Create Your Own Pension: 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 every single beautiful 50 states that we have here in America. God bless America; I love those states. I think I've been to every one so far. I want to return, dig in, and drive around in the RV, if you know what I mean. But I don't want to go to the bathroom in the RV. I'll pull off to the Hilton. That's a whole other story.
Today's topic, Create Your Own Pension. And yes, I'm talking to you, that person out there that doesn't have a pension, or the person that has a pension and wants more money, or all of you out there that already have a pension, and it's called Social Security, the best inflation annuity on the planet.
A long time ago, companies would offer the gold watch and pay the pensions to their workers. That went away a long, long time ago when the 401K started taking over. That's a defined contribution plan from the defined benefit plans. I digress, but that's what happened. The 401K is an accumulation vehicle of which, at some point, you have to turn it into an income stream. Now, whether you hate annuities or not, I hope you don't. I hope you haven't fallen for that nonsense line because you already own one, Social Security. Regardless of what you're thinking about them, it's the only product and the only strategy that will pay for as long as you are breathing. You're transferring the risk to the annuity company to pay as long as you're breathing. If it's joint life, as long as one of you is breathing.
It's called longevity risk in the business. But what you're trying to do is create income, that income floor that you can never outlive that's going to hit your bank account every single month.
The Two Questions
Now, I always ask people two questions to see if you even need an annuity. Number one is, what do you want the money to contractually do? Number two, when do you want those contractual guarantees to start? That determines what product type, and there are many different types of annuities. You can't say, "I hate all annuities." That's like saying I hate all restaurants. However, these questions will help determine which product type will provide the highest contractual guarantee. Once again, you buy the contractual guarantee. You don't buy the hypotheticals or the theoreticals that if you'd have owned it 10 years ago, Mr. Jones, or this upfront bonus nonsense. Okay, you buy it for the number. But there are really four product-type strategies out there in the annuity space that provide lifetime income. Let's go over them really quick.
Single Premium Immediate Annuity
The one that you're probably familiar with is called an Immediate Annuity, Single Premium Immediate Annuity. The acronym is SPIA, S-P-I-A, Single Premium Immediate Annuity. And that's when you want income to start as soon as 30 days from the policy being issued and as far out as a year, no moving parts, no market attachments, no annual fees, very, very simple transfer of risk. And the big companies play here. We shop all carriers for the highest contractual guarantee.
With all of these products, you can go to my site and use our proprietary calculators and run quotes till your heart's content because we're pulling from all carriers. You'll see the highest contractual guarantees. So, a Single Premium Immediate Annuity is when you need income, that pension-type income, to start ASAP or within a year. If you go past a year, if you want to defer for two or five years, or seven years, then the product types open up slightly.
Deferred Income Annuity
Another product is a Deferred Income Annuity. That's like an Immediate Annuity. There are no moving parts, no market attachments, and no annual fees. It's a transfer risk that you can defer. And the big companies play here as well. The ones you see on the TV commercials, the ones you know by name, are the ones that play here. We quote them all for the highest contractual guarantee. And remember, with SPIAs and DIAs, you can use them in non-IRA accounts, Roth IRA accounts, or non-IRA accounts, IRA Roth or non-IRA, you can use it. The guarantees are the same; just the income taxation depends on what type of account you're using. Obviously, a Roth IRA is going to be tax-free income. If it's a non-IRA account, a portion of that income from an Immediate Annuity and Deferred Income Annuity is going to be taxable. And then, obviously, an IRA you've been deferring, so all of that income will be taxable from the IRA. But Immediate Annuities and Deferred Income Annuities are pretty much the same structure. It just depends on when you turn on the income stream.
Qualified Longevity Annuity Contract
The other type is an offshoot of a Deferred Income Annuity. One of the newest types out there, and it was introduced in 2014 by the IRS and the Department of the Treasury. It's called a Qualified Longevity Annuity Contract. That acronym is QLAC. Once again, you can go to my site. All of these products I've written books on, you can get for free. You can watch videos on them. You can run quotes to your heart's content on them.
