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Is a Pension the Same as an Annuity?

Stan Haithcock
September 7, 2023
Is a Pension the Same as an Annuity?

Stan The Annuity Man here excited to answer this question. Is a pension the same as an annuity? Yeah, pretty much because what they both do is provide a lifetime income stream that you cannot outlive. So, for all the haters out there that hate annuities, "I hate annuities, all annuities stink, all annuities," whatever. Then you need to also say, "I hate my pension. That comes in every single month, and I'm never going to outlive it because I hate annuities because I say I hate annuities, then I'll have to say I hate all pensions." See how stupid that sounds? Annuities and pensions are the same thing. So, the question is, do you need an annuity? If you already have a pension, congratulations; you're among the few. But if you have a pension, do you need an additional income stream to complement that? Or if you're one of the many who don't have a pension, do you need an annuity to create your own personal pension plan? Because that's what an annuity will do. So today, in this thrilling blog, I will cover everything you need to know about annuities. For all the stuff I miss, I will tell you how to download six annuity owner's manuals that I have laboriously written for free. There's no obligation or cost because I'm such a nice guy. So, hang in there with me. Let's dig in.


All right, so pension and annuity. If you're looking at your pension, let's say you're getting a pension, you need to make sure that the company backing up those guaranteed payments can pay them, and Claims-Paying Ability, the same thing applies to the annuity world. You need to make sure that you're putting your money with a company that can pay that guarantee for the rest of your life. With that being said, it's important to understand that you can customize the structuring of the contract. In other words, you can say, "I just want it for my life, or I want it for my life and a spouse, partner life. I want to make sure that all the money goes to the beneficiaries if I die or if both of us die." You just have to answer two questions. What do I want the money to contractually do? When do I want those contractual guarantees to happen?

In a pension world, you either want the income to start right now or you want it to start later. Depending on how you answer those questions, we will quote all carriers for the best contractual guarantees for your specific situation. And you can use your IRA money. You can use your non-IRA money. You can use Roth IRA money. You can transfer your 401K to a rollover IRA-type situation, and then we can use the IRA money to quote there. So, you have to be very specific about what you want to achieve. We can either quote a lump sum, or you can solve for a specific monthly income amount that you want to see hit your bank account every single month. Why is all this important?

Like a Plane Ticket

You went a hundred miles an hour, Stan, on the quoting, structuring, and all that stuff. Understand that quoting annuities is like buying a plane ticket. You quote all carriers, and it's like a gallon of milk. The quotes expire every seven to 10 days, and you have to ensure that if you are not moving forward with the paperwork, then we have to re-quote it, and that's fine. The reason that the quoting and the structuring are important is because you're planning for your family. This is important. You're making sure that when your Learjet hits the mountain, things are set up for your family.

Client Example

Now, great story. A guy called me the other day, and he said, "I want to make sure that my wife and I have a lifetime income stream, and we needed to start in about 30 to 60 days." So that's an Immediate Annuity quote. Fine. So, the question I asked him after that, I said, "Okay, do you want to make sure the money, let's just say you pass, the money continues uninterrupted and unchanged for your wife's life, and then she passes away, and there's money still left in the account. What do you want that money to do? Do you want it to go poof, and you guys have the highest payout, which is a joint life-only structure?" And he said, "No, as much as my kids have driven me crazy," and I went uh-huh, "Got that." "I want them to get the money, but Stan, I don't want them to get a lump sum." And my joke to people all the time is that your kids will show up at your funeral in a Ferrari anyway, so have them be making payments on it, right?

Joint Life With Installment Refund

So, what we did is we set it up joint life with installment refund. Now, what does that mean in English, Stan? That means it's a joint life income stream that neither of you can outlive, but when the second person dies, whatever's left in the account is paid in payment form, that same payment amount to the listed beneficiaries. And you can list as many beneficiaries as you want. If you have two kids, then each of them is going to get half of that payment. But it's a pretty good legacy as well.

Understand, though, that if you outlive your life expectancy, there might not be any money at all in the account, even though the annuity company's on the hook to pay you. So tough luck to the kids. But what you're trying to do in a joint life with installment refund setting is make sure that all that hard-earned money that you work for is going to be paid to either you, your wife, or the family, and the annuity company's on the hook to pay regardless of how long you live.

Life Expectancy

It's important to understand that. Annuity payments for life, lifetime income payments are based on your life expectancy, if it's just you or life expectancies, if it's joint with a spouse or partner at the time you take the payment. Obviously, the older you are, the higher the payment. Think of your Social Security. You wait till age whatever, 70, and your payment's higher. Same thing. Same principle with annuity payments. The longer you wait, the older you are, the higher the payments.

It's really that simple. If you want to dig deeper into Single Premium Immediate Annuities, I did a really good video on that because a pension is a Single Premium Immediate Annuity. Now, you can structure it any way you want. You can turn it into a Deferred Income Annuity and do income later, but that's your call. So, let's talk about how you get the books.

First of all, I need you to do one thing: subscribe to my YouTube channel. And you say, "Why Stan, are you so adamant about that?" It's because I'm putting out a new video every day. I'm going to set the world record. My goal is the Guinness Book of World Records; who has the most YouTube videos. Now, we have a way to go. I know for a fact that crazy Stan The Annuity Man has done one or is going to do one, and if he hasn't done one, you could contact us , and I'll do one.

To fill in the gaps of all the stuff that I missed and forgot to say today, you can download my annuity owner's manuals for FREE, which you need to have if you're thinking about any annuity purchase because I go through the limitations and the benefits and all that stuff. So, I appreciate you joining me. 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.

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