Automate Your Income: Shootin' It Straight With Stan
Today's topic is from a friend of mine, Michael Finke, smart guy in the room, the Mount Rushmore of smart guys. His face is on Mount Rushmore, Mount Annuitymore, Michael Finke. He's been on the podcast with me before, Fun With Annuities podcast. He is an intellect. He is a person that when he speaks in the annuity industry, as the old Paine Webber ad said, people listen. But I had him on a podcast a long time ago, and he said something I wrote down, and I wanted to hammer on this a little bit more.
It's called Automate Your Income. And he's a big believer in that. Now Michael is not an annuity homer. I'm not an annuity homer. I'll tell you if somebody doesn't need an annuity. If you don't need an annuity, if you're putting too much money in an annuity, if the annuity you're buying is the wrong one, I'll tell you that, or the right one, I'll tell you that too. But he's a big believer in automating your income. And the more I thought about that, the more poignant of a point that was, high five to Michael, wherever he is, smart guy, fun guy. He'd be the guy. If I still drank beer, that's the guy you want to have a beer with because he's just fun. He's a glass half full. He's always got a smile on his face. He's just happy. I like that. Someone in the annuity industry that's happy, that's unique. And he has a reason to be because he understands the value and the transfer of risk nature of it.
Creating Your Own Pension
Automating your income is, in essence, creating your own pension, which is what annuities do, which is what annuities were put on the planet to do. Back in the Roman times, when the empire created annuities or annuas payments, A-N-N-U-A-S, pull it up, for the dutiful Roman soldiers and their families for laying it on the line for the empire, it was a lifetime income stream. And that's where the word annuity comes from and has been sold in this country, regardless of the pundits that have no clue what they're talking about for hundreds and hundreds of years. They're pensions. And that's important now because in this world that we live in, in the United States of America, less than 9% of private companies offer pensions. They don't even give you the gold watch. They don't do either.
You might have a pension if you work for the government or the state, or you might have a pension if you work for a good labor union. But most people don't have pensions. 91% plus do not have a pension. Yet they own the best inflation annuity on the planet, Social Security. So, when Michael talks about automating your income, he is talking about creating more income floor to add to that lifetime income stream you're getting with Social Security, which increases with inflation. And the reason I keep saying that is because no commercial annuity really does a good job with inflation increases regardless of what you heard at the bad chicken dinner, expensive steak dinner seminar. They're full of crap. Social Security is the best inflation annuity on the planet because politicians just raise it. They don't look at actuarial tables. They raise it. "We're going to pay them more. "Yep, let's just pay them more. Let's just print more money. Let's pay them more." Okay, great. But that's the reason I say that.
The Income Floor
When you go to chapter two of your life, which is where we all want to be, you want income. You want that income floor. When I talk about your expenses and mad money and everything, it's about what will hit the bank account every month, regardless of who's in office. What political party is in power, who's bombing who, whatever. It doesn't matter. It's the income floor. So, you need to automate that. Now, when we talk about automating your income, that hurts people's stomachs. Some of you out there that are masters of the universe that want to trade stocks and all that stuff. And if that's who you are, and you like shouldering that risk and are good at it, please do that.
But I encourage even those of you that consider yourself the Gordon Gekkos of the world to consider putting that lifetime income stream in place and automating your income, especially for that spouse that's put up with your rear end for all this time. And you know what I'm talking about. Put it in place for them. So, when you can't trade anymore, you lose cognitive function, you fall in the shower and hit your head on the soap dispenser. Ouch, that happens. I think too much. And you don't have the ability to trade, then that income floor is in place. Now that drives people like you crazy who are market people and don't want to tie up your money. And the best lifetime income products, which are Immediate Annuities, Deferred Income Annuities, and Qualified Longevity Annuity Contracts, you can throw on top of that Income Riders attached to Deferred Annuities like Indexed or Variable. You can also throw on top of that, from an income standpoint, peeling off the interest of a MYGA. But many of you don't want to tie up your money with SPIAs, DIAs, and QLACs. That's irrevocable. You're ripping the knob off the water faucet. In this case, water is income. But think of that just visually. You're ripping the knob off the water faucet. It's common. You're getting that lifetime income stream.