But a Qualified Longevity Annuity Contract is a structure where you can use your qualified money. The reason it's called qualified is that you can use traditional IRA-type money to buy an annuity, which shoots down all of the people who say never buy an annuity inside an IRA. That's garbage because the IRS and the treasury actually developed a product for use in your IRAs. And a lot of the 401Ks now are starting to offer QLACs. It's a future pension plan that you can defer as far out as age 85. And there are some tax advantages when taking RMDs if you own a QLAC.
And then the last type is called an Income Rider. And it is what it sounds like. It rides on top of a policy, an Income Rider. It's an income benefit attached at the time of application, typically to an Indexed or Variable Annuity. It's the contractual guarantee of that policy. So, if you said, "Hey Stan, I need income to start in three or seven or nine or five years," we will quote Deferred Income Annuities, Income Riders, and QLACs if you're using traditional IRA money and the age makes sense. That's how easy it is.
These are commodity quotes, and all four of these products, Immediate Annuities, SPIAs, DIAs, QLAC, and Income Riders, will pay as long as you're breathing. All four, if you set up joint life, are going to pay as long as one of you is breathing. All four can be set up so that 100% of any unused money is going to go to the beneficiaries. And the evil annuity company never keeps a penny even though they're on the hook to pay contractually. All four are transfer of risk to solve for longevity. All four are personal pension plans that we can shop all carriers for the highest contractual guarantee. All four, no company has the best product within that category. Regardless of what your agent or advisor might tell you, there is no best SPIA, best DIA, best QLAC, or best Income Rider. Best means the highest contractual guarantee, and best means solving for your specific situation. And, of course, we're only going to put companies in front of you that are strong and can back up the claim and pay you for as long as you're breathing.
So, with 11,000 or more baby boomers hitting age 65 every single day and more and more people looking to retire earlier and younger and go live their lives, that was the COVID wake-up call for all of us: go live your life. And because of that, you need to look at how you can create your own personal pension.
Now, let's quickly talk about inflation because I'm going to squash that dream like a bug. You can attach increases to these types of products that increase to hopefully combat inflation. But understand this: the annuity companies don't give that away. They just severely and drastically lower the initial payment to make up for that increase, whether it's a potential increase or a contractual increase like a Cost-of-Living Adjustment, COLA, attached to an Immediate Annuity. It sounds good in theory. Mathematically, it typically doesn't hold up.
We can look at that. We can run those for you. If you go to my site at and schedule a call, you might get me, or you might get someone a lot smarter than me that works for me. But we can run those quotes. But inflation, if you're under the belief that any company out there has a product that addresses inflation, they do not. Nobody knows how to do that. You already own the best inflation annuity on the planet, the best pension inflation annuity on the planet, and that is Social Security. And some pensions are out there from some of the legacy companies that have increases built in, which is good. But if you're buying a commercial annuity, SPIA, DIA, QLAC, or Income Rider, and you're looking for that, please don't. I mean, we can show it to you, but mathematically, if you run the number, typically, it does not make sense. There are a handful of occasions that it does, and we'll tell you when it does and if it does. But don't be that person looking for the perfect product because, guess what? Someone's going to try to sell it to you, and it doesn't work.
If you're thinking about creating your own pension, there's only one product type to do that, and that's the annuity category. There are four ways to do it: a Single Premium Immediate Annuity, Deferred Income Annuity, Qualified Longevity Annuity Contract, and Income Riders. You can quote all of those at my site. I've written owner's manuals on every single one of them that you can read and download for free. Easy to read, like 50 to 70 pages, that I factually just go into everything good, bad, limitations, and benefits.
So, with that being said, Create Your Own Pension. Let's go live our lives. Let's have money hitting that account, regardless of what the markets and the politicians do. It's called your income floor. Let's put it in place contractually. My name is Stan, The Annuity Man. 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.