Today's topic is how to use annuity retirement calculators and use SPIAs, DIAs, and QLAC for inflation. On my site, you can run quotes 24/7 365.
What does $100,000 pay? What does $1,000,000 pay? Well, it's all about life expectancy when you make the payment. These are annuitization products. Think of annuitization as ripping the knob of a water faucet, and water is flowing. Annuitization is like that. Once you turn on the income stream, it will pay you as long as you're breathing. You can go to my site and pull up all the calculators, but the three we're talking about today are SPIA, DIA, and QLAC.
Qualified Longevity Annuity Contracts were designed by our friends at the IRS and the Department of the Treasury for use inside of an IRA group. When you use annuities inside IRAs, you're buying the contractual guarantee. Anything inside an IRA, the money coming out, will be taxed at ordinary income levels. So if you're putting an annuity type inside of an IRA, you're buying the contractual guarantee. But when you run the calculators on my site for lifetime income for either you or you and a spouse or partner, the annuities are issued by life insurance companies; they’re looking at your life expectancy at the time you make the payment. Interest rates play a secondary role.
People always say, "Well, I don't want to buy an annuity right now because the interest rates are low." Low compared to what? Interest rates don't drive the pricing trend when talking about lifetime income. Now, let's talk about the gorilla in the room. Inflation. Inflation is coming, period. Anyone who took macro or microeconomics at any college or any high school knows that we're in an inflationary period at the time of this taping. So how do you solve that?
People always ask me, "Hey Stan, what if I put a cost of living adjustment rider, COLA, cost of living adjustment, on the annuity payment?" It's going to increase it.
Typically, depending on your age, there's a 20-30 percent or more lowering of the income stream visual without a COLA, with a COLA. So you have to factor in how long it will take to get to the level payment amount. Is it worth that? Did your grandmammy and your grandpappy live 110? If so, maybe that makes sense to transfer the risk you buy one with a COLA and one without a COLA. Now COLA, cost of living adjustment, you can at the time of application say, "I want it to increase by one percent," or "I want it to increase by two or three up to five percent."
Let's just say that. Right now, that's where most of the quote parameters are. So you could say, "I want it to increase by three percent." Great. Then we're going to run quotes for you with and without that COLA, so you can see how the annuity company is pricing that increase. By the way, you already own the best inflation annuity on the planet. It's called Social Security.
I encourage you to run quotes with different start dates. So maybe have one starting immediately, have one starting in three years, have one starting in five years, have one starting seven years. In my opinion, that's the way to address inflation using the annuities and use annuities for lifetime income, having income starting at different time intervals. If you're 70 years old, we have income starting now, and then at 72, and then at 75, and then at 78, and then at 80, and then at 85, because nobody knows about inflation, where inflation is going to go, how high it's going to be, how it's going to affect you personally.
Inflation hits everyone differently. If you're building a house at the time of this taping, inflation is hitting you because lumber is high, or if you have a bunch of little kitties running around drinking lots of milk and eating bread and eggs, going into the grocery store's affecting you. But if you're a retired senior citizen and you're in your RV just driving around the country waving at people, then lumber will not affect you as much, you're not feeding the kitties anymore, but you still have inflation.
I want you to look at your budget and your income floor. What is your income floor? What does that amount of money coming in every month have to be? You just need it to hit your bank account. It could be a pension. It could be dividend income. It could be rental income. It could be annuity income. It can be social security annuity income. What is that amount? Is there a gap there? Do you need more?
The most simplistic way to address inflation when you have that income gap is to run a reverse engineer quote on our site. You can do that. "Well, I've got the product that will automatically adjust for inflation, and it's the perfect solution for inflation." That's garbage. If it sounds too good to be true, it is every single time with annuity sales pitches. You're buying the contractual realities of the policy, not the sales pitch stream. There is no perfect solution. It's just really bad sales pitches. But we can put together a customized plan for you based on your goals.
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.