Required Minimum Distributions
Now the problem with that for many of you is the fear of missing out, the loss of opportunity. You didn't buy that Tesla, and you didn't get the 10-bagger stock and all that crap. That's fine. But you need to come to a point where a portion of your portfolio is automated income in combination with Social Security and a pension if you're so fortunate to have one. And in combination with your Required Minimum Distributions. Yes, your RMDs from your IRA at the time of this blog is age 73. The tax guy or the IRS taps you on the shoulder and goes, "Oh, by the way, whether you need the money or not, you need to start taking it out." To me, that's a forced annuity.
And all you curmudgeons out there can argue with me all you want. "Well, what about when it runs out?" You know what I'm talking about. It's an income stream that's coming from your IRA assets, whether you want it to happen or not. That's automating your income. In essence, you already have two. If you have an IRA, you have 401k, IRA, whatever, 43B, 457, something that's been deferring taxes, that when you turn 73 or whatever the RMD age is at the time you're reading this, it could be higher. I think they're pushing for it to be higher. That's automated income. That's going to combine with your Social Security for automated income. That's going to combine with if you have a pension, that's automated income. And arguably, it could combine with dividend-paying stocks like legacy stocks that you'll never sell, which pay dividends. That's automated income.
It's coming in, and there's nothing wrong with that. And to do it in proportion makes the most sense. When Michael and I were talking about that, I always say to people and I told him this, and of course, he applauded me. He stood up and clapped, and I said, "Please sit down, Michael. You don't have to do that." He didn't, but he wanted to. I always tell people to use the least amount of money possible to solve for the income goal. Period. Now, on my site, you can do what's called a reverse engineer quote. You can say, "You know what, Stan? I need $1,757 a month, starting in a year, starting in two years, or starting now or in five years. And you could run that reverse engineer quote, solving for that amount, and know exactly to the penny what it would take to create that contractual guarantee. In other words, use as little money as possible to solve for that contractual goal. That's a very interesting way to do it.
Now, for all you masters of the universe saying, "We'll, Stan, what about inflation? Stan, inflation, inflation, inflation, inflation, inflation, inflation, inflation." I just keep hearing it. Any agent or advisor that says they have the annuity that combats inflation is full of crap. They smell like it. They're full of crap. They don't have it. Annuity companies don't give away inflation increases. You can buy it contractually with a COLA, Cost of Living Adjustment, and choose your percentage of return. But the annuity company just simply lowers that initial payment to make up for that increase. Same thing with Indexed Annuities or Variable Annuities, whatever the pitch is. "Well, the return will increase your income stream..." Annuity companies don't give that away, player. They're just going to severely lower that initial payment to make up for that increase.
So, if you're automating your income and thinking, "Well, I got to combat inflation with that," don't. Please don't. The way to combat inflation using annuities is to figure out what that income gap's going to be. Let's say your income floor is $5,000 a month. And three years from now, it's now, you need $5,250 a month. Then let's do a reverse engineer quote at that time for $250 to solve for that income gap need. There's no floating product that addresses inflation. Even though a lot of agents will tell you they have it. They do not have it. You can't be that stupid. It doesn't exist.
Automating your income means that you're going to know exactly to the penny what will hit your bank account every month. The only inflation increase you can bank on is the one from Social Security, which again is the best inflation annuity on the planet. I encourage you to go and use our annuity calculators, which are the best in the world. We can run DIAs SPIAs, QLACs, and Income Rider quotes to your delight. I have owner's manuals that you can download and read on each of those specific strategies. And you can really get up to speed with not only the owner's manuals but specific videos I've done on those strategies as well.
But the point of the matter is, as you go into chapter two of your life, as you go from retirement into chapter two about lifestyle and living to the fullest, you need to automate your income in combination with Social Security, in combination with your RMDs, in combination with the pension, if you're so fortunate to have one. Automate your income so you don't have to worry about that monthly income amount you need, and you can live your life. And if you want to trade the rest of the money in futures and option spreads and butterfly spreads and condor spreads, do it. Knock yourself out. But make sure that that income floor is not only in place for you but your family members as well, spouse, etc. And that way, when they go to your funeral, they'll actually sing nice songs about you, not some dark hymn. It'll be like, "Ah, he was great. He was really great. He was wonderful." That's what you want. You don't want them singing some dark deep hymn from the 1500s at your funeral. Think about that. You don't want that.
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.