is going to bite you. And so you have to be cognizant of that. But that's the other part of the annuity that. So I was like, how's that going to work then? How does the RMDs work with that? Because I did use my 401k money to move over to the annuity, but it turns out that's all kind of handled internally. So it's not a problem, I guess, is what I'm saying. It doesn't necessarily. It's not really an advantage, but it's not a disadvantage either.
[00:07:16] Speaker A: No, that sounds great. I really appreciate you being here. Is there any other things you got a couple of notes left on here that you want to cover?
[00:07:23] Speaker B: Yeah, I guess I would say, don't you have to go into it holistically? Like in my case, like if you were going to be a 60, 40, for example, and then you say, I'm going to take 20% of that and I'm going to put that in the annuity. That means you got in originally 40% bonds, 60% stocks, and you say, I'm going to take the 20%, I'm going to put that in annuity, and then the other 20%, I'm just going to keep that in bonds then because I want to diversify.
[00:07:51] Speaker A: A lot of people do that.
[00:07:52] Speaker B: You don't really want to do that. Because now that whole thing that you're trying to do, again, if legacy is important to you is you want to be able to grow that well, that means you're going to have to take that other 20% and put it in growth so that at the end of the day, net, you're still going to be better off. So if I live to 90 and if the market just does the average of, you know what, it's done, then I'm actually going to be quite a bit ahead as far as when I'm going to be able to leave my legacy. But, but you have to make that conscious effort to consider that. You can't just look at it in a vacuum and say, I'm going to take this and put it in over here. It's got to become a holistic and everybody's different, Everybody's situation is different. That's why. Yeah, there's so complicated.
[00:08:36] Speaker A: So some people that protect more more and some people that do less. And you'd actually be surprised. I've had two, two other people this week come in and say, you know, they're in their mid-70s, they're 93, 97% in equities right now, and it's, look at it. So I'm a little nervous. I'm like, I think you should be because you're, you're going to be swinging real fast as the market moves around. And like I said, it's going to go up over time. There's some people that need a lot less risk than they're taking. But if you stick in the 60, 40, then theoretically with the annuity, you can take more risk. And that's so.
[00:09:08] Speaker B: Couple of other things too that I found interesting that we really haven't talked much about is the other thing I hear commonly come up is inflation. Right. Because a fixed income annuity, it does not go up with inflation. So 20 years from now, it's not going to meet as much of your base level expenses. So again, I think people have to be careful. You're not comparing apples to oranges. You, if you put your money in a bond, is that going to grow in value?
No, it's not either. So again, you're comparing it to a growth engine. This is not about comparing to a growth engine. And so you keep coming back to that because that's again, what I see most people keep coming back to. You know, they keep comparing it to a growth type investment. This is not a growth investment. That's not what it's intended. And if you have money in bonds, guess what? Those don't grow either.
[00:10:00] Speaker A: That's true. There's a lot of people that will not buy the annuity because they feel like they're just throwing money away and they don't understand that concept. It's like, if I let it go, then it's not going to be there and you just have to understand what it's doing. So, yeah.
[00:10:13] Speaker B: And so then the other one is again, most people are going to have Social Security of some kind. But Social Security does have that ability to grow with that. So in mine, I look at my guaranteed income as annuity plus Social Security, and the Social Security is growing, so that helps be a buffer for that as well. But again, I think most people are visual. And it took for me to see the visual of, okay, when I'm 90, if I do, this is what my heirs get. If I don't, then this is what they get. And they're real numbers. Right. Take all the other things into consideration. It's not about theoretical anymore. It's about what is the actual numbers that come out over a long period.
[00:10:50] Speaker A: Yeah. And in the worst case, I believe that you are equally as good in either path. And then you add the. The confidence, the simplicity, and all that stuff of the annuity.
[00:10:59] Speaker B: But no, actually, I was. Again, this is assuming, I think you were ahead. If I live to 90, if markets return an average amount, then I'm going to be actually pretty far ahead as far as what I can leave my heirs. Yeah. So to me, it was a win. Again, assuming I live to 90, could you go.
[00:11:16] Speaker A: You could equally go back and look, when you asked me the question, what if I waited and it would cost you 30% more. What if you did have 40% of your money in bonds for the past two years? How even that would probably make a big difference on what your portfolio looks like today, just two years in.
[00:11:31] Speaker B: So for 80% of people you talk to, that's probably true in my case. Again, mine, it's very unique because I'm getting deferred compensation, so I don't. I never. That is my bond equivalent. So I don't really have any bonds anyway.
It's for the next few years. But, yes, conceptually, yes, you're exactly right.
[00:11:50] Speaker A: I told. We told you we didn't have to talk about specific personal detail.
[00:11:53] Speaker B: Yeah.
All right.
[00:11:55] Speaker A: No, this has been great. I really appreciate you doing this great idea. And I think just based on your thought process, I'm going to pick your brain as we go forward and we can keep a conversation going because I got some other technical ideas for information, podcasts and stuff like that.
[00:12:08] Speaker B: So, yeah, that'd be fantastic.
[00:12:10] Speaker A: All right, Dave, thank you so much for joining me. I really appreciate it. Remind everybody he came here because he got a better deal, but we'll have a good relationship going forward because he did so much work and it's been awesome. So thank you again for joining me, and you're welcome back anytime you got an idea. Okay.
[00:12:25] Speaker B: All Right, Brian? Sounds good, bud.
[00:12:26] Speaker A: I ran him through the beginning parts of the calculator I mentioned two weeks ago. And after looking at it in hindsight, should I have done it when I did it? Market's done well. How would it compare? He's still very confident and comfortable with the decision that he made. And that is what it should feel like. The big takeaway, honestly, is he kept coming back to compare apples to apples. If you need guaranteed income, compare the annuity to bonds, not to your growth portfolio. And think holistically. If you're taking 20% and putting it into guaranteed income, what does that let you do with the other 80%? And why does that make you more profitable? That's where you find the real advantage of this. And Dave does a really good job explaining of it. If you're in a similar spot, maybe you're retiring soon or maybe you've got a portfolio to figure out the income piece. Then go ahead and reach out. We can run your numbers, look at what makes sense for your situation and make sure you're comparing the right things you can get on my calendar on the top right corner of any page on annuitystraighttalk.com schedule a call. My name is Brian Andersen. This has been episode 217. I want to thank Dave immensely for joining us and providing his story and how he got into this, made this significant decision and what it's done to benefit his retirement two years into it. Thank you for joining me. I'll be back next week for episode number 218.
