Episode Transcript
[00:00:00] Speaker A: Hello and welcome everybody to the Annuity Straight Talk podcast. Northwest Montana. Beautiful August day. My name is Brian Andersen, founder and creator of Annuitiestraighttalk.com wrote everything on the website. And you guys know, over the past couple years I have been bringing into this business some colleagues, some people like minded individuals who can help me bring sense to the world of annuities, find the value in them for certain peoples in certain situations. So here to do episode 191 with me is my friend Nate. And you guys might remember him from a podcast a little while ago. But he's going to introduce himself again and talk a little bit about our topic today. Go ahead, Nate. What's up buddy?
[00:00:39] Speaker B: Well, thanks for having me, Brian. Good to be back. I'm excited to record another episode with Annuity Straight Talk. But yeah, I was a wholesaler for almost 20 years of my career, which means I sold annuities and essentially taught agents and advisors about products from three different large insurance companies, well known from variable annuities to fixed annuities to fixed indexed annuities. So I do feel like I bring insiders perspective that a lot of people don't get to see, at least on the retail side. Right, because I was calling on you.
[00:01:10] Speaker A: Right. Yes, he was, he was the advisor's advisor. And so one thing that we talked about last time when you were here was that he understands the perspective of what the typical advisor is going to be doing. You see, 20 years in the wholesaling business, how many advisors did you meet with and do you feel like you got a pretty good feel for how they operate and the type of diligence they put into the product selection or the advice that they give.
[00:01:33] Speaker B: Absolutely. And I will start by saying I worked with some amazing advisors, but I also worked with a lot of them that weren't very good. And to put it bluntly, their motives maybe weren't aligned with the clients and ultimately what was in their best interest. And I, I kind of struggled with that. I wanted to always see the client put in the best position possible, but oftentimes they were sold something because it was the easiest thing to sell or maybe it paid the advisor more money or in some cases maybe that was the only thing they had to offer. But you know, the reality is, is I still see and hear about it all the time is people that have an annuity contract that don't even understand what they got or why they got it.
[00:02:12] Speaker A: Right. And so we talked about, and I don't necessarily want to go too far into this we'll show a couple little things. But I talk about the Allianz products a lot and we have one. And I do believe they're versatile products with a lot of different optionality and different benefits on it as well. But I'm part of this is to explain why I don't ever sell that product because we have something very similar that's better. And the point of doing this is that late last year Nate, who's a wholesaler professional in the business, bought an annuity from me.
And so Nate, this is the easiest sale I ever made because he said, this is what I want, go buy it. Talk about that a little bit, big guy.
[00:02:48] Speaker B: Yeah, so Brian and I obviously go back a little ways. We talked about it on the last podcast I was on, but see everything, you know, essentially the exact same way we had talked. And I just said, hey, I'm wanting to do an annuity for myself. And I said, I know what I want, but I said I want to write it through you. And you know, it was kind of a no brainer again because of how he, he operates. And I could have written it with a lot of different people. And again, there's some great people out there, but I trusted Brian to handle my money for my own personal annuity.
[00:03:17] Speaker A: Pretty cool. So why in the world did Nate Lee this annuity from me? So let's talk about this. We're talking fixed index annuities, we're talking guaranteed income, we're talking growth.
And what's curious about this is a lack of fees, which is what some of the other products in this class get really touted for is like, hey, there's no fees on this thing. So where do you want to start with this and explain it to everybody else? And what should I show? Because I can share my screen and give you guys a couple ideas.
[00:03:41] Speaker B: Well, yeah, and so Brian and I were just talking about maybe some topics, but again, why would I buy an annuity from Brian? But more importantly, what annuity did I buy? Now, like I said, I worked for multiple insurance companies, most recently from Midland National. I worked for Midland national, part of Sammons Financial Group. But the product I bought was called the Income Vantage Pro. We are going to talk about that specifically in my personal case study, but also some other ones, some that you've written. And then also I wrote one for my dad who is is 78 years old. I am 48, so he's 30 years older than me, but the same product worked for him.
[00:04:17] Speaker A: And I think the first way I can explain It, I've talked about it a little bit in the past, but one that I sold to a lady a couple years ago, she said, well, I really like and again that mygas are powerful and some people like a guaranteed interest rate. But she said, no, I like participating in the market. I like taking a shot at the upside with no risk of the down. She said, I like not paying fees. We don't really need the income, but the income will be there.
