Increase Your Annuity Income Floor as You Age: Shootin’ It Straight With Stan
Hi there. Stan The Annuity Man, America's annuity agent, licensed in all 50 states. Welcome to Shooting It Straight With Stan. Today's topic is a good one: Increase Your Annuity Income Floor as You Age. In other words, that income floor, that amount that's hitting your bank account every single month, needs to be increased as you get older. Unless you're Gordon Gekko and trading butterfly spreads, condor spreads, futures, options, and all that stuff, and that's what you do. There are some people like that. I mean, they really are.
But as we get older and go into chapter two of our lives, as they say, you want to do your own thing. You don't want to keep score anymore. That's a big one. I always tell people, "If you've won the game, why are you still playing?" The cheerleaders have packed up. The band, the tuba guys, walked out. The scoreboard in the middle of the arena got the final score. You've won, but everyone's left the arena. Why are you still playing? If you have enough money, why are you still playing? That's chapter two in a nutshell to me.
You Already Have an Income Floor
Now, for you annuity haters out there, you already have an income floor product in place, at least one that I know of. If you're a United States citizen with a Social Security number, guess what player? You already own the best inflation annuity on the planet; it is called Social Security, and that's part of your income floor.
If you work for a company, a labor union, or someone in the government that provides a pension, that's annuity lifetime income floor number two. Just think about flooring like when your wife put a gun to your head, figuratively, of course, and said, "We need to redo the floors," and they're laying the floor down with that really nice wood. You're doing the same thing with lifetime income or income-type products. So, you already have Social Security, and you might have a pension, but also included in that could be rental houses that kick off income. Dividend stocks, kicking off income. A bond's kicking off income, CDs peeling off the interest, Multi-Year Guarantee Annuities, which are the annuity industry version of a CD, peeling off interest and adding to the income.
Not Attached to the Markets
Do you see where I'm going here? So, what I would like for you to do as an exercise for your retirement or chapter two of your life, and this is real because it's not a game. Even though you've won the game, I don't want you to play anymore. The income floor, the vast majority of it, should be non-correlated, meaning not attached to the markets, not going to be affected by markets, and not going to be affected by wild swings in the Dow or the NASDAQ. Or if crypto goes crazy or we have a black swan event. You want that income floor to be solid. You want it to be just like Social Security, just like a pension. You want that income to be hitting that bank account all the time.
Obviously, if you're married, you would need to set something up or make sure there's a continuation of that income floor if something happens to you. So, it continues for the life of your spouse who's put up with you for all these years. But the one thing you will have a hard time replicating is the inflation component of your Social Security, which is the best inflation annuity on the planet. Why? Good question. It's because politicians raise it. Social Security gets raises all the time to the income because there's argument A, you've earned it, but B, you vote. People who get Social Security are voters, and if anyone tries to touch that, whoever tries to touch that is going to get voted out. We all have seen that calamity when someone steps to the mic and says, "I really think we should look at Social Security." "What? What did you just say?"
Then, all the pundits from both left and right, middle side up and down. "I can't believe that they said that about Social Security. The rich and poor and the whole class stuff happens, but it's all about income flooring. As you get older with each year, you need to add more layers to that. It's just kind of a natural progression because, speaking for myself, I know you're saying, "Stan, how can you talk about chapter two when you look so vibrant and young?" Then the wife's saying, "Why has he got that gray goatee going?" It's an annuity goatee, ma'am; that's what it is. It's very fashionable. I'm setting the trend out here, and yes, my wife, I think she'll cut it off sometime at night when I'm not aware of it. But for now, it does give away the fact that I am getting older, and income flooring is important to me and should be important to you as well.
The Napkin Close
If you remember the really bad sales pitch back in the day when you were sitting at Dean Witter, Paine Webber, Bear Stearns, Lehman Brothers, or one of those companies, I can mention all the ones that are no longer here, and they did the napkin thing. “Well, let's take your age. Let's put that amount percentage-wise in bonds, sir, and then put the rest in equity so you can get growth.” It's the old napkin close, as I used to call it back in the day. By the way, I used to work for Dean Witter, Paine Webber, Morgan Stanley and UBS just as a pedigree. No, I did not wear Adidas sweats. I should have. It wouldn't have lasted long, but man, I look good in a suit. But I burned all those when I decided to come out here and be the annuity man. I'm just going to tell you, it's been good.
Let's get back to the topic, and the topic is income flooring. You might say, "Stan, why don't you start a company that's called Income Flooring Incorporated?" Good question. I think Stan The Annuity Man rings better, personally, but as you get older, you need to add more to that. Let's go back to the napkin close really quick. We could do that. We could say that you could increase with age the income flooring, the guaranteed income coming in, but you also have to factor in how much income you need.
