Annuity Examples: Lifetime Income Annuity Choices

Social Security

We're talking about lifetime income choices using annuities. You're already a member of the annuity income family. You're aware of it.

The best inflation annuity on the plant is Social Security. It will pay you for the rest of your life. It's a transfer risk, meaning you transfer the risk to our beloved government, which you all love and care for, for them to pay you for the rest of your life, and the payments are primarily based on your life expectancy when you need to start the payment. With Social Security, the payments are higher at day 70 than they are at 65. Nod your head. Sounds eerily similar to an annuity. For lifetime income, yes, it does.

Annuity History

We've established that you're already an annuity owner; I’m glad you're in the family. That is fantastic, but let's talk about the four annuity types that provide lifetime income but let's go backward in time. A little history lesson for all of you out there wondering, Where did annuity start? The dutiful Roman soldiers and their families were laying it on the line for the empire back in Roman times. What did the empire do as good empires do? We will create an annual pension payment for you and your family for the rest of your life.

That's where annuities came from and have been sold in this country for hundreds and hundreds of years. It can be traced back way back. Moshe Milevsky; the smartest guy in the room in the annuity world; moshmilevsky.com, he's always going to England and researching annuities in ton times; what is your transfer your pooling of risk? These have been around forever. This isn't anything new, and annuities are the only product and only category that provide a lifetime income stream as long as you're breathing. The point is, as long as you're breathing, it will pay.

Transfer of Risk

It's a transfer of risk for the annuity company to pay for the rest of your life, and you can set it up as joint life or single life. In the simplistic world that I live in, Stan, The Annuity Man has a usage right here; that's called dosage; everything comes down to income now and income later. So you either need income to start right now or income to start later. Well, income now to me; Stan The Annuity Man, America's annuity agent lives of all of its date, is really about Single Premium Immediate Annuities. The original annuity type that's very eerily similar to that in the Roman times is to transfer risk based on your life expectancy.

If it sounds too good to be true, it usually is.

Remember, with an annuity, what I call annuity insurance, retirement insurance, lifetime income insurance, what do you want to call it. You have home insurance, fire insurance, car insurance, playing insurance, health insurance, and dental insurance. How about lifetime income insurance? You already have that with Social Security. You might need more with these types of annuities. Remember, lifetime income; annuity is the only product that can do that and is part of your overall income flor.

Yes, that was hard. You didn't even say a subtle in it because we love you. Stan, The Annuity Man, loves you, and I love lifetime income. Everyone needs that income floor. At the end of the day, everyone needs that income floor. What's that income floor? Every month, the monthly amount hits your bank account regardless of who's in the office and what's happening in the world. If Israel is at war, it doesn't matter. It's hitting your account, and you're living your lifestyle and the lifestyle you've earned, saved, scrimped, and laid on the line to get. That's your income floor, and annuities can fill in that gap, so lifetime income now.

SPIAs, DIAs and QLACs

Single-Premium Immediate Annuities that's the easiest understanding the choice for a lifetime income. It's a transfer risk; income starts as soon as 30 days, as late as one year. Once you're past one year, there are three other choices: deferred income annuities, qualified longevity annuity contracts, and income riders attached to index annuities. For us, you can also attach into variable annuities. We don't sell variable annuities. Who would sell anything that has the potential to go down? No offense to all of you out there selling variable annuities. Also, the income riders attached to index annuities historically have higher contractual guaranteed income amounts if you quote them side-by-side.

That doesn’t make them better. It is what it is, and I live in a world of contractual guarantees where you own an annuity for what it will do, not what it might do. Let's talk about the income later side. Income now is immediate annuities. Income later; Deferred Income Annuities, an immediate annuity structure, turn into a Deferred Income Annuity once you go past the 12 months-13 months.

It's the same structure. No annual fees, no moving parts, no market attachments. It's a straight transfer risk based on your life expectancy when you take the payment, and by the way, all of these types of annuities. Life expectancy at the time you take the payment drives the train. Interest rates play a secondary role. Interest rates play a secondary role; I say that because we're, "I want all interest rates to pay before I buy my annuity." Chester, good luck. You're not the master of the universe, and there is no way to time it.

Deferred Income Annuities are immediate annuities and Qualifying Longevity Annuity Contracts you can only use in your traditional IRA or qualified accounts. By the way, that's a DIA. A DIA is a SPIA, a QLAC is a DIA. Confused? I hope not because I have books on that. The Qualified Longevity Annuity Contract is the newest lifetime income product on the planet, developed, designed, and introduced in 2014 by our friends at the IRS and the Department of the Treasury.They're encouraging you, nudging you, taping you on the shoulder to use your qualified assets, your retirement assets. Some four or one in the case have them, but most people buying traditional IRAs want you to use that money for future income, and it can start late as age 85.

You got immediate annuities, Deferred Income Annuities, and QLACs. Pretty much the same structure, with a couple of different rules, and the last one are income riders. Income riders, I like because they're flexible. They can be attached to an index or variable annuity at the time of application, but we only look at the income rider guarantee when we run quotes. We don't look at the indexed annuity return possibility scenario as hopeful. A projected back-tested unicorn is chasing the butterfly; it sounds too good to be true because they are returns. After all, index annuities were put on the planet to compete with CDs in 1995, and that's what they do.

Break It Down Visually

But how we use them primarily, they're efficient and cost-effective delivery systems for the income rider guarantee. Just visually draw a line down a blank sheet of paper. The index side is over here; the income rider side is here. We're running the quotes only focused on the income rider. The income rider is the guarantee for a lifetime income. It's a flexible product, meaning that you can turn on the income in year seven and then shut it back off and then turn it back on in year 11. It's fantastic. You only have to turn it on and off.

You could get to the end of the index annuity surrender charge time period and say, "you know what? Plans have changed. We're not going to use the income rider, send me all the money back with interests, whatever the index annuity gained." We can do that. Whatever the choice is, whether it's income now or income later, I will shop all carriers for the highest contractual guarantee. I represent all carriers, so I don't have any skin in the game, and people say, "What's your favorite carrier, Stan? What's your favorite?" I don't have one.

Conclusion

My favorite is the one that provides the highest contractual guarantee for you for your specific situation. Now, yes, when we get to the finish line of looking at the carriers and who finished first, second, third, fourth, or whatever, we're going to look at the claim span ability of the carrier. We're going to make a decision on what you feel comfortable with from the standpoint of the ratings, and the solvency ratios, and all that stuff, and all the financials of the company, but I don't have any skin in the game with anybody other than they all won't stand the Annuity Man selling their product because I'm selling it the right way which is all about I will do, I might do it, and they will do a contractual guarantee. They are all retirement income insurance, whether immediate annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, and lifetime income riders. They're all lifetime income insurance. They all will pay regardless of how long you live.

There's no ROI until you die. It's part of the income floor, just like Social Security, from its transfer risk that will pay you for the rest of your life. When it comes to lifetime income, you already own the best inflation to an annuity on the planet; Social Security, but the question is, do you need to add to that additional income floor that you need? Maybe you do.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.