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 00:00:46 Hello and welcome everyone to the Annuity Straight Talk podcast episode number 91. My name is Brian Anderson, founder and creator of annuity straight talk.com. Uh, all my work, all my words, all the information I've learned over 20 years in this business. If you can't find something that helps, then you're not looking in the right place. That's why you gotta give me a call my number (800) 438-5121 or schedule a call top right corner. Any page on annuity Straight talk.com. Please like, subscribe, comment on your favorite podcast platforms or YouTube. Share with your friends, get the information out there because it is helpful and I get comments every day about how much it has helped. So today we're gonna do something. We're gonna tackle a popular product, which is the ion's benefit control and I'm going to take it down. I had the opportunity to review this for someone a couple of months ago.
Speaker 2 00:01:42 That gentleman thought about it for you know, two, three months and he said, you know what? I kind of, I like your approach when I'm not saying he is, we're gonna do business. He's obviously gonna get pushback from the other agent. So I'm gonna explain the case and I'm gonna tell you guys what I think. There's a couple of recent podcasts that relate to this. I've found three actually that are directly related to it. So let me share my screen and we'll uh, take down the Allion's benefit control. This is just one of those things where you gotta have options and a lot of people call me and they're dealing with guys that say, this is what he showed me. Will they show you anything else? No, he said this is the best. This is just the best. So first thing I can share with you is product review, safety, growth and income.
Speaker 2 00:02:25 I'm not gonna get into the details of that, but the Ion's benefit Control is one of those products that does not have a fee. So you can get income from it, it's safe cuz Allons is a stable company and it can grow how much it grows, who knows? But a jack of all trades is a master of none. It doesn't offer you the best in any of those categories is a kind all blended together. All right, so when I'm talking to this guy, he's getting ready to retire. So he wants to take immediate income and if you know that Ion's benefit control, call it the abc. The ABC was the answer to the ALLONS 2 22, which requires a 10-year deferral before you can capitalize on the bonus and have that credited toward your income value. Allons benefit control came out, what, four or five years ago, something like that.
Speaker 2 00:03:11 And it was the product that'll give you a bonus and you can take income in any year and still factor that bonus into, it's not free money, it's just an income factor that increases your, your income. So anybody who wants to take income right away or two or three years out down the road, unfortunately a lot of people bought the 2 22, man, I met somebody last two weeks ago, they had 80% of their assets in an alliance. 2 22 they bought two years ago and they're retired now and wanna start. It's like, oh man, terrible 80% and you wonder why I get so fired up, right? Anyhow, the benefit control was a, you know, an alternative to the 2 22 for people who wanted a bonus on income. And again, you gotta just look at the bottom line. So here we go. Male, age 65, I apologize, I've done a lot of single life illustrations this year and that's kind of been the topic of the podcast.
Speaker 2 00:04:00 If you're a joint life, if it's a couple planning for retirement, the result will be the same. The income figures are gonna be different. If you add an extra life to it, you get a lower payout, it cost, you know, basically costs more money for you to get the same amount of income. But this is just a lesson. It's a general lesson and that's what we're talking about. So he needed about $20,000 a year to supplement his retirement income. That's where he was comfortable. He's got plenty of money to do it, but he wants to do it in the most efficient way. Ah, he goes into this guy's office in Florida says, ah guy's like, oh, all Allen's benefiting control. This is the best. Ah, you might like it but it's not the best. So he pays $400,000 for it. Uh, assuming that what the benefit control offers is increasing income potential for increasing retirement needs.
Speaker 2 00:04:44 So when you have a product that has no fee for the income rider like this one does, that's a giant benefit that a lot of people like. That goes back to another podcast I did about guaranteed income with or without fees. Go look it up. There's a newsletter on this, I'll link that article. You can get an income writer, you can get guaranteed income without a fee, but because there's no fee, honestly the company adds the fee because it pads their reserves and they can ensure themselves against you living longer than expected. So if they're not patting their reserves and they're gonna offer you a lower upfront payment. So this one according to what the indexes do, you know, indexes up 5%, they'll increase your income by 5%. Pretty good deal, right? Well it remains to be seen because it's gonna run headlong into a lot of the issues people have with index annuities in general.
Speaker 2 00:05:30 So mail 65, $400,000, single lifetime withdrawals. It could be joint, uh, numbers will be different, but the lesson is the same as I said before. So we look at this part right here and this purple line is your accumulation value, all right? Starts at 400,000 and then oh, you're seven, eight, it just tanks goes all the way down. So nothing left at 15. There's nothing wrong with with that because that's essentially what you're doing. You're spending your money, right? They're giving you back your money and the insurance you buy is what happens when that money runs out. So the insurance company backs that and you're guaranteed not to run outta money, right? But remember this because I'm gonna talk about when that cash value goes to zero and this is gonna run into another podcast I recently did as well. Uh, I'm not gonna go into too many of the details about the, you know, laddering strategies, but we're gonna get to that first one here and I'll show you.