So it's a backstop if I ever need it. But essentially I've got safe money that's protected. I've got a shot at the market. She's done well over a couple of years, but a real easy product to understand if you keep it in perspective like that. And so what I've said to a lot of people, it's like if you need to maximize income, you go with the glwb, right?
[00:04:58] Speaker B: Yep.
[00:04:58] Speaker A: If you don't need income, maybe you go with a MYGA or an fia. That's just going to grow. If you want some middle ground, hey, we'd like to have a little income. There's. And that's where you'll see the growth rates are going to fall somewhere between the maximum growth products and the income products. And that's where it provides the optionality. Is that fair to say?
[00:05:13] Speaker B: It is. And I will argue all day that this is the most flexible product I've ever come across and it does everything really well without a fee. So I always start there. And you mentioned that. But I think the fact that there's no drag on your contract, so it's not going to impact your account value and the performance. But it also has a built in income feature that will provide lifetime income. We'll talk more about that. But it also includes an enhanced death benefit, all at no cost to the client.
[00:05:42] Speaker A: And that's why it'll fit like again, where you can use it for income in your situation, you're going to get to grow it for, you know, until you're 60. Right. So another 12, 13 years. And because there's no drag on the fees, you can walk with the money or you can turn the income on. You can do something different. It's an ira, so you've got the flexibility to do that. Right?
[00:06:00] Speaker B: Well, you touched on two key things there. First of all, yes, it's qualified money. I can't touch it till 59 and a half. But my intent was to turn on income at age 60. But I love that it is flexible to the point that if in 10 years. It's a 10 year contract. If I decided I didn't want or need income, I didn't hurt myself at all because this has great upside potential. And I want you to talk a little bit about that because you do a good job of comparing contracts. And you mentioned Ally odds.
[00:06:26] Speaker A: Yeah. And so the one thing is like people say, and I like, I don't dislike the Allianz products. I think they're sold the wrong way. And I think if this podcast convinces one advisor to sell this product instead of the abc, then we did our job. Because it's not just about us selling. Hey, we want to make all the money. We're just trying to bring transparency to the business so you can see where the value is in the product and why this one's going to provide more optionality. So again, it's not everything I sell, but it really fits in some. I mean, I'm talking to a person right now who we like the idea of maximizing income, but they're comparing like a growth product versus a GLWB for max income. You're going to split the difference here where you're going to get really good growth and you got an income benefit that you can use if you want to. And if you don't want to, you can just turn it off, take withdrawals, manage RMDs. You're not stuck with one purpose of the contract. You have all the benefits in one.
[00:07:16] Speaker B: So and just to piggyback off of that 100% with what you said, and when you think back to variable annuities and why a lot of people don't like those was the fees.
[00:07:26] Speaker A: Right.
[00:07:26] Speaker B: Even though they had some great features. But what's so cool about this is there is no fee, but it has all those benefits that we talked about. And most importantly, I think income is where this thing can really shine.
[00:07:36] Speaker A: Right.
Let's talk about the rates as far as what we've got in front of us, like the rate spotlight. So tell me what you know about this. So right now what I'm going to say to you and we're going to hit Allianz real quick. Okay, Just real quickly. So the fixed account rate is 3.45%. Right now that's 3.45. And we'll go something that's easy, apples and apples to compare is The S&P 500 cap rate is at 7%.
[00:07:59] Speaker B: Yes.
[00:07:59] Speaker A: Okay. So most guaranteed income products have cap rates in the 5 or so range plus a fee that's going to drag the account value this has got no fee on it. So you're getting 7%. Now the top line cap rates in the business right now are 9, 10%. So you're approaching what you get there. But again, it's got that income backstop on it. And so those are going to translate. Anybody who's watching the video, you'll look at the Allianz Benefit Control rates. Fixed interest rate is 2.7, quite a bit below the 3.45 that Midland's got. And we can look at all the other deals. Right. S&P 500 index is 5% versus 7 for the other. So 40% higher on the Midland product. I've done a whole podcast on this. This has potential allocation fees. Now a lot of guys are going to say, well, it's never happened, but it's in the contract where they can add an allocation for you to be participating in the index. It's possible never be greater than the maximum allocation charge of 2.5% on certain indexes in there. Understand that there is a possibility that they will tack a fee onto it. Six, seven years, eight years maybe when you're in the income phase down the road. And that's an issue. And I just, I don't know why anybody would accept that. Maybe it's highly unlikely that they will. But it is in the contract and you could be, when you can't afford to change it, when you got to take what you can get and oh, dang it, they're going to stick a fee on you. I don't like that. And Midland contract doesn't have it. So that's why I would say, like, in any case, I don't know why you'd ever sell that. You just sell this. So let's go back to that. Right.
