Live off the Interest Until You Can’t: Shootin' It Straight With Stan (TAM Classic)

Welcome to Shooting It Straight With Stan. I am your host Stan The Annuity Man. I'm America's annuity agent licensed in all 50 states, every single one of them. I do that all the time. And then someone on my YouTube video the other day, their comment was, "Are you licensed in Kentucky?" Yes, I'm licensed in Kentucky. I'm revved up today because the topic is live off the interest until you can't. What am I talking about? I'm talking about current interest rates. Look at the date of this beautiful blog that I'm doing. By the way, I'm Stan. And when I say live off the interest until you can't, at this time of this blog, there are some current interest rates out there that you can just take the interest and not touch the principal. Most people go, "I would never buy an annuity, Stan, because the insurance company keeps the money." That's one type.

‌Principal Protection

‌It's called a lifetime income annuity, and that's one of 40 ways to structure it. We usually structure it so that 100% of the money goes to you or your family, not the evil annuity company. But what I'm talking about are MYGAs, CDs, Treasurys, and money markets. The four places where you can get full principal protection, not pay any fees and get a guaranteed interest rate from those four products. Again, money markets, CDs, Treasurys, and Multi-Year Guarantee Annuities, Fixed Rate Annuities. One of those four I sell. MYGAs. That's the annuity industry version of a CD. At the time of this blog, there are some money markets that are 4%, and there are some CDs at five. Many of you out there have enough funds that whatever interest you can take off those products is sufficient, and you never have to touch the principal.

‌Schedule a Call

‌My question is, why wouldn't we do that? You can visit The Annuity Man and schedule a call with us. I'm the leader, of course, because I own the company, and there is a lottery pick that you might get me. Once in a blue moon, I will pick up the phone, call the people that are scheduled, and I always go, "Hey, Stan The Annuity Man himself. You might've won the lottery or lost it. I guess we'll find out after the call." I will shoot it straight and tell you the truth, period, which is why people schedule the call with The Annuity Man. But most of the time people are looking for income. And they're thinking they will have to tie their money up with a Single Premium Immediate Annuity, a Deferred Income Annuity, a Qualified Longevity Annuity Contract, or an Income Rider.

‌Those are the four primary lifetime income products in the annuity world. And I'm like, "Yeah, we can do that. That's turnkey. That's lock and load. That's if you're not hitting on all cylinders, losing some cognitive abilities, which we all will eventually." Those are great products because the income's going to hit. It's turnkey. You've ripped a knob off a water faucet. But what if we don't have to do that?

‌Simple Math

‌It's simple math because I always say, "Okay, tell me your total investable assets." Of course, you can't put more than 50% into annuities. I can push it to 60 if I use a couple of bullets with the carriers. But the annuity industry really does not want you to put more than 50% of your investable, not your car, not your guitar, not your house, assets, investable assets in annuities. So, let's just say you can get an average of 5% on everything: CDs, MYGAs, Treasurys, or you can even say 4% to be very conservative. Of course we can get that. Multiply that by the investable asset amount. Not touching the principal, will that be sufficient? If you have a million dollars and you're getting a 5% yield, you're getting $50,000 a year, and you're never touching the million. Hello.

‌Client Example

‌I had a person on the line the other day. They were damned and determined, as my grandmother used to say. "He just damned and determined is what he is. Damned and determined." I'm like, "Stop cussing, grandma. You're driving me crazy. You're influencing me poorly. I don't want to cuss." He was damned and determined to buy an Immediate Annuity or Deferred Income Annuity because that's what he thought he needed. So, he went through the whole process, and I'm like, "Okay, tell me about the assets." And he needed XYZ for X amount per month in income. And I said, "We don't really have to tie the money up and buy an irrevocable." What does that mean? Can't get it. Can't touch this. As MC Hammer said, "Can't touch this. Can't touch this." Can't touch the principal. Can't touch it. You'll never forget that, will you?

‌Keep the Powder Dry

‌SPIAs, DIAs, and QLACs are annuitization products. You are ripping the knob off a water faucet. Income's coming. We'll structure it so that 100% of the money goes to you or your family. But what if you don't have to do that? What if you can achieve that income amount, that income goal, by taking interest from CDs, the money markets, Treasurys, or Multi-Year Guarantee Annuities, Fixed-Rate Annuities, and CDs? What if you can do that? Why wouldn't you do that? Why wouldn't you keep the powder dry? Why wouldn't you control the asset? There's no good answer. Why wouldn't you? You should. Now someone steps in and goes, "Stan The Annuity Man's kind of a simpleton, you know? Had to play college basketball and didn't get an advanced degree and all that stuff. He really doesn't know. You really should get a Buffer Annuity, Index Annuity, or Variable Annuity."