Speaker 2 00:06:28 So hopefully I got all of his information redacted cuz I do not like to share personal information, but I do appreciate getting in it my hands on an illustration. I mean this comes into the like the neighborhood of contracts. I could sell this stuff I want to and if I was selling it, I'd probably pick all the right things about it and if it was really good, I'd say yeah, yeah I, I'll do that. But I just never, that ain't no good, right? Okay, so this is like BS annuity illustrations, that other podcast and newsletter I did a couple months ago, same thing, it was an Allons contract but it was built for accumulation. It's a little different. This guy's going on a Bloomberg index that's been in existence for a couple of years. So it's back tested, we don't know how it really performed.
Speaker 2 00:07:07 Uh, but a two year participation rate, 175% participation, current allocation charge is zero, guaranteed maximum is 2.5. There's your first lever lever. I prefer the contracts where you have a choice of the allocation fee. This is telling you right here that index, they can arbitrarily add an allocation charge if they want to. Plus that 1 75 is only guaranteed. I think probably the guaranteed minimum is like 10%, which would be nothing, right? Index does 20%, you get two and then they charge the 2.5. Now you get zero. So levers to control the contract recently had a lot of conversations with people worried about companies reducing rates whether you're accumulation or income, what happens if they want to reduce rates. I did a series of newsletters a couple years ago about that. So that's the next podcast next week I'm gonna talk about that cuz I wanna get out right out in front of you with all the material information that you need to understand before you make a commitment.
Speaker 2 00:08:05 So I look at that and we've got the allocation charge two and a half percent possibly, right? And if that participation rate drops, then uh, well doesn't work, right? So hypothetical values most recent and most recent 10 calendar year period. Here's what I'm gonna draw your attention to. This is what I would consider a BS annuity illustration. All right? So as you can see, you get the bonus and he's gonna take lifetime income, he needed 20,000, he's getting 21,000, right? And then every time you get an interest credit they increase the income Wild numbers. Wouldn't it be great if this worked out, right? So it shows when the cash value, that's this column right here. Cash value goes to zero after the 14th year cuz you pulled $91,000 in income out the company has no money left. All right? Then two years later you see a 25 or 6% income increase.
Speaker 2 00:09:07 Look at these yields. Incredible, right? I think it's unbelievable and I would not bank my retirement on that. I've seen a lot of people buy these contracts and they look at those and they need 60 or 70,000 income and they think they're gonna get it off of $400,000. But if the company has no money left, if you understand how index annuities work, they use the earnings on their bond portfolio, right? To buy an option in the index. They've got no money on this contract. Where's their budget to buy the options? Crank that rate down. This is never ever gonna work out like this. You'll get some increases, it'll grow a little bit, but the results of what you see on this page dramatically different. So if you go all the way down, I mean in year 30 they're illustrating $690,000 of income in one year off of 400,000, that is complete garbage.
Speaker 2 00:10:02 There is no way. I've talked to two companies that have similar products and they both said internal people at the company said, yeah, that's, you know, after the cash value's gone, don't expect any increases. So do you think they're gonna wait until the cash value's here or are they gonna manage it somewhere before that? And I guarantee it. So total bullshit on this one. You know, you want to cover your basic income needs, you want to have your $20,000 a year, right? And you want to plan for inflation and do all that stuff. It's pretty simple. So look at like if you go down most recent 18 year period, they back it up another eight years. This is dramatically different. It has far less income, right? It goes up much more slowly. It's still nice. And you remember in the BS annuity illustrations podcast I showed you like I think it was 9.7% and then I just changed the return cuz I calculated it separately in an amortization schedule.
Speaker 2 00:11:06 And what was a half percent change? Correct me if I'm wrong. If you wanna go watch it, you should. A half percent change made a dramatic, it was like a 30% drop in accumulation value over a 30 year period. Cause we had something that was like, what was it 20? You know, or it was, it went from 18 million to 14 million left. Huge reduction. So maybe 20, 25%. A slight change in this. An adjustment in rates, an added allocation fee, even just a little bit, not even the worst is gonna dramatically change the, the how this contract performs. Okay? So this is your minimum value, right? This is what the company will guarantee. The rest of it is just fluff. It's all hypothetical, right? 21,000 per year, year 18, the money's gone. That's a typical contract, right? You've paid the money out, it's all based on how much longer you live.
