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 00:00:49 Hello and welcome everyone to the annuity straight talk podcast, episode number 52. My name is Brian Anderson, your host, founder, and creator of the website, annuity straight talk.com. Been a busy summer, and I apologize for being a little less consistent than I would like to be, but there's several reasons for that one. I've been busy. Two, I've been trying to enjoy summer as much as possible. Although I have not been able to do what I wanted to. And three, it started getting really hot and I was bragging about it for the longest time. Oh, Montana, Western Montana. It's nice and moderate weather. We had plenty of rain. It's really green. And then it got really hot. And the little cabin I'm working in right here is a little heat box. The sun hits it in the morning. It's about to hit it right now. So I'm doing, trying to do this early.
Speaker 2 00:01:38 And the sun shoots through that window in the back. I got no lighting. You couldn't see me. And then it starts to heat up really bad. So you can see the corner of it right here. I got my AC unit and about nine 30 or 10 in the morning, I've gotta flip that thing on and run it full blast all day to keep it moderate in here. And I'm not gonna move my recording studio around. And so there's a lot of times when it's just like thought, cuz then you do have this white noise and the wind blowing.
Speaker 2 00:02:09 And it's not really that fun to listen to. So I decided to, Hey, I'm gonna get after it and do it early in the morning. And I may not be early enough cause the sun's about to come up. And so hopefully I'm finished making my point by then anyway. So I hope everybody's been having a good summer and I've had several people come visit me that I met on the website. And I appreciate that. I think it's fun to do. If you're coming through, I'd love to buy you a cup of coffee, lunch, whatever things work out, you can come see where I'm at. Just depends, but anybody's welcome. And I'd love to drive within an hour or so even because I'm kind of in the middle of Western Montana, but it's been good. I have not had the chance to get out and do as much as I wanted to.
Speaker 2 00:02:49 So the next few weeks I'm gonna really try to maximize my weekends this weekend. I'm going out to spend some time with my dad and my brother and couple of nephews. So anyway, I wanted to talk about a topic that kind of came to mind throughout this year of rising interest rates. And so I thought of the title splitting annuities, and there's a couple of different ways. You can look at that and uh, I'm not gonna share the screen cuz there's not really any technically heavy stuff, but two weeks ago I had a podcast guaranteed income. Yes or no. And I talked about the different ways of doing guaranteed income. And then I wanna say about, oh, it's been almost six weeks ago. I did index annuities are better than.dot. And that one talked about how rates have come up. And everybody likes the multi-year guarantee.
Speaker 2 00:03:33 Just the easy fixed annuities, but index annuities also are, have increased in potential. And so there are a lot of people that are kind of nervous about there's one of two things and they're not necessarily related to each other, but they hit on the topic I want to cover. And a lot of people. So in relation from a fixed annuity, those are easy, simple, guaranteed, just like a CD. Everybody knows 'em in certain cases, you know, CD or fixed annuities almost always pay more interest. And in certain situations they're far superior. So I don't need to go into that too much, but you've got if fixed annuity and that's easy and simple to understand. And then people look at the index annuities like, oh, it's kind of complex or it's kind of difficult and I'm not sure I'm comfortable going for the upside. Now you got no fees and you've got no loss.
Speaker 2 00:04:26 And the idea is that there's more potential to that. But a lot of people are still nervous thinking, oh, there's something out there because all the things that people say, the other guys saying, oh, annuities are bad or they're gonna screw you. They're gonna do this. They're gonna do that. And so they don't wanna take anything. That's just not written in stone. And so they go with the fixed annuity and I've had a lot of people this year say I like the fixed rate. And I like the opportunity to maybe earn a little bit more and I can't quite decide what to do. And so my solution to that is why don't you split it up? Do half and half. The reason I say that is in a lot of index annuities I've sold. And especially in the last few years, if people are amenable to the idea, now, one of the problems with an index annuity is you have to wait an entire year to get your first interest credit.
Speaker 2 00:05:16 So you can log into your account. You can see your money sitting there. And I've had a lot of people come to me and say 3, 4, 5 months later nothing's happened. And so I thought, well, let's allocate cuz in an index annuity, one of the allocations you can choose for your index options is the fixed account. Don't forget that the baseline product of the index annuity is a fixed annuity. So there's a fixed account. There's typically money market in your 401k, in your IRA. There's fixed accounts and variable annuities. There's fixed annuities. And so you've got that as an option and because there's more working parts in an index annuity and it costs more to administer that the rates aren't quite as high as the multi-year fixed rates, but you can still get pretty close. So a lot of times in the index annuities, I've been telling people, maybe you oughta just like put 20% of your money into the fixed account.