[00:09:26] Speaker B: Well, and as you're going back to it, want to mention that anybody who's ever been on the fence about buying an annuity contract, you got to look at the difference in those numbers. So just from a straight fixed account, you said 2.7 on the ABC.
[00:09:38] Speaker A: Yeah.
[00:09:39] Speaker B: Versus 3.45. And anyone who's ever compared fixed rates on like a myga, that's a huge difference in itself.
[00:09:45] Speaker A: Just on the fixed bucket, 3/4 percentage point.
[00:09:47] Speaker B: It's huge. And then to have 2% more per year on the upside is also a very big difference. But that's one of the things I like about this contract is if you're in it and 10 years down the road you say, you know what? I thought I may need income. But now all of a Sudden, I don't need it. For whatever reason, you did not hurt yourself one bit. You've got good growth and good upside potential with the strategies and the things.
[00:10:09] Speaker A: That are available in this class of product. It is going to perform the best for you.
[00:10:13] Speaker B: I had a big chunk, like a lot of people do, in qualified money out of a 401k from previous employers. But I took 350,000 of my own money and put it into the Income Vantage Pro with the intent of letting it sit until age 60. Right. Gotta wait till 59 and a half to turn on income. And there's a couple of reasons why I'm targeting age 60 that I'll talk about. But Brian's going to pull it up here and show you the illustration. We just did a mix 25% into the S and P annual point to point with the cap, and then also the NASDAQ 100, the S P500 Dynamic Intraday, and then 25 into the fixed account. So just a general diversified mix.
[00:10:53] Speaker A: So you got the paper showing like your blended yield over a period of time. So why don't you talk to people about what that means with the illustration?
[00:11:01] Speaker B: Again, hypothetical. We don't know what the future holds, but this is going to show. And at the top, you're going to see an annual effective rate of 6.36%. That means the average annual return is 6.36%. Now, some of you have probably had your local agent or advisor show you illustrations with 10, 12, 15 or even 20%.
[00:11:20] Speaker A: And we could do that. We could juice this up a little bit. And that's not the point. When I go to Allianz juiced illustrations, what people see versus what they get. And I just show them, here's the cap, here's the fix. There's more potential here, but we're still going to dial it back and give you something we think is reasonable to expect. Instead of saying 10, 12, 15, for crying out loud, it looks ridiculous. So we can show it, but we don't.
[00:11:42] Speaker B: And I'm not a believer in that. Right.
[00:11:44] Speaker A: This is you with your own money, how you set your expectations this way. That's what anybody else should do, looking at it as well.
[00:11:50] Speaker B: And keep in mind, I've had an inside look behind the doors with these insurance companies. I know how they build these products. Right. I know how they're intended to perform. Right. I understand all those things. And so I think this is a somewhat realistic, even conservative with this illustration. But what I want to highlight is you go in 12 years with this and you go down under the accumulation value, you're going to see 735,000, 6, 32. So that's 12 years in. I'm out of surrender. If I wanted to walk with my money, I more than doubled. Right. For my initial 350k investment.
[00:12:24] Speaker A: Correct.
[00:12:24] Speaker B: Not bad when you have zero downside risk.
[00:12:27] Speaker A: Exactly.
[00:12:28] Speaker B: Okay. But the important piece for me is I need income later. I'm looking for income in retirement on the illustration on one of these pages. What you're going to see here, here is under the benefit base now there's some different features and Brian and I can both talk to you about that. Some moving parts, but what it does is guarantees some growth. On the benefit based side there's a stacking feature, there's some cool things, but if you go across, what you're going to see is a value of almost 1.3 million on the benefit base.
