Lifetime or Interest Income: Shootin' It Straight With Stan (TAM Classic)

Welcome to Shooting It Straight With Stan. I'm your host Stan The Annuity Man, America's annuity agent, licensed in all 50 states, and I'm so glad to be here. I love doing these things and hope you enjoy them too. It's kind of therapy for me because I get to vent and rant and edutain while the other annuity people out there are trying to just sell, sell, sell, sell, sell!

Today's topic is lifetime or interest income. Now, I always say you can't just say I hate all annuities. I had a person call me recently, and this is a great story; great guy, ex-military. It was, yes sir, no sir. Which I felt kind of weird about because he was in the seventies saying, "Yes sir, no sir." I mean, but he was buttoned up. I'm so glad.

That's an Annuity Too!

Thank you so much to all the military people out there who serve. I'm one of those people that if I find you and you have one of those hats that you're on the ship or something, I'd buy you dinner and all that stuff. But this guy was saying, "Well, you know Stan," started the conversation off like this. And there are occasional times when I've had too much coffee that I blast people when they say this. "Well, Stan, I just normally hate all annuities. Now let me tell you a little bit about me and the missus. I'm military, so I have a pension. And then we both have Social Security." I went, "Stop. You already have three annuities." He's like, "Huh?" Yeah. Three annuities, two Social Security annuities, and a pension annuity. And then he came off the, I hate all annuities thing, right?

But right now, at the time of this blog, interest rates, because our friends at the FED and the Treasury, have raised them to a point where you have two choices when it comes to annuity income. And yes, my friends out there, there's more than one type of annuity. There's more than just the Index Annuity or Variable Annuity that everyone sells at the Bad Chicken Dinner Seminar.

My gosh, that's like a doctor holding a seminar about health and then prescribing one medication to everyone. And you're talking to a person that's on a lot of medication, blood pressure, cholesterol, fill in the blank, I'm on it. And now my doctor's on me about, in the South we call it the sugars, normal people call it diabetes. But in the South, "Yeah, he's got the sugars. It's pretty savvy. He's got the sugars." Sugars means I start with dessert. Sugars mean that my favorite staple food is a Snickers bar, and that's not good long-term. So there, I got the sugars, taking medication for the sugars. I'm not stabbing myself yet, but they want me to stab myself if I don't get my stuff together.

Annuity Types

Why am I talking about it? I don't know. But I am. Lifetime income and interest income. Everybody knows. And if you don't, you should. There are four types of lifetime income products: Single Premium Immediate Annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, and Income Riders attached to Variable and Index Annuities. Index Annuity Riders typically have a higher contractual guarantee. So, those are the ones we use. And in addition, I don't sell Variable Annuities. I only sell fixed, but lifetime income is a transfer of risk pension product that as long as you're breathing, even if you're on a ventilator, the annuity company's on the hook and contractually obligated to pay you.

And if you set it up joint to pay you and your spouse or you and whoever you set it up with, as long as one of you is breathing, and if you're the male out there and you're married, I'm betting on your wife because I'm betting on my wife. After all, it's this evil plot to kill off all males, and we'll get to that later.

Life Expectancy

However, lifetime income is a transfer risk primarily priced on your life expectancy at the time you take the payment. Interest rates play a secondary role. Interest rates play a secondary role. By the way, interest rates play a secondary role. It's life expectancy. The older you are, the higher the payment. "No, I don't believe you, Stan. I don't believe you." Well, tell me this, Chester is/are wherever state you come from, and the grammar is right, is/are your payments higher if you're 70 with Social Security or 65?

Good answer. 70, why? Good question. You have less life expectancy, which means there are fewer projected payments, which means those payments would be higher. Same with annuity lifetime income. So, it's a transfer of risk. Many people do that because they want to fill that gap for the income floor in combination with pensions, Social Security, and all of the other annuities they have.

Roman Times

‌Lifetime income and the annuity categories started in Roman times for the dutiful Roman soldiers and their families who were laying it on the line for the empire. And I do mean laying it on the line. So, they created an annual; does that sound familiar? Annuity for the dutiful Roman soldiers and their family lifetime income payments. That's where it started. And then my friend Moshe Molesky will tell you that England and Europe we're doing ton times and perpetuities and all kinds of stuff. Lifetime income streams. But that's lifetime income. But now you can have interest income. Wait, tell me more, Stan. Tell me more. Tell me more. Interest income, tell me more, tell me more.

