Table of Contents
Automate Your Income: Shootin' It Straight With Stan
Welcome to Shooting It Straight With Stan. I'm your host Stan The Annuity Man, America's annuity agent, licensed in all 50 states. Today's topic is from a friend of mine, Michael Finke, a smart guy in the room, the Mount Rushmore of smart guys. His face is on that Mount Rushmore, Mount Annuitymore, Michael Finke, F-I-N-K-E. He's been on my Fun With Annuities podcast with me before. He is an intellect. He is a person who, when he speaks in the annuity industry, as the old Paine Webber ad said, people listen. But I had him on the podcast long ago, and he said something I had written down. I wanted to hammer on this a little bit more. It's called automate your income. 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 or put too much money in it, if the annuity you're buying is the wrong one, I'll tell you that, or if it's the right one, I'll tell you that, too.
But he's a big believer in automating your income. The more I thought about that and the more poignant of a point that was, high five to Michael wherever he is, smart guy, fun guy, he'd be the guy like, "If I still drank beer, that's the guy you want to have a beer with" because he's just fun, he's glass half full. He always has a smile on his face. He's just happy. I like that. Someone in the annuity industry who's happy and unique. He has a reason to be because he understands the risk transfer's value and nature.
Brief History
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 all on the line for the empire, it was a lifetime income stream. That's where the word annuity comes from, and it has been sold in this country regardless of the pundits who have no clue what they're talking about for hundreds and hundreds of years. They're pensions. The reason that that's important now is because in this world that we live in in the United States of America, less than 9% of private companies offer pensions, period. They don't even give you the gold watch. They don't do either.
Pensions and Social Security
If you work for the government or the state, you might have a pension. If you work for a good labor union, you might have a pension. 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 that increases with inflation. No commercial annuity really does a good job with inflation increases, regardless of what you heard at the bad chicken dinner or expensive steak dinner seminar. They're full of crap.
Income Floor
The reason that I say Social Security is the best inflation annuity on the planet is because politicians just raise it. They don't look at actuarial tables. They just raise it. "Well, 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. That's the reason I say that. But 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, what I talk about, your expenses and mad money and everything, what's going to hit the bank account every single 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. You need to automate that.
Now, when we talk about automating your income, that makes people's stomach hurt, 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 you're good at it, please do that. But I would encourage even those of you who 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 who's put up with your rear end for all this time. And you know what I'm talking about. Please 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. And that happens, I think, too much, and you don't have the ability to trade, then that income floor is in place.
That drives people like you crazy who are market people and who don't want to tie up your money. And the best lifetime income products, which are Immediate Annuities, Deferred Income Annuities, 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 a lot 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 it off, the knob off the waterfall. It's common. You're getting that lifetime income stream.
RMDs
The problem with that for a lot of you is the fear of missing out, the loss of opportunity, you didn't buy the Tesla, and you didn't get the ten-bagger stock and all that crap. That's fine. But I mean, you need to come to a point where a portion of your portfolio is automated income in combination with Social Security, in combination with 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 into age 73 that the tax guy, 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.
All you curmudgeons out there can argue with me all you want, "Well, when I'm done, it runs out ...." You know what I'm talking about. It is in the 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 a 401k, IRA, whatever, 403b, 457, something that's been deferring taxes that when you turn 73, whatever the RMD age is at the time you're reading this, it could be higher. I think they're pushing it for it to be higher. And the IRS taps you on the shoulder; that's automated income. That's going to combine with your Social Security for automated income. That's going to combine with your pension, which is automated income. And arguably, it could combine with dividend-paying stocks like legacy stocks that you're never going to sell, and they pay dividends. That's automated income. It's coming in. And there's nothing wrong with that. I think 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, of course, he applauded me, 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, "Use the least amount of money possible to solve for the income goal, period."
Reverse Engineer Quotes
At The Annuity Man, you can do what's called a reverse engineer quote. You can say, "You know what, Stan? I need $1,757 a month, period, starting in a year, starting in two years, or starting now or starting in five years." And you could run that reverse engineer 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 amount of money as possible to solve for that contractual goal. That's a very interesting way to do it.
Inflation
Now, for all of you masters of the universe saying, "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 return percentage. Still, the annuity company just lowers that initial payment to make up for that increase.
It's the same thing with Index Annuities or Variable Annuities, whatever the pitch is, "Well, the return, 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 you're going to figure out what that income gap is going to be.
Let's say your income floor is $5,000 a month. And three years from now, you will need $5,250 a month. Then, let's do a reverse engineer quote at that time for $250 to solve the income gap.
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 would encourage you to go to my site at The Annuity Man. We have the best calculators in the world. We can run DIA, SPIA, QLAC, and Income Riders quotes to your delight. I have owner's manuals that you can download for free and read all the stuff on each one 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 that 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, your RMDs, and a pension if you're so fortunate to have one. Automate your income so you don't have to worry about the monthly income that you need, and you can live your life.
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.