Speaker 2 00:11:57 So when I talk to this guy about it, everybody looks at that, oh is is it too good to be true? It's like, you know, kind of get dollar signs in your eyes. Wow, that would be great. Well it would be great but it's a fairytale, I'm not gonna happen. And guys will sit out there and say, oh yeah, that's gonna happen. Well I guarantee that guy's gonna be, he's gonna be on his yacht retired and he is gonna change his phone number. You have nobody to complain to and the company's gonna tell us in the contract, in the contract we could reduce all these things, right? So you can expect to get a little bit more out of it than just the $21,000 but it costs you $400,000 to do it. And he was skeptical of the illustration. I said, well okay, let's look at it.
Speaker 2 00:12:34 What would it cost you to get your $21,000? I ran an illustration through the database. I don't have a dog in the fight. Who's the company that's gonna pay you the most for him? It cost him $270,000 to lock in that baseline income. Well you don't get, you gotta pay a fee for it again, with or without a fee. You pay a fee cuz that way for less money, they're paying you the same amount of cash flow. They've gotta pad their reserves to ensure themselves and make sure they can keep doing it forever. You want them to keep doing it forever. That's how they do it. $270,000 saves 'em 130,000 up front. Can you not invest that elsewhere and plan for inflation adjustments or changes discretionary income and all the extras in, in life. If you've got an index that does all this stuff, right?
Speaker 2 00:13:21 Here's a 10 year calendar year period, 7 18 6, 4 24 15, 15 20. That's like investing in the market in the eighties for crying out loud. If the market is that good, then you're better off having your $130,000 in the market, save the money on the purchase and buy your guaranteed income. Then you've got, I mean, what is, what is that? That's a more than 30% reduction in the cost of securing the income you need. It's 65 years old, right? Inflation is a concern, but you have $130,000 to deal with it and it's 65. You know, you got, I don't know, seven or eight or 10 years before it even becomes a real issue as far as your spending goes. But you've got 130,000 if inflation's running wild, you're gonna have yields in the stock market, you're gonna have yields in the annuity, you're gonna have all that extra stuff. Don't bank on an insurance company being the solution to all of your problems.
Speaker 2 00:14:18 You gotta take some control over it. Save the money on the income rider. That's what I say, who cares if you pay a fee, you're saving $130,000, the $400,000 of backend fee and you're trusting an insurance company to come through on all this hypothetical stuff, right? So it's pretty clear to me that this is why I stay away from it because I'm never going to pretend that that might even happen. Now if you wanna try it out, try it out. A lot of people have, um, this sells a lot and so a lot of guys, oh buy the 2 22. Well I don't wanna wait 10 years. Okay, well then buy the abc. You don't have to wait 10 years. It's like, it's the same pile of crap. Really? You're only guaranteed $21,000 to get a little bit more out of it, but you're wishing honestly.
Speaker 2 00:15:06 So that is about as clear cut as I can make it, okay? Taking down the allons benefit control, save the money, don't waste it. I'd love to make a $400,000 sale in that situation, but it's not appropriate and I'm not gonna do something that's not appropriate. I'd rather take the chance with the other money. I mean if you wanna protect it, put it in a fixed annuity, right? 5% fixed annuity, $130,000, you got your guaranteed income, that's an extra 6,500 bucks a year. Maybe you need it, maybe you don't. Just accumulates over time. You can get it anytime you want. That's another solution. But save the money. Spend the least amount of money required to get the guaranteed income you need and that's the best deal cuz you got a contr contractual guarantee for a 30% cost savings. And you don't have to worry about the hypothetical and everybody's concerned about it any anyway.
Speaker 2 00:15:51 That's why I'm gonna tackle it next week Anyway, thank you guys for joining me. Episode 91, taking down the Allons Benefit Control. My name is Brian Anderson. Uh, again, like, subscribe, comment, or otherwise on your favorite podcast platform or on YouTube. Love to hear what you have to say. Share it. Let me know what you think. There's an advisor out there that says, oh, I love that product. Okay, well I'll have you on the podcast to tell me why you love it. And you have to agree to be back here in 10 years. Bring your illustrations and your contracts, come back in 10 years and prove it to me. I guarantee I win that one. Anyhow, appreciate you joining me for this week. I'll be back next week with episode 92. We're gonna talk about rates, rate adjustments, the things that people are concerned about. Index annuities, same thing I was concerned about, uh, but we're gonna get it next week. Until then, enjoy yourselves and make good financial decisions. I'm here to help with whatever you need. So have a great day. Thank you again and goodbye.
Speaker 1 00:16:57 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 annuity, straight talk or its partners. No information presented today should be acted upon without meeting with the 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 insurance.