‌Guarantees

‌Whoa, whoa, whoa, whoa, whoa. Whoa. If you want to buy your agent a car, then buy them a car. We're talking guarantees. That's what we're looking at. There's no guarantee of return with Index Annuities. There's no guarantee of return with Variable Annuities. There's no guarantee of return on Buffer Annuities. I'm not putting those down, but we're talking about guarantees. Living off the interest, peeling off the interest, taking the interest from the top. Why wouldn't you do that? Well, we're at current interest rate levels where we can do that and you should do that, which leads me to this. This question happens all the time. I'm on the phone, we solve the problem. The guy goes, "Oh, I love that." And the wife's hitting him in the back of the head. "Of course, you like it because that's what I like. I like protecting the principal and I like interest." That's not the voice, but you know what I'm saying. And here's what they'll say, "Stan, that sounds pretty good. Appreciate the honesty and the straightforward nature of your conversations." I'm like, "Thank you." But what happens when interest rates go back down player? And they always ask me that. They don't say player, but they should. What happens when interest rates go back down? 31 trillion in debt, interest rates have to go back down. They just got to go back down. It's like raising the interest rate on your mortgage. No one does that long-term. You're right. I'm not disagreeing with you. So, let's just say you buy interest rates, and they're high right now, and you lock them in. Three year, five year, seven year, 10 year, whatever.

‌Many people are locking in 10-year MYGA rates at about 5.4 or 5.5. Why? Good question. Because they know this is a moment in time, let me tell you something. If you lock in a 10-year rate at 5.4 or 5.5, and you want to call me six years from now, cry and moan, and call me names, I'll take the call. Player, bring it because I will tell you that you won't be disappointed. You're going to be mad that you didn't put more in. Of course, I'll remind you, but you can't. You can only put up to 50% of your investable assets in. But going back to the question, everyone said, "They're not going to lower the rate, Stan. What are we going to do about that, Stanley?" You know what we'll do at that point in time?

‌Figuring It Out

‌We'll figure it out, mathematically. If we can still live off interest rates with CDs, MYGAs, Treasurys, and money markets, those are the four CDs; we can still live off the interest, not touch the principal, and keep the powder dry. We will. Nod your head. But let's just say we can't. Let's just say mathematically, we can't. At that point in time, we will then visit Immediate Annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, and Income Riders. Then, we'll look for contractual guarantee products for lifetime income because they will provide a higher payback for your money. After all, part of that lifetime income stream with Income Riders, QLACs, DIAs, and SPIAs is a combination of return of principal plus interest. So, if we have to do that to hit the bogey, to hit that monthly nut that you got to hit financially, then we'll do an Immediate Annuity.

‌But not until then. Not until mathematically we've been proven we can't do it with interest. Not until the cards have been laid out in front of us, and there's nothing we can do, and we have to buy an Immediate Annuity. Up until then, up until that point, and I don't know when it's going to happen and you don't know when it's going to happen and no one on CNBC knows when it's going to happen. And Jim Cramer doesn't know when it will happen, I guarantee you that.

‌Nobody knows. Nothing against Jim. I just have better hair, and I'm taller. Nobody knows at all what's going to happen. But if they force, they meaning the math, they meaning the rates, they meaning the economic environment that we have with contractual guarantees, then and only then will we look at Immediate Annuities. Now, if you come back to say to me, "Stan, I really want an Immediate Annuity or Deferred Income Annuity because I want it turnkey. I don't want to worry about it. I don't want to manage the MYGAs with you and then, at that point in time, convert it into an Immediate Annuity." I'm okay with that. That's rational.

But if you want to keep the powder dry and live off the interest, then why wouldn't you? There's no good answer to that other than, of course, you would. You're going to ride that interest rate train as long as you can. You're going to ride that peeling off the interest as long as you can. You're going to ride that train of never touching the principal and never paying a fee as long as you can. And if rates go down, then we will pivot.

‌Thanks for joining me today. That's Shooting It Straight With Stan. 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.