Retirement Tips: Annuities Can Help You Rock a Budget

Hi there. Stan The Annuity Man, America's annuity agent licensed in all 50 states. Before we get started on this, download my books, listen to my podcast, and use our search bar at The Annuity Man to search all things annuity. Yes, I am the top agent in the country. I do sell annuities when they're appropriate and suitable, but not all the time. Not always does it fit because many people call me and say, "I want this to happen with the annuity," and I'm going, "It's not going to happen." I only sell contractual guarantees. So, if it's not going to happen contractually, then I'm not going to recommend it.

Today, we're talking about rocking the budget. What is rocking the budget? Annuities can rock a budget. I'm kind of a free spirit. I don't know if you call it that, but my wife, budget, budget, budget, budget. And I have some clients who are just all about the budget. They can tell you their income stream calculating inflation 17 years from now. They're in it. But annuities can help you with what I call "rock the budget" and help you be a better budgeter because of the contractual guarantees that they provide. We're going to talk about that today and how it fits and might fit in your situation. It might not. That's fine. One of the things you need to understand about annuities is that they're not for everybody. It's not a one-size-fits-all. There's no square peg into a round hole. It might not be for you, but it might. And let's look at how annuities can rock that budget and help your budget and plan.

Brief History

For all of you, what I call box checkers out there, you know who you are. You have the plans, and you make the list. You always have lists everywhere in your planning. It is the same thing when you budget for your life, your lifestyle, and your retirement. You have these lists; you have these boxes. You're checking off the boxes. So, how do annuities help you rock that budget? First, understand that annuities were put on the planet in Roman times for lifetime income. It's the only product out there, period, of all products that can provide a lifetime income stream, meaning you can never outlive it. There's no other product that does it. Annuities have a monopoly on that. You already own the best annuity on the planet, inflation annuity on the planet, called Social Security. If you have a pension, that's an annuity. These things pay for life.

Client Example

When you're looking at budgeting, either currently or for retirement, or if you're in retirement, you need to fill a gap; lifetime income can help you fill that gap. I'll give you an example. I had a person call the other day, and they said, "Well, I've got this plan; it's detailed, but right now, we're missing about a thousand dollars a month. Me and the wife are missing a thousand dollars a month that it's part of the income floor we'd like to be there." So, we ran a reverse-engineered Immediate Annuity quote to solve the problem of $1,000. In other words, quoting all carriers, how much money will it take to create a thousand dollars contractually per month for both him and his wife? Pretty simple quote.

The other thing I asked him was, "If you die early, do you want the money to go to the beneficiaries and the evil annuity company not to keep a penny?" The answer was, "Yes." So, we put on what's called an installment refund, meaning that when they die, both of them die, payments are going to go to the beneficiaries until the money's gone. But the bottom line is we filled in that thousand-dollar gap, which is great.

The question then came, "Well, Stan, what about inflation?" The problem with inflation and annuities, and I'm the only person that's probably going to tell you this because most agents say, "You have got one that'll adjust with inflation." No, no, no. Annuity companies have the big buildings for a reason. If they have an inflation component to an income stream on the annuity, all they're going to do is lower the payment as compared to the same exact annuity without that inflation increase. You can't have your cake and eat it too. If it sounds too good to be true, it is every single time with annuities, no exceptions.

Income Floor

What's an income floor? Social Security, pension, if you have rental income or dividend income, and then what is that gap that needs to be filled? For you box checkers out there and planners, that's the way to go about it.

Future Income

Another way to use annuities to rock that budget is if you want to plan for future income. There are a lot of very good products that you can know contractually to the penny what the income stream's going to be in the future. Remember, all lifetime income stream payments with annuities, regardless of type, are primarily based on your life expectancy or life expectancies when you take the payment. Interest rates play a secondary role. People always talk about interest rates. It's about life expectancy. You don't want the life expectancy tables to change against you. That's as drastic as interest rates changing.

So, with that, there are a couple of products that do solve for what I call income later. Income Riders attached to some Deferred Annuities. A Deferred Income Annuity and a Qualified Longevity Annuity Contract can all have an income starting at a future date you choose.

