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4 Contractual Paths to Income Later: Shootin’ It Straight With Stan

Stan Haithcock
April 26, 2023
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Today's topic is 4 Contractual Paths to Income Later. Income later is when I ask the two questions, what do you want the money to contractually do, and when do you want those contractual guarantees to start? An example answer to the first question is, "I want lifetime income," and an example answer to the second question is, "I want it to start in two or three years or five years or seven years or 10 years." There are four ways to get there using annuities. None of the four, unfortunately, is better than the other. None of the four are arbitrage sweet spot moments. "Sir, I've looked at all of them, and this is the best." No. After speaking with you, if you book an appointment and we have a conversation, I might tell you, "This specific one fits you and is more suitable and appropriate." But up until then, none is better than the other.

Let's go over the four. The first one is very, very basic. Don't buy an annuity if you need income in five, three, or seven years. I know. "Oh my, the annuity Gods. They're here. I can sense it. They're going to yell at me." But it's true. Many of you don't need an annuity right now, but you buy an Immediate Annuity when you need income. You shop all carriers through our site and look for the highest-yielding with the best carrier-rated guarantee. They're commodity products. And when I say commodity products, people say, "Well, a true commodity Stan's like when you buy wheat, or you buy gold futures as a commodity, and then if you don't sell that contract, they deliver the wheat. They deliver the oil." No. You know what I'm talking about. It's wheat. It's annuity products. It's annuity types. You shop all carriers for the highest contractual guarantee. That's what I mean when I say commodities. Some guy got deep in the weeds and started telling me, "Well, they could just deliver the oil to your backyard." Stop. I understand all of that. I used to be on Wall Street. I get it. I sold managed futures. I understand it backward and forward. But the first way is not to buy anything; when you need income, buy an Immediate Annuity.

The second way is what I call MYGA to SPIA. A MYGA is the annuity industry's version of a CD. So, let's say, "I want income in five years, Stan." "Great. Let's buy a five-year MYGA with a guaranteed interest rate like a CD. And at the end of the term, we will shop all Immediate Annuity carries into a non-taxable event transfer. It doesn't matter if it's your IRA, Roth, or non-qualified, into the highest-paying Immediate Annuity, MYGA to SPIA." I've done a video on that if you want to check that out.

The third way is a Deferred Income Annuity. Remember the Immediate Annuity? It's the same structure. No moving parts, no annual fees, no market attachments, and no-nonsense. It's just a straight transfer risk. You can use an IRA, non-IRA, or Roth IRA, and you can say, "I need income to start in five years." Now it's a liquid product, and it's irrevocable. That's okay. You buy it today, and I can tell you to the penny what that income stream will be in five years. Or you might say, "You know what, Stan? I want $2,750 five years from now every single month for the rest of me and my spouse's life." We'll run a reverse engineer quote. You can do that yourself with our annuity calculators to determine how little money it takes to create that contractual guarantee. So again, hold, hold, hold, as Mel Gibson would say in Braveheart. Remember that war scene? Hold, hold, hold, and then buy an Immediate Annuity. I need to do that but with my shirt on, if you know what I mean.

So again, the second path is MYGA to SPIA, a Fixed Rate Annuity, and then transfer it into an Immediate Annuity. The third way is Deferred Income Annuity. It's an Immediate Annuity that you defer. And the fourth way is what every single agent in the world will try to sell you. It's an Indexed Annuity with an Income Rider. Nothing wrong with that. It's just that the income rider part of it is a commodity. You shop all Income Riders for the highest payout, period. There's not one that's better than the other. There's not one that's better because it has an upfront bonus. There's not one that's better because it increases your income when the index increases. Listen, that's a great sales pitch, but when you hear it, understand that the annuity company severely and drastically lowers the initial payment to compensate for that potential increase. It's no free lunch. If it sounds too good to be true, it is every single time. So those are the four ways to get to income later.

Now, let's go through them from the standpoint of who it fits. Let's go through the first one. It's hold, hold, hold, hold, and then buy an Immediate Annuity. That's for all you players out there. All you traders out there. All you masters of the universe and Gordon Gekkos of the world that you want to control it, you can trade it, you can make your money, but you know that eventually that the cognitive ability is going to go or you want to set something up for the spouse who could give a rip about any of that trading crap. In fact, when you take them out, you go, "You know honey, I did a butterfly condor spread today, and we made 7% on the internal risk." They're stabbing themself with the wine glass in the eye because they don't care. But that first one is you, "Hey. This is how we do income."

