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Annuities Can Have Flexible Income Start Dates: Shootin' It Straight With Stan

Stan Haithcock
February 21, 2024
Annuities Can Have Flexible Income Start Dates: Shootin' It Straight With Stan

Welcome to Shootin' It Straight With Stan. I'm your host, Stan The Annuity Man, America's annuity agent, licensed in all 50 states, glass half full, doggone it. Today's topic is: Annuities Can Have Flexible Income Start Dates. A lot of people out there, when they talk about annuities, they think there's only one. "I won't buy an annuity because the annuity company keeps money when I die." That's one of 40 ways to structure it, Chester or Chesterette. These are customizable commodity products, and we represent all carriers at The Annuity Man, pretty much all carriers, the ones that we want, which is a lot of them, and you can run quotes 24/7, 365 at The Annuity Man using our proprietary calculators that I spent a ton of money developing and paying for, and continue to pay for because I want you to be able to run quotes and see the numbers on your terms and your timeframe.

‌Lifetime Income

‌Now, when it comes to lifetime income, there are primarily four products for lifetime incomes: Single Premium Immediate Annuity, SPIAs, Deferred Income Annuities, DIAs, Qualified Longevity Annuity Contracts, QLACs, and Income Riders that can be attached to Variable Annuities and Index Annuities. We don't sell Variable Annuities because we don't sell anything that has the potential to go down in value. More importantly, the Income Riders that are attached to Variable Annuities are typically and historically not competitive to the ones that are attached to Index Annuities. We're not a big fan of the Index Annuity upside bonus, upfront bonus, upside, no downside, and all that nonsense. We use Index Annuities as an efficient delivery system for that Income Rider contractual guarantees because our saying is you own the annuity for what it will do, not what it might do. We never sell the might do; it's always the will do, the contractual guarantees of the policy. Those are the primary four types to do lifetime income.

‌Multi-Year Guarantee Annuities

‌Now, there's a fifth, Multi-Year Guarantee Annuities, which is the annuity industry version of a CD, but that's not lifetime income. You can peel off the interest like a CD or a bond coupon. So, that's MYGAs, but I don't put that in the lifetime income category. Lifetime incomes are SPIAs, DIAs, QLACs, and Income Riders because you're transferring the risk to the life insurance company that's issuing the annuity to pay for you as long as you are breathing, as long as you're on a ventilator breathing in oxygen, it is going to pay. There's no way to calculate or return on investment until you die, period. There's no ROI until you die.

‌The Two Questions

‌But with a lot of you out there, when we ask the two questions, and these are the two questions we ask everybody, and when I say we, I mean The Annuity Man team. If you go to The Annuity Man, I have a team of really, really smart people, smarter than me. You might get me on the phone, or you might not get me on the phone, but if you don't, they will ask you two questions: what do you want the money to contractually do, and when do you want those contractual guarantees to start? Now, the soonest that you can have income start with is typically an Immediate Annuity, 30 days from the policy issue date. But you can defer out as far as 10, 15, or 20 years if you want to, so let's break all of these down.

‌With the Immediate Annuities, SPIAs, Deferred Income Annuities, DIAs, and Qualified Longevity Annuity Contracts, QLACs, those are what I call annuitized products. All lifetime income is a combination of return of principal plus interest, but these rip the knob off the water faucet.

‌Once you start the income, it's coming, baby. It's going to hit your bank account as long as you're breathing. Now you can say, "But wait a minute, Stan, I answered the two questions; what do you want the money to contractually do? I want lifetime income for me and the spouse or joint life, and I want it to start five years from now. That's what my projections and spreadsheets and check boxes say." But it might be six years, or it might be four years, or it might be seven years. We're going to structure things contractually or point you to a product type that allows you to change the income start date, so you're not fully locked in if you tell us that you might want the possibility and the potential to change that start date.

‌Life Expectancy

‌Let's look at that comment for what it is. Lifetime income is primarily based on life expectancy, your life expectancy, or if it's joint life expectancies, plural, at the time you start the payment, interest rates play a secondary role. Interest rates play a secondary role on the pricing. I just need you to know that. If you decide, we go into the contract, you decide to use The Annuity Man, we shopped all carriers, we find the highest contractual guarantee, and the plan from the start, because we have to have a plan in place, is you're going to turn on income in five years, okay?

‌Now, if you get to year four, we're going to be in contact with you, not bugging you, but just saying, "Hey, how are you doing? Anything changed?" on the yearly type call/email, and you can always book a call with us. We're always available. You might say, "You know what? We need to start it sooner." If you start it sooner, the payments will be lower because you are younger, which means there are more projected payments because your life expectancy is longer, which means those payments will be lower.

‌The reverse is true. Let's say you get to year five, and we say, "Okay, you ready to turn the income stream on?" You say, "No, let's defer it for another year or two." You say, "No, let's turn it on at year seven." That means the payments will be higher. Why? Because there are fewer projected payments because there's less life expectancy, which means the payments will be higher. It's really that simple.