What You Want to Do
Many people will say, "Well, we live very frugally in that we don't really need all this stuff, and I'd rather keep it in the market." That's fine. It's all about what you want to do, how you want the money to work, the kind of risk you want to shoulder, and the risk you want to transfer. But one of the sayings I like to say is, "Fly first class, or your kids will." Or "There's no U-Hauls behind hearses. If you see one, send a picture."
I'd rather you spend it. I'd rather you upgrade your lifestyle, upgrade your travel, fly first class, and stay in the Ritz Carlton. You've earned it if you're going to keep increasing the income floor. Why wouldn't you increase the income floor? Because of current interest rates, many people out there, check the time of this blog; they're at a level where people can protect the principal and take the interest off the top. Never touch the principal, never put it at risk, never lose it, and take the interest off the top to create that income floor. You can do it with treasuries and CDs, some AAA bonds, Multi-Year Guarantee Annuities that can then combine with your Social Security if you have a pension, etc.
So, I need you to think about the income floor; I need you to think about that foundation. I need you to put it in place where it's non-correlated, and if you're buying blue chip legacy stocks for dividends, they don't move much. You know that. That's a good income floor thought. Obviously, we don't do that. I'm Stan The Annuity Man. I focus only on annuities, but there are many ways to get income and create the needed income floor.
Let's talk about inflation really quick. There's not a product out there that solves for inflation, period. You might hear the sales pitch at the bad chicken dinner or an expensive steak dinner seminar. The guy or gal that says, "Hey, I got the one that increases with inflation." No, they don't. Life insurance companies that issue annuities do not give that away, and typically, they lower the payment by 30 to 40% to make up for that increase. It just mathematically doesn't make sense.
What I would tell you to do is create the income floor, and if there's a gap that needs to be filled, think about this good visual. There's a gap in your floor, what are you going to do? You're not just going to leave the gap because you're going to stub your toe, and you're going to be walking over it with your bare feet, and it's going to cut your foot. You don't want that. So, if you have a gap in your income floor, you're going to fill it. How are you going to fill it? You're going to fill it with as little amount of putty or fake wood as you can, analogy.
With annuities, you do the same thing. Let's say you had an income floor that was established five years ago at $4,500 a month, and then five years from now, you need $5,000 a month. You need an additional $500. What do you do? You do a reverse engineer quote. You can do that at The Annuity Man, solving for the $500 amount. That's how you go about solving for inflation, using annuities and contractual guarantees. You don't try to throw a dart at it. You don't buy a packaged product that might increase or should increase or historically has increased. No, no, no. You keep your powder dry and at the time you need to gap fill that income, you do that to fill in the gap of that income floor. I think the visual works. When we think of wood floors, I come from the deep south; all the wood flooring and all that stuff that my grandmother had, Boy, you couldn't even build it. That would be expensive.
Think about that. Think about the wood floor; if you're young out there, you will start putting in a slat of income at a time. The older you are, the more you start adding more slats every single year to make sure that that income's going to hit your bank account regardless of what happens in the world. Regardless of what party's in charge or what really old person wins the presidency. Regardless of that, can we have somebody a little younger? I don't know. That's just me. I'm not political. I don't watch that stuff, but it does seem odd.
I'll say this. When I'm that octogenarian age, if I get to the octogenarian age, you don't want to watch my videos. Well, maybe you do. It's going to be fun, but hopefully, by then, and let's say that happens, your income floor is in place because I'm going to tell you this right now. Me and the lovely Christine of 35 years, that's put up with The Annuity Man, and I wanted her to change her last name to The Annuity Man, but she wouldn't from a marketing standpoint. I thought that was a great idea. She shot it down. We're putting in the income floor. We're putting in the income floor right now one slat at a time, and we look at it every single year. "Okay, this is the income floor. What are we going to need in the future? This is the income."
We start planning because you can build the income floor for right now, or you can build the income floor for the future because it all comes down to two questions. What do you want the money to contractually do? In this case, I want to build an income floor. When do you want those contractual guarantees to start? You might say, I need to build the income floor now or build it over time and ladder in those guarantees. Either way, you can run those quotes at The Annuity Man. Schedule a call with us. You might even get me. Wouldn't that be a hoot? But either way, we're going to listen to you, ears in proportion, two to one, ears to mouth. We're going to listen to you, and we're going to put together a customized strategy and plan that suits you building that income floor.
It's not going to be all annuities. The annuity part, we can do and do better than anyone on the planet, but there are going to be other things that you're going to add to that income floor to get you to that monthly total so that you can go live your life because you've earned it. You won the game. Don't play anymore. The band's left. The cheerleaders have left. Stop standing in the middle of the thing, dribbling, and playing the markets. You don't have to do that. Build the income floor and go live your life.
My name is Stan The Annuity Man. I am America's annuity agent. I'm so glad you joined me. Thank you so much, and I'll see you next time.
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