‌MYGAs

‌Interest income means that you can buy a MYGA, Multi-Year Guarantee Annuity, the annuity industry's version of a CD. Never touch the principal, never touch the principal, never touch the principal, never touch the principal, never pay a fee, and peel off the interest from the top. I'll give you an example. Let's say you bought a five-year seven-year, or ten-year MYGA with a guaranteed interest rate every single year.

‌And for some of these MYGAs, you can take off the interest monthly if you want to. Some are lock and loads, but it just depends on what you're trying to achieve. But my goal is if you're going to do that interest income using annuities, then what are you going to do? You're going to peel off the interest and at the end of that duration, I'm going to call you up and say, "Hey, man! Stan The MYGA Man here. You got a MYGA that's coming due; it's maturing. What do you want to do? What do you want to do with it?"

‌You can get the money back. You can have the money sent back to Fidelity, Schwab, or Vanguard. IRA, where it came from. Yes, you can use annuities and IRAs. You can do that. Or we can roll it to another Multi-Year Guarantee Annuity and keep doing this and peeling off the interest. Or suppose you're feeling cognitively challenged and want to prepare for the future, which you should. In that case, we could shop all Single Premium Immediate Annuities, transfer that MYGA matured money you've been taking interest off, and shoot it over to an Immediate Annuity, non-taxable event transfer for lifetime income.

‌The bottom line is MYGA to SPIA or MYGA to MYGA or MYGA to wherever it came from. You control the asset, but you're peeling off the interest for income. Is it lifetime income? No. Why? Because it's not a lifetime income stream. It's an income stream peeling off the interest for that duration that you locked in. Now, at the time of this blog, check the date, there are a lot of people that are saying, "Hey, Stan the Annuity Man, America's annuity agent, why wouldn't we lock in a 10-year or seven-year or longer than you typically do, Stan The Annuity Man, because I'm watching you a lot, why wouldn't we just lock those high interest rates in and peel off the interest long term?"

‌Good question. And there's a good answer. There's no reason not to. Why wouldn't you? Now people say, "Well, I typically don't like locking in that long, Stan." And that's okay, but with 31 trillion in debt, whoever, I mean, that's the last stat I looked at, and they're cooking that, 31 trillion in debt every time they raise interest rates. That's a heavy load on the debt service, as you say. It'd be like me and you having a mortgage and saying, you know what? It's a good interest rate, but I'm going to raise it. No, we wouldn't do that. And every time they do that, I'm waiting for them to try to find the light at the end of the tunnel to lower it.

‌All About Income

‌So, with annuities, at this point in time, at the time of this blog, and I hope it continues, you have two choices. Lifetime income or interest income. Keyword, income, lifetime income, interest income, income. I love income. You love income! Chapter two of your life is all about income. It's all about money coming in and establishing that income floor that you don't care about, but at this point in time, I'm telling people, hey, yes, we can buy the Immediate Annuity. Yes, we can buy the Deferred Income Annuity. Yes, we can buy the Income Rider. Still, if we can buy the MYGA and peel off the interest, that's contractual annually, with no market attachment, returns, no bonus, no caps, no spreads, no participation rates, none of that, no back-tested numbers.

‌You're In Control

‌It is a guaranteed interest rate number that you could peel off the interest. Why wouldn't you do that? And, of course, we will. "But what happens, Stan, if the interest rates go lower, what happens then? Okay, pal. Can you tell me that one? Tell me that one son." I'll tell you what we'll do. We'll figure it out. As they say in the South, when you come to the fork in the road, pick it up, right? Or go left and right. You could pick it up, go left, go right, or go left or go right and not pick it up. Or you could just pick it up, the fork. The point is you're in control, and that's the key. So, I feel good. Can you tell? I mean, I'm happy. I don't know why, but I am. I feel good.

‌Even though the doctor said today that I got sugars. Stan, he got the sugars. Sugar's, the high, Stan, the sugars, whatever. Okay, so I don't have a snicker bar, so I don't start with the carrot cake, with the sour cream icing. You know what I mean? God, I love that. Seriously. I mean, I really do like carrot cake with sour cream icing. And my grandmother used to make something called blackberry jam cake. I swear to you, you would fight someone for it. It was that good. You really would.

‌What does that have to do with lifetime income and interest income? Everything. Because it's all about lifestyle. It's all about you living your life. It's all about you getting the income you need to go live your life and stop watching cable and sports and stop watching everything and start watching yourself and your life. That's what it's all about. You can get income from annuities in two ways: lifetime or interest, which is your choice. But that's something you and my team need to discuss; go to The Annuity Man and set a time with us. Listen, thank you for joining Shooting It Straight With Stan. My name's Stan The Annuity man. 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.