Speaker 2 00:06:10 If you put 20% of your money into the fixed account, then it's daily credited interest. Most of the good companies have online reporting and they update those values daily. And so you put your money in and if you check it in three months, you're gonna have more than you put in cuz 20% of that's getting the fixed rate. So I started doing that over the past few years and there's a lot, that's kind of like the psychological reason of doing that. I don't like people waiting an entire year. Now. Some people don't mind, but it's usually a good way to get first time buyers of the annuity, not to mention that there's a lot of uncertainty with markets. So we don't know if we're really going up with the indexes anyway. So if we're gonna put a portion into the fixed rate now after the first year, you can take that fixed rate portion and put it into one of the upside indexes S and P 500 or something like that.
Speaker 2 00:07:01 There are a lot of different ways to do. You're not stuck at that fixed rate, but it's a way to just get started in the contract and start making money. And there's been several situations in the past where, because the market dropped or everything was really volatile where that little piece in the fixed rate actually gave him positive movement in the contract. So that's good. Now I've been working with several people this year who kind of thought the same thing where it's like, ah, I really like the guarantee, but I hear what you're saying. Maybe there is more potential here. And so what some people have done is, you know, I'm fine. Now I had one guy recently by the index annuity and he just put a hundred percent of it into the fixed rate. Ha I don't know what's gonna happen. Okay. Now let's, we'll use the, the example of 4%.
Speaker 2 00:07:46 So he's getting 4% of his money for the first year. After the first year, he can choose to put it, you know, move it into one of the equity based indexes if he wants to shoot for more. And we'll see what, what happens, what other people say is all right, well, I've decided that I'm comfortable with the fixed rate, but I want some index. So I'm gonna put half of it in a fixed annuity. And half of it in an index annuity rates are pretty strong across the board right now in comparison to what we've seen. So you can split companies. If you're concerned about safety, you can split companies and you get half your money. That's gonna sit at a guaranteed fixed rate. And half of it, that's gonna be an indexed annuity. So if you're looking at a 4% rate, then you're setting your entire portfolio at a baseline of 2% or your entire annuity portfolio at a baseline of 2%.
Speaker 2 00:08:35 So the least you can get is two. And then if your upside potential in the index, annuity is 10. Then you're adding, maybe in relation to the whole portfolio, you're adding 5% total to that. So if you get a good yield in the index annuity, then you're seven across the board instead of just ha because you got four and one, you got 10 in the other, it's an average of seven for the whole thing, but your bottom is 2%. And in this day and age again, not everybody gets every penny of the market, even though they carry the risk, nobody hits it dead on. So, oh, the S and P five, hundred's up this much. I mean the S and P five hundred's down. I mean, it's had a nice bear market rally recently, but again, there's the fixed annuity. So I had one guy that took third of the money, put it in the fixed annuity and two thirds of the money and put it in the index annuity.
Speaker 2 00:09:29 I wanna set that baseline. It's whatever you wanna do. So I'm just trying to give you ideas if locking into something and you don't know how to choose between the two, you know, one couple who did a 50 50 mix, you know, 4% on one side and the index annuity. On the other side, we did the index annuity first, and I kind of, my habit was to say, all right, let's put 20% in the fixed account. And they reminded me, well, we're getting 4% on the other half of the money we don't need to. And the four percent's an example right now, okay. Don't quote me on that. It's not the highest rate available. Here's a little nugget. I went to visit one of the insurance companies a couple of weeks ago. I might tell some stories about that. Uh, the chief investment officer is very interesting because rates have actually settled.
Speaker 2 00:10:10 The fed is raising rates, but the treasuries dropping. And if you see some volatility in the market, expect that to come down. As people kind of jump into safety. So rising fed rates do not mean higher annuity payouts. Now this year, we did get a bump in interest rates for consumer rates. But the fed keeping that rate keeping to increased is probably eventually gonna lead to a drop in treasuries and you're gonna see lower opportunities. So it's a pretty good time to hedge and get into income contracts, deferred contracts, all that stuff. One benefit of like splitting the annuity half and fixed half an index is the fixed annuity rates are strongest over three to five year period. The index annuities are strongest over seven to 10 year period. So you're also staggering dates. And the reason I say they're better is because they're more options and you've got that baseline strong rate.
Speaker 2 00:11:08 So like a fixed rate at five years is about as high as one for 10 years, it might be a touch higher. So there's just a, a good way of thinking about it. If you're really a conservative investor, you set up half of it on one half of it on the other, you're gonna get a good baseline. You're guaranteed on the whole pool of money to always be moving forward. Now, again, that's one of the ways you can use annuities that not a lot of people think about. I think most people know it, but still some people can't wrap their mind around the fact that you can just set your money in an, into, in an annuity and not touch it. That's what a deferred annuity is. Fixed index variable, whatever it is, you can put it into an annuity and you don't have to touch it.
Speaker 2 00:11:46 Now, if it's an IRA, you gotta take RMDs at 72, but those are deferred annuities. It's just a safe place to put money. And right now with rates, if you're able to lock in and guarantee that rate, then you don't have to worry about interest rate fluctuations on free withdrawals. Splitting annuities is a really good idea to set a baseline for the whole amount, but you also have, could consider liquidity provisions. Some fixed annuities have maybe interest. Only some of the highest paying contracts have no liquidity, unless you want to reduce your rate to get some. And some of 'em have a full 10%. So you have to figure out which ones work based on, uh, your liquidity needs as well. If we're doing income planning, you want might want to have the full percent, a full 10% for some people, just the interest only will work.