I got a call today, and he was that person. He was a trader Joe, and I'm not talking about groceries. He was trading everything and was good at it. He goes, "But you know what, Stan? I got to set something up for my wife. How do I do that? Do I buy something now?" No. Here's how you do it. If you have a trust, put in the trust that upon your demise, when you die on the trading floor, when you die and your Learjet hits the mountain, and she's not with you, of course, there's something in the trust that says, "When I die, there is an Immediate Annuity to be purchased for my lovely spouse who put up with my ass all this time, and there's a lifetime income stream that's going to be created for her so she can go visit the kids and the grandkids." You don't have to buy anything now. You can buy it later, and if you don't want to buy anything while you're alive, that's fine. Then put it in the trust and dictate the trust that an Immediate Annuity has to be purchased. Hopefully, it's us that you use, but structure it life with a cash refund for your wife or spouse. Okay? So that's the first way. The second way is MYGA to SPIA. I like that one just because you can control the asset. It's like buying a DIA, but it's non-revocable until the end of the MYGA contract when you're transferring it to the Immediate Annuity. Remember, you're buying a MYGA. "Stan, I need income in seven years. I want to control the asset. I'm a control freak. I don't know if I'm going to need the income, but I want to be able to do this. I want to put the plan together because I'm a box checker." Is that you? Nod your head.

We buy a seven-year MYGA with a seven-year interest guarantee. You can take the interest out if you want, or you can let it roll and compound. IRA, non-IRA, Roth IRA, it doesn't matter. And at the end of that duration, we'll be in touch with you and say, "Hey. Hey. Hey, hey, hey. Remember us? We got this MYGA that's maturing. What do you want to do? You want us to send the money back to where it came from, the IRA or wherever, or do you want to go with the plan and shop all Immediate Annuities for a lifetime income stream for you and the spouse?" So, you're controlling that asset until the final second, and then we annuitize. That's MIGA to SPIA.

The third way is a DIA. It's for the box checkers that say, "You know what, Stan. The other three are fine, but I'm a box-checker. I'm a planner, and I want that income stream. I want to note to the penny what it's going to be. I don't want to think about it. I want to go with a large carrier, an A double plus type carry, or an A plus carrier. I want to lock and load here. I could care less about markets. I got other assets. I want this to be earmarked for lifetime income to hit at a certain date, and I might even ladder it. I might buy a DIA to start in five years, seven years, 10 years." That's your consultant brain that you got it all lined up. You probably know when you'll die and what trip you'll be on. If that's you, then a DIA might work.

Then there's the fourth one, which is the Index Annuity or Variable Annuity. The highest contractual guaranteed Income Riders usually come with attached Index Annuities. You're buying the income rider contractual guarantee with an Indexed Annuity and Income Rider. It's Monopoly money, and you can't cash it in or transfer it or, "Hey, send me that interest rate. High-interest rates have been growing on the income rider." No, it's not going to happen. "Send me that upfront bonus." That's funny. But for the person who still wants to control it, you can turn on the Income Rider, which is not annuitized in most cases. It's a drawdown. It's flipping the light switch on and off. In other words, you can turn it on and off or put it off down the road. If you need more flexibility and your time horizons a little bit longer, say seven or 10 years, an Index Annuity with an attached Income Rider may fit you. But we're going to talk about that when you book a call with me, and we get on the phone. I use my mouth and ears proportionately, meaning I listen more than I talk. I know you're saying, "That's hard to believe, Stan, because I watched your videos, and you seem to like the camera." No. I really don't. But what I do like is edutainment. I like educating you, making you laugh a little bit, but sticking some things in your head that are facts, so you won't fall for the sales pitch out there in the hinter lens of annuity sales presentations, which are doozies and seems to be unregulated. They keep telling me, "No, Stan. Yeah. We're regulating these sales pitches you talk about all the time." I'm like, "Really? Because I don't see that." The calls I get, I'm like, "No. That's not happening."

Again, there are four contractual paths to income later. If you need income in the future, you can hold, hold, hold, and buy a SPIA, you can do a MYGA to SPIA, you can buy a DIA, or you can buy an Index Annuity with an Income Rider. That Income Rider is the future lifetime income stream guarantee.

We look forward to working with you and speaking with you. Go to our annuity calculator to run quotes 24/7, 365. You can also navigate the sight to see our videos, blogs, and even book a call with me. Thanks for reading along, and I hope to have you reading our next Shootin' It Straight With Stan 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.

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