Annuity Quotes: How to Structure for Future Income

Hi, I'm Stan The Annuity Man, America's annuity agent licensed in all 50 states. Today, we're talking about how to structure income for the future with annuities or annuity quotes, as they say. A good annuity quote is, will do not, might do. You buy an annuity for what it will do, not what it might do. What's another annuity quote that I came up with? There's no ROI until you die. I'm doing quotes. We're going to get to the numbers quotes in a second. Just calm down. ROI is the return on investment. But with annuities, if you live forever, I don't know what that ROI is until you die. I've got so many more of these. I've even got one of my T-shirts. Stan The Annuity Man in the front, but in the back, it says, "You can't handle the annuity truth." Remember Jack Nicholson? "You can't handle the truth!"

But you can handle the annuity truth, and you better be able to because that's what's coming. Why? I'm Stan The Annuity Man. I'm the walking middle finger. Think about that for a second. I'm the walking middle finger of brutal annuity truth. Let's get right into it.

Customizable

Now, annuities are customizable. They're commodity quotes, so you can structure them anywhere you want. In fact, there are two questions I always ask. "What do you want the money to contractually do, and when do you want those contractual guarantees to start?" That question with this topic is, "When do you want those contractual guarantees to start? When do you want that income to start?" And you can start it as soon as 30 days from when the policy is issued and as far out as 40 years. You literally can choose exactly how you want it to work. Once we come up with those parameters, hopefully, you and my team will talk. You can contact me at The Annuity Man, and we can have a one-on-one phone conversation. We can come up with an exact customized quote structure and then go out and quote all carriers for the highest specific contractual guarantee for your situation because not everybody's the same.

And with lifetime income being based on your life expectancy at the time you take the payment, interest rates play a secondary role. Obviously, we'd love to see them higher, but it is what it is, and you can't time them. Then, there are a few ways to structure the policy for future income. You can structure it for life. Life only would be on your life. The annuity company would guarantee they would pay for the rest of your life, regardless of how long you live. Now, you can also set it up joint life. That could be joint life with a spouse, that could be joint life with a partner, that could be joint life with a kid, that could be joint life with anybody.

Now, it depends on what kind of account you use and what carriers will quote for joint life. And by the way, you can use it with any type of annuity except for QLACs. But you can put the rest in any type of account. IRA, traditional IRA, Roth IRA, non-qualified, non-IRA. The only difference is that the guarantees are the same. The only difference is how it's taxed coming out. Then the other way to structure it is what's called a period certain. That's not a lifetime income stream, that pays for a specific period of time that you choose. If you say, "Okay, Stan, I only want 10 years of payments, or I only want 20 years of payments, or I only want 15 years of payments." I got a call the other day, and it was from a son representing his mom, who was, I believe, 88 years old.

Client Example

And he said, "Well, my mom's got this annuity maturing, and they're going to make her cash out of it because of her age, but we want to transfer it to something, give her some income for the later years of her life," she's already outlived her life expectancy. What I told him to do is buy a ten-year period certain for her. Now she lived for two years, which means somebody in the family would get eight more years of payments, but we were betting that she probably wouldn't live to 98. If she lives to 98 or 99, that money's gone. But in most cases, there will be 10 years of payments, and somebody in that family will get those payments, whether she's alive or not. And the annuity company doesn't keep a penny. Everybody's situation is different.

That's why I encourage you to contact me at The Annuity Man, to have a one-on-one conversation about your situation. When structuring, you have to tell me exactly how you want the money to work. Now, when you do life only or joint life, that doesn't mean that when your Learjet hits the mountain, money goes poof. It could mean that. That's called life only, but that's only one of about 30 to 40 different ways to structure it. You can structure these lifetime income guarantees so that they will pay you regardless of how long you live. If you lived to age 150, they, the annuity companies, are on the hook to pay, but you can also structure it so that 100% of any unused money goes to your listed beneficiaries. Let me tell you the two best ones, in my opinion.

Installment Refund

Installment refund. Let me explain how that works. In essence, you could have life with installment refund, life with cash refund, joint life with installment refund, and joint life with cash refund. Once again, the dominant part of that structure is the life. It will pay you for life regardless of how long you live. What you're doing with these is, in essence, putting in a contractual backstop to make sure that 100% of the money goes to somebody in your family. For most people that I deal with, I am the top agent. I have clients in all 50 states, and I'd love to have you as a client, but most of my clients work really, really, really, really hard for their money. Trust fund babies normally don't call Stan The Annuity Man because they're trust fund babies, right?

People that's worked really hard, they want to make sure that all the money stays in the family even though there's a transfer of risk contractual guarantee of that lifetime income stream that only annuities can provide. You're already on Social Security, the best inflation annuity on the planet. But when you're setting up for income in the future, an installment refund means that when you die, whatever's left in the account gets paid at the same payment level until the money's exhausted. Cash refund means that when you die, whatever's left in the account goes to the list of beneficiaries of the policy in a lump sum. If you attach that to the policy and compare it to a cash refund, installment refunds will pay more. Why? Because the annuity company's holding onto the money, they will pay you out more. That doesn't mean it's better, but I always tell people, "Your kids will come to your funeral in a Ferrari anyway. Why not have them make payments on the Ferrari?" My kids will probably helicopter in from Maui or wherever they live.

The other thing you have to realize, too, is when you're planning for future income, when you go into the application process, you have to put on the application, "This is when I want the income to start." The annuity company is going to base that contractual guarantee on that.

Typically, with most policies, and I say most, you can't ever say all with the annuity business, but most, and that's the reason we need to talk. We need to get those details and understand what they do. But most will allow you to change that income start date once after the policy is issued.

Life Expectancy

Let's say, for example, you set it up 10 years from now, and the income starts. But say life changes, an event changes, in seven years from now, you need to turn on the income stream sooner. What happens to the payment? The payments are different because you will start at a younger age, and they will be lower. And remember, it's life expectancy driven. The younger you are, the lower the payment. It works in reverse. Let's say the same example, I want to start income in 10 years, and you said, "Okay, you get to the ten-year mark, you call me up and say, "You know what, Stan The Annuity Man, I do not need that income right now. Let's defer it for another three years. Instead of a ten-year deferral, you go for a 13-year deferral; what happens to the income stream? It goes up. Why? Because your life expectancy is less, which means the payments are going to be fewer, which means the payments will be higher. I hope all that makes sense. I went really fast, but you can always reread it.

Just remember, it's life expectancy based. You can't beat the insurance companies; you just have to transfer the risk to them. There's no ROI until you die, right? Exactly. I encourage you to go to The Annuity Man to use our proprietary calculators. That means you need annuity calculators that utilize all carriers to find the highest contractual guarantee for your specific situation. In addition, because I am such a giving person, you can download all 6 of my annuity owner's manuals for free. But I'd love to connect with you one-on-one. You ask me, The Annuity Man. I'm not just some figure in front of the screen. I'm an actual annuity agent, the top agent in the country, and I would love to interact with you to ensure that you find the best product and the best guarantee for your situation. Thank you for joining me; I will see you on the next 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.