Speaker 2 00:12:32 So again, that's deferred annuities. Another way I look at it, and this is a tough one for people, cuz traditionally annuities are used for income. So some people come to me for income planning. Most of you that are listening to me for a while, know I have some creative ways of looking at income and the idea is to differentiate myself. And also because the reason it's advantage for you is because you're likely to find something that's going to give you more control, more output, more cash flow, obvious output, and more opportunity to change the plan over time. If you go with a deferred annuity and use free withdrawals rather than income, but then again, some people there are a couple of, uh, another podcast. That's the one I did last week, guaranteed income. Yes or no. It's my job with every one of you to decide what is the best opportunity for you?
Speaker 2 00:13:25 Now? Some people like the safety and security of the guaranteed paycheck. They'd not so worried about what the total output is. If they live a long time, they'll get their money out of it. So some people like that guarantee, they don't want, if you do use a deferred annuity, fixed or index to draw withdrawals and do your income planning that way, if you wanna maintain more control over the cash balance, there's some variability that goes along with that and we can very conservatively project that you're gonna be fine over time. But some people, you know, I don't wanna have to make the decision, but the advantage is often on that side of things for several reasons. Well, what's the answer. The answer is to split it up, get a little bit of guaranteed income, a little guaranteed paycheck, direct deposit every month, uh, but maintain some more control, get some growth out of the other side of it. And I've had a lot of people do that in the past where they say, well, okay, I wanna set up a baseline of 500 bucks a month and then I'm gonna get the other 500 on a discretionary basis. It's also really good to say, you know, needs versus wants, well, I need a thousand a month, but I think I might want 2000 a month, whatever that is.
Speaker 2 00:14:36 And so don't take my advice or my recommendation as the only way I'm willing to do things. It's not one or the other, whether you're looking at just protecting money and growing it, or if you're looking at a serious income planning situation and trying to figure out asset distribution in retirement, if you look at the annuity in relation to the rest of your portfolio, that adds another twist to it. So there's so many working parts that have to happen for each person. And I wish you'd be comfortable enough to figure out, to ask me for a little bit of assistance. Most people call and say, I'm wondering if I need an annuity. Like I don't, I can't think of a single client. I have maybe just a couple who need the annuity. Most people do it because they want the safety, the protection, the consistent cash flow, the protected value, the guaranteed growth, no loss upside, any of those things, you can split annuities, you can split strategies.
Speaker 2 00:15:40 You can split growth opportunities. You can buy a guaranteed income contract. And then you can use a deferral contract just for some extra safe money. If you have X amount set aside for guaranteed income and you only need half of that, you may still wanna protect the rest of it. So you use an income annuity for the part that you need, and then you defer the rest and a fixed or an index annuity. It's really, really simple. So splitting annuities means that you don't have to make as big a decision. Now it's not all that complicated. Just I need to throw these ideas out there. So people begin to kinda learn and understand what is possible and that it's typically not an all or nothing thing. Your preferences dictate what you do with your money. I'm here to educate you as to the options and opportunity.
Speaker 2 00:16:29 So this has been episode 52, splitting annuities is a great way to mix your preference with, uh, a little extra opportunity or to kind of give you some peace of mind that you're getting what you need, but you also have some additional potential. I wanna make things the best as possible for you and I'm here to help. So don't be afraid to reach out and ask questions. So a lot of people have done this this year. And I think some people, I learned this from a lot of people who kind of slowly gravitated to it. And I just, I re I don't know. I can't say it was really my idea, but it's like, well, well, I like to fix, but kind of like the idea. And so, oh, I'll put some here and some here, it's pretty simple. So you can gimme a call the (800) 438-5121.
Speaker 2 00:17:14 If you want to talk about it, you could subscribe to the YouTube channel. If you wanna watch the video, this one does not have a visual aid, which is fine. So it's an easy one to just listen to, or you've got. So that's where the podcast comes in, hosted on Casto apple, Spotify, Google pod, any of the podcast platforms go look it up. You got your little phone, you got a podcast app, open it up, annuity, straight talk. It's there anyway. So I'm available and I'm out there and I'm ready to help if you need something. So I really appreciate everybody working with me this year. It's been a good year and I hope to be very effective for everybody else who needs help. And it's not all about just doing business. It's about helping people, making sure you get what you want. So episode 52, splitting annuities, I appreciate you stopping by and I will be back next week with something equally as good or even better. So thank you again for joining me and you guys have a great day. Okay, bye.
Speaker 1 00:18:23 You have been listening to annuity straight talk. The proceeding is for information and educational purposes only. It does not represent tax legal or investment advice. The views expressed by guests on this program and do not necessarily reflect the views. No information presented should Beed without with professional. It's important that you all insurance contract disclosures based on financial paying of the insurance company.
