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Annuity Income: Do You Need It to Start Now or Later?

Stan Haithcock
April 29, 2024
Annuity Income: Do You Need It to Start Now or Later?

Hi there. Stan The Annuity Man, America's annuity agent, licensed in all 50 states, including yours. Today's topic is excellent and stems from the question, do you need income to start now or income to start later?

You might be too young for this, but Now and Laters used to be these taffy things that we used to buy in the store. I loved them. My favorite color was grape. Now and Laters, I loved Now and Laters. For all you old cats out there, you know what I'm talking about. Parents used to let you eat candy back in the day. Now, I didn't let my kids eat candy. Why would I do that? Back then, we used to go to the candy store, and I used to get Now and Laters, but let's get back to annuities.

Annuities are boring products. Who chooses to be Stan The Annuity Man? Who chooses to love contractual guarantees? Only some crazy person like me would do that. But with 10,000 baby boomers reaching retirement age every single day in this demographic tidal wave, and I live in Florida some of the time, so with a demographic tidal wave of retirees and people looking for contractual guarantees, I think it is time to start educating. I've been doing this for a while, but I'm ramping it up. I do these blogs videos every single day, Monday through Friday.

Income Now

Let's talk about income now. That's in Single Premium Immediate Annuities. Income now means the income will start 30 days from when the policy was issued up to a year. That's a Single Premium Immediate Annuity. It was the original annuity type that originated in Roman times as a payment for the dutiful Roman soldiers and their families to pay them a lifetime income stream because they were laying it on the line for the empire.

Immediate Annuities: I think most people in the country think that when they say the word annuity, "I hate all annuities," they're thinking of Immediate Annuities. Well, if you hate all annuities, you hate all pensions. If you hate all annuities, you hate Social Security payments. Immediate Annuities are income now products.

Now, the information we would need for you to run that is your state of residence, date of birth, or dates of birth if it's joint, the type of account, when you want the income to start, and how much money you want to put in or how much money you want to solve for. Meaning that, hey, here's $100,000. How much will that pay for life? Or do we need $2,500 a month for the rest of our life? How much money would that take?

The Structure

Understand that there's a myriad of ways to structure this contractually. You could do life only, which means when your Learjet hits the mountain, the money goes poof. Too often, people think that's the only choice you have. You don't. You can secure a lifetime income stream and guaranteed transfer of risk for longevity risk, meaning the fear of outliving your money. Still, you can also put in your policy that 100% of any unused money will go to your listed beneficiaries, and that evil annuity company doesn't keep a penny. Yes, you can do that.

Income Later

Let's talk about income later. There are three primary income later products. We'll go over them quickly: Deferred Income Annuities, QLACs, and Income Riders. A Deferred Income Annuity is really the cousin of an Immediate Annuity. It has the same structure. The difference is that income starts within 13 months and can last up to 40 years.

You have to say, "Wait a minute. Who in the world would defer for 40 years?" Let me tell you who. It's me. I've got two daughters in their 20s. One's a writer. One's a dancer. What does that equate to? They're either going to be stars, or they're going to be poor. I'm betting on the poor part.

So, I bought Deferred Income Annuities for them because I love them. They're great kids. They're just very talented. But I think they're focused on a job that will never make them money, which isn't a bad thing. But I've bought them Deferred Income Annuities with income starting when they're age 50. That's pretty cool. That'll be my legacy. They'll hate me. But then that income stream will come in, and they go, "Well, he wasn't that bad. Wasn't that bad of a dad."

QLACs are Deferred Income Annuities that you can only use in an IRA or a specific employer plan. Some have them. But a traditional IRA, not a Roth IRA. It is for future income. There are specific rules on how to fund a QLAC, but that's for income later. Typically, using it in your IRA, you will start income in your 70s. The farthest out they'll allow you to defer a QLAC is age 85.

Now, I've written books on all of these products. You can download them all for free. They're owner's manuals for each product type.

Income Rider

The last income later is called an Income Rider. It's an attached benefit to a policy, typically an Indexed Annuity or Variable Annuity. It's a separate calculation that you can only use for income down the road. Typically, people will defer up to five years and out to, say, 15 years.

Income Riders and Deferred Income Annuities can be used in all account types. So can Immediate Annuities. The guarantees are the same. The only difference is how that income is taxed coming out of that specific account.

If you said to me, "Hey, Stan. I need to know the highest contractual guarantee for income starting in seven years. I'm using a non-IRA account," then I would quote Deferred Income Annuities and Income Riders. Now, both get you to the same goal, which is income later contractual at that specific time, seven years. But they take two different contractual paths to get there.

Why do we quote both? Sometimes, DIAs are higher than Income Riders, and sometimes, Income Riders are higher than DIAs. Notice that I'm not quoting a carrier name; I'm quoting a product because annuities are commodities. So, I'm quoting for the highest contractual guaranteed number.

When you talk to us, and hopefully, you're going to talk to me or one of my wonderful experts that have gone through the Stan The Annuity Man boot camp, which is hell on wheels, trust me. But I'm hoping that you and I can talk because I want to ensure you're getting the best recommendations. Even if you don't speak to me, I will have that recommendation in front of me. I'm going to sign off on it. I'm going to know about it, and I might call you. But you'll have to tell me exactly what you want to achieve because annuities are customizable, they're commodities, and we'll shop all carriers for the highest contractual guarantee.

As you know, I write these blogs weekly, so I appreciate your attendance. Remember to go to The Annuity Man for all things annuity. With that being said, 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.

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