[00:12:54] Speaker A: Right.
[00:12:54] Speaker B: This is not walk away money, but this is the amount that I can pull income and it's based on your age.
Couple important notes too. Yes, you can take at time of income. You can elect either single or joint payout, which is important if you're married or you can do level or increasing income. Some of you, if you're worried about inflation, it's nice to have that option for increasing income. But what we're going to show here today is a level lifetime payout which is going to be a higher number. But that's what I would personally take. And at age 60, I can get 5.45% on a single payout for the rest of my life.
[00:13:28] Speaker A: Yep.
[00:13:28] Speaker B: Do you think that's a pretty decent payout?
[00:13:30] Speaker A: That's a really solid payout at that.
[00:13:32] Speaker B: Young of an age.
[00:13:33] Speaker A: It was hard. I know three years ago you had to be 70 to get that kind of payout.
[00:13:37] Speaker B: Exactly.
[00:13:37] Speaker A: Right now it's really good. And again, you can maximize income if you can afford to take the shot at the growth. But again, having the ability to walk away with a solid yield on a contract if your plans change. And that's exactly how I sold this identical contract to a guy about our age last year. He had done really well and was retired. He said, hey, I want to put some stuff aside. Guaranteed income was, you know, he realized the value of it but didn't really need it. He said, I just really want to protect some money. And he gets to play the game and work the contract overtime. He's not paying a fee. He's going to wait till he's 60 and decide what he wants to do with it. But my guess is because he's a year into it, he got a really nice yield. The beginning of the year, I'm guessing he's going to take that income rider, but we're still a long ways away from that as well.
[00:14:18] Speaker B: And that's the power of this is if you do end up taking the income instead of that account value of 735,000 and change that we talked about, I can draw income off of almost 1.3 million. At a 5.45% withdrawal rate, that's $70,656 a year, every year for the rest of my life, starting at age 60.
[00:14:41] Speaker A: Right. So if you get there, one thing that's important to point out is that with this, because you're young and you're going to take it for a long time, you'll get your money out of it. But in a lot of cases, if you're a little bit older, when you start this in a guaranteed income contract, if you pass away before you get all the payments back because of that fee drag, there's a chance you might not get all that you put with this contract. You will get every penny of it back and have the option to walk with the money or take the income because of no fees and a really good growth rate. So it is the most versatile product in the market.
[00:15:08] Speaker B: What you just touched on too is something else I wanted to mention, all at no cost. This also has what we call an enhanced death benefit. Now you can still walk away with the account value. So if I died after 12 years, I never turned on any income. My beneficiaries could get that 735,006,32 in a lump sum, right? But because this product has a built in enhanced death benefit, if you go to the far right on the illustration, you're going to see it would pay 183,908. But what's the catch? You get that payment over five years, right? It's over $900,000 in death benefit, right. Just by taking it in five payments versus a lump sum. So you could go to your beneficiary, do you want 735? Would you rather have another 100? Almost 80,000 in?
[00:15:54] Speaker A: Yeah. And this is one of the plays is like that's not a guaranteed death benefit payout, it's an election you have to make. So if you do that like with any of the other products that tout this, your beneficiaries have to know to elect that and have to be in A financial situation where they understand the benefit of waiting five years rather than getting at one lump sum. So benefit with your dad owning it. Like you're going to be the guy that knows. You're going to tell all your siblings, hey, no, we're going to take this over five years, right?
[00:16:21] Speaker B: Well, yeah. And there's some huge tax advantages. Distributing that over five years versus an.
[00:16:26] Speaker A: Elapsed, sending the money to somebody who's in a higher tax bracket. A lot of the clients I work with, they've been successful. They've raised smart kids who are going to have like 20, 30 years. When those kids are in their 50s and you're passing away, they're probably not necessarily going to want to have that big taxable event upfront.
[00:16:42] Speaker B: Exactly. And again, goes back to the versatility of this product. There's so many different things you can do with it. And I have to stress that anyone who's ever heard anything negative about annuities.
[00:16:52] Speaker A: Yeah.
[00:16:52] Speaker B: If you look at this product and have to go, there is zero drawback to this contract.
[00:16:56] Speaker A: Right.
