Enhancing Your Retirement Plan With Annuities Shootin’ It Straight With Stan

Welcome to Shooting It Straight With Stan. I'm your host Stan The Annuity Man, America's annuity agent, licensed in all 50 states. Today's topic is enhancing your retirement plan with annuities. Is that possible? Should you even consider it? Do you need an annuity? Big questions we're going to cover. First of all, you already own one. It's called Social Security. It's the best inflation annuity for lifetime income on the planet, period. End of story. If you have an employer and are so fortunate that they provide a pension, that's your second annuity. But in our world at The Annuity Man, we are the leader out here and have done thousands of videos you can check out. I have seven books you can get for free on annuities. 

We really have delved into the edutainment and information out there so that you can make a good decision on your terms and your timeframe after fully understanding annuities and not just listening to someone saying, "Hey, it's all annuity." You already own one. Everybody in this country that has a Social Security number. But I want to focus on one part of how it enhances your retirement. With that being said, at The Annuity Man, we look at annuities in a very unique way. We only look at the contractual guarantees, which set us apart. You own an annuity for what it will do, not what it might do. And the reason that we do that is what you're going to get in the mail if you buy one. It is a policy which is a contract between you and the life insurance company. Life insurance companies issue annuities. That's the bottom line.

The PILL Acronym

We always ask people two questions when they come to our site, and they schedule time with us. What do you want the money to contractually do, and when do you want those contractual guarantees to start? From those two answers, we can determine whether you need an annuity and, if so, what type would solve that specific goal that you're looking to solve. And the acronym that we've come up with that annuities solve for is PILL. P stands for principal protection. I stands for income for life. L stands for legacy, and then the other L stands for long-term care. So, principal protection, income for life, legacy, and long-term care. If you don't need to contractually, and that's a key word, underline it and bold it, contractually solve for one or more of those items in the PILL, you do not need an annuity.

Income for Life

There's no G for growth. There's no M for market. There's no S for stocks. If you're looking for market growth, do not buy an annuity of any type. And I'm probably the only one that's going to tell you that, but it's the truth. It's the brutal truth. When we're talking about your retirement and how annuities can enhance that plan, I want to focus on one thing today: the I of the PILL. I stands for income for life. Now, annuities were first put on the planet during Roman times as a pension payment for the dutiful Roman soldiers and their families for laying it on the line for the empire. That's where the word annuity comes from. ANNUA in Latin means payment. And that type of income annuity has been sold in this country for hundreds of years. It's called a Single Premium Immediate Annuity.

Annuity Types

Four types of annuities solve for lifetime income: Single Premium Immediate Annuity. The two offshoots from that SPIA are Deferred Income Annuities and Qualified Longevity Annuity Contracts. And then the newest members of the income family are what's called Income Riders. I want to do a broader picture of how it fits and can enhance your retirement. I'm 60 years old at the time of this blog. And now you say, "No way." Yes, way. If you cut me in half, you couldn't count all the rings, as they say. That's tree talk, I guess. But every single one of us, when we're inching toward chapter two of our lives, we're trying to figure out the income part, that income that will be hitting your bank account every month. I call it the income floor. You're putting in that income floor.

Income Floor

Well, you already have one slat, and that slat is Social Security, the best inflation lifetime income annuity on the planet. If you're so fortunate to have a pension from your employer, that's another slat. You can then say dividend stocks, if you have rental property, if you have a side hustle that's bringing in some money, etc. That's your income floor. That's the amount that's going to hit your bank account regardless of who's in office, regardless of what party is in control. It's what you're going to live off of. And I think it's essential to focus on. That's the reason I'm going to stay right here. I need you to focus on setting up your income floor. Now, when you buy lifetime income with an annuity, annuities for lifetime income are the only product category that's going to pay for as long as you're breathing, even if you're on a ventilator.

Longevity Risk

If you lived to 150, it's going to pay. For the life insurance company that issues the annuity, you're transferring the risk to them to pay, whether you set it up just your life or whether you set it up with your spouse. And understand, we can structure it and customize the payment so that 100% of any unused money goes to your listed beneficiaries and the evil annuity company never keeps a penny under any circumstance, even though they're on the hook to pay. That risk that you're solving for is called longevity risk. The pundits and the financial journalists love using it. In essence, what it means to you and me is the fear of outliving your money. You're covering that fear. You're not going to outlive your pension if you have one. You're not going to outlive Social Security and you're not going to outlive a lifetime income stream.

Understand that lifetime income products are commodity products, all annuities are. If you go to my site at The Annuity Man, depending on when you want the income to start, you can quote to your heart's desire. We're quoting all carriers and showing you the highest contractual guarantee. Remember, lifetime income is primarily based on your life expectancy or life expectancies at the time you start the payment. The older you are, the higher the payment. The younger you are, the lower the payment. Interest rates play a secondary role. You're not going to be Gordon Gekko, and you won't be able to time it. The bell doesn't ring at the top or the bottom. Quote it for the highest contractual guarantee to set up that income floor.

