Retirement Income: Are Multiple Annuities a Good Idea?

Hi there, Stan The Annuity Man, America's annuity agent, licensed in all 50 states. I'm holding up the trusty clipboard. The will do, not might do, clipboard. You know what that means? You know what the Pavlovian side of you, the mouth starts drooling. You're like, "He's getting ready to read a question. It might be my question." It could be your question. If you submit a question, that's the only way it could be your question, and then I read your question, you become a superstar. People start showing up at your door. It's fantastic. You can't even go to the airports anymore because you've been on the Stan The Annuity Man blog. We're talking about retirement income. Are multiple annuities a good idea? Like buying a bunch of them at the same time or laddering them, and things like that.

‌The Question

‌So, let's read the question. This question is from Robert Moorefield. Robert, you are now a superstar with this evergreen content for everybody to read for infinity, and here's Robert's question. "I have 60% of my portfolio in an annuity. My wife (still working for four more years) has two-thirds of a portfolio my size. Would a second annuity with hers down the road be a good idea? Just a percentage of it." That's a good question. Right now, you have a lot of annuities. The annuity industry has a guideline of 50% of your investible assets in annuities in total. That doesn't mean you can't put more if you make a good case for it. If you talk to me and say, "We really need this, and we can make the case with the carriers," it might make sense from a retirement income standpoint.

‌Let me go through a couple of ways that we could ladder specific types of annuities for income. Now, with Robert and everybody out there, your situation is unique; it's customizable. We need to talk one-on-one. We put together a custom plan for you. You can go to The Annuity Man and book a call. You click that, access our schedule, and set a time. And guess what? We'll call you right on the dot every time and take 30 minutes to go over your specific situation confidentially.

‌Annuity Types

‌Let's talk about multiple annuities and how that works. If you just wanted to protect the principal, never touch it and then peel off the interest like you did with CDs or you've done that with bonds. There's a product type in the annuity world called a Multi-Year Guarantee Annuity, MYGA. It's a Fixed-Rate Annuity. That's the annuity industry version of a CD that you can buy multiple durations and then peel off that interest rate.

‌Not all MYGAs allow you to peel off the interest rate, but we would choose that if that was your goal. If you said, "Stan, I want principal protection; we want to peel off the interest and never touch the principal and use that interest as some type of income stream for us," we can do that.

‌Client Example

‌I got a call the other day; a gentleman specifically said, "I want to do a MYGA ladder. I have $300,000, and we did a three-year, a four-year, and a five-year MYGA for three different companies, $100,000 each." We're going to peel off the interest during those durations. Then, when each of those Multi-Year Guarantee Annuities matured and hit, it was at the end of the surrender charge period. They can get the money back in full, or we can transfer it to another Multi-Year Guarantee Annuity, a non-taxable event, and then they can continue to take the interest out.

‌And you can do that in a non-IRA setting. You could do that in an IRA setting, but when you take money out of an annuity like that, a Multi-Year Guarantee Annuity is taxed at ordinary income levels. So, that's a principal protection-type ladder that you can peel off the interest for income.

‌Lifetime Income Products

‌Let's talk about lifetime income products like Single Premium Immediate Annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, and then the fourth is an income rider, which is an attachment to either a Variable or an Index Annuity for lifetime income needs. Now, you can ladder those as well. You can have multiple products and strategies in play, and what I mean by that is, let's say you had, again, the $300,000 example, and you wanted income to start. Your age is 70. You wanted income to begin at 75, 80, and 85. Then, we would shop for the highest contractual guarantees for those specific durations.

‌When you want to turn on that income stream and have income starting at those specific durations, which, by the way, is the best way to combat inflation, you can buy a Cost-of-Living Adjustment rider to increase the income, or there are some Indexed Annuities that the sales pitch is that your income's going to increase with the index increase. But understand that the initial amount of income you're going to get will be lessened by, say, 30% to 35% ballpark average if you choose an increase instead of a static payment. But with lifetime income, you can do it a couple of ways. You can buy all three products at the same time and have income starting at those intervals. Like the example I gave 75, 80, and 85, or you could say, "I'm going to buy an Immediate Annuity this year, an Immediate Annuity next year, an Immediate Annuity the following year for lifetime income.

Because at the end of the day, and when you get to chapter two of your life, which is retirement, there are 10,000 baby boomers hitting age 65 every single day. A lot of people want to transfer risk, they want to protect the principal, or they want lifetime income. You can structure it so you can ladder that income to start at different intervals, or you can ladder the purchase state, or you could do both. You could ladder the purchase state for future laddered intervals, customization, or anyone. I mean, at the end of the process, when you run quotes at The Annuity Man, and you get a good feel for what the contractual guarantees are, then you're going to schedule a call with us, and we're going to go through the specifics of what you're trying to achieve and ask you the two questions.

‌The Two Questions

‌"What do you want the money to contractually do, and when do you want those contractual guarantees to start?" You might say, "I want to protect the principal, but I want to peel off the interest." Then, Multi-Year Guarantee Annuities are a very good solution, and we can ladder those. Or if you say, "We need a lifetime income streams, we need a pension, like a Social Security payment," which by the way is an annuity or a pension from you're getting from your company, we need an additional lifetime income stream that me and the spouse can never outlive. As long as we're breathing, we need to put that in place, but we might want to ladder those start dates and just remember with lifetime income, okay? The primary pricing mechanism is your life expectancy at the time you start the payments. Interest rates play a secondary role. Let me repeat that. Interest rates play a secondary role, so if you don't like the guaranteed payment, then you probably don't like your age.

‌You may think you're too young, but you can't time it. I know that sounds like a sales pitch, and I'm not saying, "Hey, you need to buy it now." I'm just saying you can't time the purchase because life expectancy drives the income and pricing train. You have to be careful about timing it because if life expectancy tables change against you, meaning that they're projecting you to live longer. That means the payments will be lower. So, getting back to the original question from Robert, is multiple annuities a good strategy? Does that make sense? It might. In this specific situation, I would encourage him to schedule a call with us because what I would do is I would take a look at the annuities that he currently owns, and if his wife owns annuities, we'd look at those as well, and we'd look at the contractual guarantees.

‌If those contractual guarantees were the best you could get, you'd stay there. If you can exceed those contractual guarantees somewhere else, we would entertain that thought, and I'd show you the reason why you do that. But in most cases, we're going to take the annuities that you currently own, and then we're going to combine them potentially with newer contractual guarantees and newer annuity purchases to get you to the goal that you want to get to.

‌Hey, thanks again, Robert, for the question, and I encourage everyone to put in questions on one of my YouTube videos. We will read them, and we will answer them, and you might get on the Stan The Annuity Man blog.

‌I also encourage you to use my proprietary annuity calculators 24/7 365, the best ones out there on the planet, and feel free to schedule a call with us because, just like Robert's situation, everyone has a customized solution waiting for them and their goals. There's no one-size-fits-all, and if nothing fits, I'll tell you that you do not need an annuity. But in Robert's situation, we might want to look at the annuities that he owns and combine them, maybe with new ones, or just take them and make them work well for them. I mean, period. That's what I do. I'm Stan The Annuity Man. America's annuity agent. With that being said, I'll see you on the next Stan The Annuity Man blog.

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.