For planners out there, that's fantastic, you go, "You know what? We're retiring in five years. In five years, I project X amount that we're going to need in five years. I can go reverse engineer that quote." Quoting all carriers and all product types, the Income Riders, Qualified Longevity Annuity Contracts, and Deferred Income Annuities, to find the highest contractual guarantee for your specific situation. Once again, the inflation question, what happens with inflation? There's not a perfect solution for that with annuities. The best way to combat inflation using annuities is to have income streams starting at future dates.

Let's say you have five more years until you retire. We'll run a quote solving for a specific dollar amount monthly, starting in five years, and then we can buy another annuity with income starting in seven years and then one starting at 10 years.

In other words, we don't know what inflation's going to be. There's a pretty good argument for deflation in some cases, but let's say there's hyperinflation. We can also buy an Immediate Annuity at the time inflation hits and you need more income. That income floor needs to be filled so we can buy an Immediate Annuity at that time. But there is no product that just automatically adjusts for inflation. If there was, those would be the only videos that I did. That would be the only product that you know about. Once again though, if it sounds too good to be true, it is every single time with annuities, and you always buy the stake, not the sizzle. You're going to own the contractual reality. So, don't buy the dream, buy the contractual reality.

The Contractual Guarantee

And with all of this planning, if you're a planner, you're also going to be someone who wants to read before you sign. We can get you the specimen policies and the actual application, so there will be no surprises. Whatever information you need, we can get you information on the carrier you choose, but whatever information you need to make you feel comfortable that you can make your decision, informed and on your terms and timeframe, don't hesitate to ask. And if anyone out there is trying to sell you an annuity and they say, "Well, I'm not going to get you a specimen policy," then you need to leave. Annuities are contracts. There's no urgency to buy them. Even though we have to shop all carriers and their commodity quotes, there's no urgency to buy. You have to understand the contractual guarantee, feel comfortable with it and know that this is what the annuity is going to do. This is the contractual guarantee.

All right, so consistent, contractual, keeps you on track. All this sounds pretty good, right? For people out there who are planners, kind of like me, I'm kind of an OCD or a lister person, Obsessive Compulsive Disorder, but I function well. But my wife is a big-time planner. She likes things in order. She likes to know exactly what's going to happen. And we're always having these yearly dinners where I take her out, and I go, "Okay, when I die, this is exactly what's going to happen, and this is the file that it's in, and this is the emergency file that you take if the hurricane hits." We have those plans in place. What annuities can do is provide those contractual guarantees, so you know what's going to happen. In a world where we never know what's going to happen day to day, we're currently at the time of this blog in election season and global politics, and it seems like chaos. It seems like the world's on fire sometimes.

What's not on fire is an annuity contract, because it's a contract. Now, you have to choose a carrier that's going to be able to back up the Claims-Paying Ability of that guarantee, but we can help you with that. And representing pretty much all carriers, we can provide quotes with the strongest carriers on the planet.

What Happens if the A++ Company Goes Down?

I got a call the other day, and it was from a client; all this stuff was going on, and he was concerned about geopolitics and what was happening. He bought an A++ company. I'm not going to mention the name, but his comment was, "Hey, Stan, what happens if this A++ company goes out of business?" And my comment to him is, "Me and you are in the grocery store's bread aisle, and we're punching each other for that loaf of bread." We used to call it in the South bunny bread. That's what's happening is anarchy.

And I'm not saying annuity companies are foolproof or the best thing since sliced bread, but they are more regulated than banks. They're not smarter than banks; they're more regulated than banks. There are a lot of rules in place that do not allow annuity companies or life insurance companies to take big risks with your money. They have to do things within the law and that's the reason you don't see a lot of hiccups in the industry. And we can show you those stats as well.

But at the end of the day, if you're planning, trying to rock that budget, or trying to budget either for now or for the future, annuities have their place. I encourage you to go to The Annuity Man and download all of my books. Listen to my podcast called Fun With Annuities. I know it sounds crazy, but we do have some fun with it. Because they do have their place, they don't fit for everybody. But for a lot of people, they do fit very well. But I would encourage you to schedule a call with us 1-on-1. We have remained a boutique firm for a reason. We want to talk to you. We will look at your stuff, devise a plan, and find a solution that fits your specific needs.

So, with that, I'll see you on the following 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.