‌Income Riders

‌The vast majority of what's called Income Riders, again, are attached to either variable annuities or indexed annuities most, vast majority, I can't say all because the annuity industry is not that uniform, but most, the vast majority; you can change the start date of that income rider. In the annuity company, think about the life insurance company that's issuing the annuity. They don't care. Okay, we'll hold onto the money longer, or we'll turn on the income sooner. They're going to give you your money back with interest as long as you are breathing, joint life, as long as one of you is breathing, and even if the account goes to zero, they're on the hook to pay, which is the value proposition. So, it's no skin off their back. You just have to use us and my team as your administrative arm to do exactly what you want, whether it's to start the income sooner, start the income later, or start the income right on the dot from when you first scheduled that, or attached that Income Rider to the policy. So, Income Riders allows you to change the start date.

‌Brief History

‌When we talk about Single Premium Immediate Annuities, Deferred Income Annuities, and Qualified Longevity Annuity Contracts, let me give you the genealogy of those products. It all starts with Single Premium Immediate Annuities that were developed in Roman times for the dutiful Roman soldiers and their families who were laying it on the line for the empire, and the empire said, "You know what? Let's give them a pension, an annua, which means payment" See the correlation? And it's a lifetime income stream as long as somebody in the family was breathing. That's the genesis. That's where it all started with Single Premium Immediate Annuities.

‌Deferred Income Annuities are, in essence, Single Premium Immediate Annuities that defer past a year. It magically turns into that. Really, the same thing. There are no moving parts, no annual fees, no market attachments, and a straight transfer of risk pension that you can customize the structure of. And then Qualified Longevity Annuity Contracts are DIAs, Deferred Income Annuities, that can be used in qualified accounts, i.e., Qualified Longevity Annuity Contracts so that all the people that are never buying annuities inside of an IRA, you think? Not, because there's such a thing, it's called a Qualified Longevity Annuity Contract, which was put on the planet and developed by our friends at the IRS and the Department of the Treasury for use in IRA-qualified type accounts, for lifetime income because Social Security was never put on the planet to be the sole annuity.


‌And yes, it is the best inflation annuity on the planet, but it is the sole income source for people. They want people to use QLACs to enhance that income floor that they're building. So, we have SPIAs, DIAs, and QLACs that are pretty much the same structure: no moving parts, no market attachments, no annual fees, nothing complex about that. If Warren Buffet bought annuities, these are the ones he'd buy. Why? Because they're simple, you can explain them to a 9-year-old; no offense to nine-year-olds. But with a lot of these companies, if you do it life only, meaning you're a misanthrope, you hate your beneficiaries, you don't have beneficiaries, you want the highest payment, a lot of these companies with the life only will not allow you to change the start date, but you can change the start date if it has a cash refund attached to it, or an installment refund attached to the life contingency, or period certain attached to it, they do allow that.


‌So, we're going to ask you the question. If you say, "I want life only, I want the highest payment, I hate my family, I don't have any benefactors, listen to what I'm saying," we'll still say, "But you do understand that you're going to defer it for three years or a year, two years, whatever you come up with the two questions, what do you want the money to contractually do, and when do you want those contractual guarantees to start? We're going to make sure you understand that with the carrier that you chose, if it's life only, you're locked in, okay?" And you say, "Well, I'm not sure I want to be locked in like that. I want some flexibility. You know what I'm saying? I can't really reach over and touch my toes anymore, but I want flexibility with my income strength. You know what I'm saying?"

‌And we'll go, "Okay, great. Then let's do life with installment refund, or life with cash refund, or life with a period certain, we can explain all those to you to make sure that you have the flexibility to change your mind." Because what's going to happen is when you buy a lifetime income stream that you're deferring. We're going to be in touch with you about 90 days before that income stream starts.


‌To give you an example, let's say you bought a deferred income annuity, life with cash refund, starting in three years. We're going to be in touch with you about 90 days before that start date to say, "Hey, Chester, you still want to turn on that income stream?" You say, "Yep, lock and load." Then we're going to verify the bank account that the money's going to hit, and it's going to be like a turnkey, going to hit your bank account.

‌But if you say, "No, let's put that thing off for a while. I came into some money; I hit the lottery the other day," we can push it out. And remember, the older you are, the higher the payment. The younger you are, the lower the payment. It's really that simple. But what I want you to take away from this phenomenally presented, Shootin' It Straight With Stan, can we nod our head in unison, mm-hmm, is that you can change the start date of a lifetime income stream that you have planned to start in the future. You can change it if it is structured properly at the start, which is why you need us standing there. The Annuity Man and my team understand how to do that so you can get to that fork in the road moment; it's an income fork in the road moment, and you pick up the income fork, and you can pivot.

‌You can pivot to turn it on sooner, you can pivot to turn it on later, but you have the ability to pivot. How about that? Man, I'm rolling. I'm like butter. I'm on a roll, as they say. So, that's it. Annuity lifetime income. Remember, transfer of risk annuities solves four things: principal protection, income for life, legacy, and long-term care. The acronym is PILL. We're talking about the I in PILL, income for life. That income for life transfer risk strategy with annuities, typically four primary types, SPIAs, DIAs, QLACs, and Income Riders, we can structure it so that you have the ability to pivot and change that income start date. My name is Stan The Annuity Man. I am America's annuity agent, doggone it, and I am licensed in all 50 states and pay those fees every year. I'm a good citizen. And that's it. We'll 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.

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