Example

And annuities for lifetime income should be that gap-fill. So, let's give you an example. Let's just say your income floor is $3,000 a month. I'm choosing that out of midair. And two years from now, the dreaded I word inflation hits again, and you need $3,400 a month. You run the numbers; you know exactly what you need for that income floor for you to live comfortably and sleep well at night. That's when annuities come in. What you do is reverse engineer the quote, and you can do that at The Annuity Man, solving for $400 a month. What are you doing? You're having the company's bid on solving for $400 a month using the least amount of money possible and contractually to solve for the $400 a month.

Cost of Living Adjustments

Now, there are a lot of sales pitches out there about increases in your income and Cost of Living Adjustment increases on annuity payments. I need you to listen to me clearly. I've been doing this for a long time, and I'm the top agent in the country. Don't do it. Annuity and life insurance companies issuing annuities have big buildings for a reason. Why is that, Stan? They don't give anything away. For instance, if you wanted a COLA to make yourself feel better, you want to see increases, and the annuity company is going to do nothing more than severely and drastically lower that payment to make up for that increase.

And typically, depending on your age, it could be a six to nine-year break-even point. I'm a math guy. You should be a math person as well. It's all math. Annuities are math. They're contractual guarantees. I would rather you get the higher payment with a static payment, and then when you need to fill the gap for inflation or other costs that you need, the grandbaby or the trip or whatever, or your wife says, "Yeah, I'd like to spend 500 more dollars a month," I get that too, you go in and reverse engineer the quote.

Hold, Hold, Hold

Think of the Mel Gibson movie Braveheart, where they got the horses, and the British are running at them, and he's like, "Hold, hold, hold, hold." And then after that, it's gruesome. But it's not gruesome with this. What you're doing is hold, hold, hold, hold until you need to fill that gap, and then you fill the gap. And the question is: What happens in three years if I need to fill the gap again? Then we fill the gap again, period. It's that simple. It's that basic. It's that easy. It's that efficient. It's the best way to do inflation used in annuities. Now, why haven't you heard that? It is because the sale doesn't happen now. The sale happens when you need it to happen and how it should. So, income flooring should be your focus.

Whether you're in pre-retirement, retirement, post-retirement, or whatever you want to call yourself, it's all about income. Chapter Two of our lives is all about income. I'm getting ready to be a grandfather. I know what you're saying. There's no way. Yeah, I'm getting ready to be a grandfather. It's all about establishing an income floor for me and primarily for my wife. If something happens to me, she never has to worry. That income's going to come, period.

Now, let's talk a bit about a nuanced one for a bunch of all you players out there, you Gordon Gekko types. And you say to me, "Stan, that sounds great. Love the passion. But we don't need income as long as I'm clicking on all cylinders. I can do it, baby. I'm the one." I understand that. Here's how you do it.

Setting up a Trust

You go to your attorney to set up the trust and you say to them, when I die, at the second I die, my wife needs to buy a Single Premium Immediate Annuity, hopefully from us. It doesn't have to be. A Single Premium Immediate Annuity to fill that income gap because I'm no longer here, and I'm no longer kicking; I'm no longer managing it. So, for all of you out there that say, "I don't need one now. I'm killing it. I'm a market dude." I get it. I get it. But I have corn futures traders and big-time players out there that have set it up so that when they die, that Immediate Annuity is purchased for their spouse, significant other that could give a frick about markets like my wife.

I've been in financial services my whole life. Morgan Stanley, Dean Witter, Paine Webber, UBS, and my wife couldn't care less. All she cares about is our two daughters, that grandbaby, and the grandbabies coming behind that. She doesn't want to talk to me anymore, and I don't blame her, but I will set it up to where it will be there for her. So, for all of you out there going, "I don't want to buy it now." Great, don't. Talk to your estate planning person. Talk to your EP lawyer. When you bring it up, they'll be like, "Uh-huh. Yeah, that makes sense." You don't have to buy it now. You don't have to time it. Have it in there. When your Learjet hits the mountain, that thing kicks in and she's happy. And explain to her, take her out to dinner, say, you know what, honey? When I die, please don't kill me, but when I die, this is going to kick in from an income stream standpoint. But as long as I'm here, you know this, we're rolling.

That's my opinion, having been on the side of the ledger and worked in New York with Morgan and all. Listen, annuities aren't for everyone, but in chapter two, as we get older, it's all about income and what's flowing monthly. And I know many advisors out there will just use the 4% rule. Give me a break. Put in an actual income floor. The 4% rule is not a real income floor. If you're a trader, I get it, but the other 98% of the people out there, the 4% rule, is dead as a doornail. Wade Pfau and others have just shot it down factually. Their income flooring should be contractual. Income flooring should not vary. Income flooring should be guaranteed, period. So, think of that. Income flooring is either right now or for your spouse in the future. You now know how to do both, and we'd love to help you. Go to The Annuity Man. That's Shooting It Straight With Stan. My name is Stan The Annuity Man. Hope that helped. See you next time.

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.