[00:16:56] Speaker B: There really isn't any way this thing can hurt you. So to me, it's. It's the perfect fit for anyone who's like, man, I'm not really sure, but my neighbor or my friend said I should never buy an annuity contract. But this thing.
[00:17:07] Speaker A: Okay.
One thing that's nice is like, where we have an increase of rates in the past few years. Okay. I have people that have owned index annuities for 10 years, and most everyone is pretty satisfied with what they've done. It was a pretty good deal 10 years ago when we could sell a 5% cap rate on just a growth product.
[00:17:23] Speaker B: Yeah.
[00:17:24] Speaker A: So this has got a 7% cap rate, 40% more. It's got a backstop of income. Use it or don't use it. Right. That's why in today's market, well, yeah, sure, if you want to go accumulation, you go 10% cap, but if you want to have a little blend of it as well, and maybe things change in retirement. Yeah. It'd be nice to turn some income on. It might not be as high as what the guaranteed income product, but it's a solid deal and good value for the money because you're going to get everything out of it without paying fees, for sure.
[00:17:50] Speaker B: And, you know, I mentioned that I put my money in it, obviously believe in it. I also put my dad's money in it. Talk about two completely different scenarios. But it made sense for him because he wants to turn income on in three Years, me knowing these contracts and how they work, I didn't want to sacrifice the death benefit, maybe for selfish reasons. Right. Like, I don't want to turn it into a spia. Right. I'm the beneficiary of some of this money, but I also know how strong this thing is that he can put his money here and let it sit for a few years. And I know chances are good that not only is the account value going to grow, it's going to hang in there even when he starts taking withdrawals.
[00:18:24] Speaker A: Yeah. And if he gets to a point where he needs, like, yeah, I really need some cash flow. I'm 83 or 4. Like, turn it on and start taking some cash.
[00:18:32] Speaker B: Well, and you mentioned one thing, and I had to grab my sheet here, but beyond age 80. So 80 plus the payout on this is 7.45% for life.
[00:18:41] Speaker A: Right.
[00:18:42] Speaker B: Pretty good payout.
[00:18:43] Speaker A: Right.
[00:18:44] Speaker B: So if you do have that individual or if somebody's watching or listening to the podcast, this works for anybody in their 40s. Right. Or starting to plan towards retirement. But then also that's well into retirement, but that's looking to guarantee some income, but also have some flexibility with that money.
[00:18:59] Speaker A: Right. And one thing where it says, like you asked me, why don't you buy it? Well, because I took so many trails, I don't have any cash. Right.
But this is what I would do. And there's a lot of reasons where it's not just applicable to me. At 46 years old, Nate, at 47. You're older than me. I'm almost 47, but.
[00:19:17] Speaker B: And I'm 48 now.
[00:19:19] Speaker A: Old guy. Anyway, really appreciate you sharing a little bit of your personal information. Pretty good deal. If you want to talk about this product and the versatility, the value of it, I'm going to let Nate handle it. If you make an appointment, you ever really want to talk to me, you can, but he's going to be part of this business. We're going to do more podcasts together. And it's incredibly valuable to me to see, hey, this is what a financial professional decided to put his money into. And I hope you guys understand that, the value of that as well. And so I appreciate you coming up here, visited. We had a good week, had some good food. We're grilling tonight. So we got some more good food coming.
[00:19:50] Speaker B: But, yeah, thanks for having me again. I had options on where I could go to put my money, but also I had a ton of options as to where I could put it. And I think I know better than most with the time and experience I've had in this industry and even though I had worked for the company I turned around and put my own money, I put my dad's money, I'm going to put my brother in law's money. If that isn't a testament to a company, a product that you've seen after.
[00:20:12] Speaker A: 20 years what you have faith in and confidence and what I believe in.
[00:20:15] Speaker B: For sure so but would love to talk to you about it and anyone has questions of course reach out to either one of us and we can get into the details on their individual situation.
[00:20:24] Speaker A: So okay. Got it. Well thank you again. Episode 191 why Nate bought this Annuity from me like subscribe or comment and any of your favorite podcast platforms or on YouTube schedule a call top right corner of any page on annuitystraighttalk.com appreciate you guys joining us. I will be back next week for episode 192. Have a great day guys. Okay bye.
