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Keep Your Powder Dry Annuity Income Planning: Shootin' It Straight With Stan

Stan Haithcock
April 24, 2024
Keep Your Powder Dry Annuity Income Planning: 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 a very good one, as usual. It's called Keep Your Powder Dry Annuity Income Planning. One of the biggest fallacies in the annuity land is people getting different information on the internet or from their advisors who know nothing about annuities or financial journalists who, in most cases, know nothing about them. They'll say, "Well, you don't buy an annuity because that's irrevocable. Once you made that decision, it's over." They're primarily talking about Single Premium Immediate Annuities, which are pensions. It was put on the planet in Roman times as a reward for the dutiful Roman soldiers and their families. It's a pension payment. That's where the word annuity comes from, annua in Latin means payment. But you don't have to do that. You don't have to rip the knob off of a water faucet for a lifetime income.

‌I always say, "There are ways to keep your powder dry." What a lot of people say, "Well, you know what, Stan, I don't really care. I just want to lock and load, and let's get that lifetime income stream coming, just like Social Security, a pension, etc." I'm good with that. That's fine. Depending on the type you choose, Lifetime income with annuities is a guaranteed income stream for as long as you're breathing. Whether it's joint life with a spouse or significant other, as long as one of you is breathing, even if you're on a ventilator.

‌Hold, Hold, Hold

‌But many people do not want to tie up the money until they have to. Think of the Mel Gibson movie. If you have never seen Braveheart, watch Braveheart. If you have, then you know what I'm getting ready to say. There's a scene in the movie where all these ragtag people that Mel Gibson is leading have just a spear. They're against the British, and the British are coming toward them, and Mel Gibson yells, "Hold, hold, hold, hold." And then right when they get there, they stab everybody, kill everybody, and it's fantastic and glorious and gory. But what I want you to think about is your lifetime income guarantees as well. Do you want to hold until that very last second to buy lifetime income? You can do that.


‌Let me give you a couple of examples. Let's say that you're doing well in the markets. You have a good money manager, or you're managing it, and it's doing well. There's no reason to lock up lifetime income stream guarantees right now, regardless of the sales pitch you hear, because the primary pricing mechanism is your life expectancy or life expectancies, so the older you are, the higher the payment. So, you can hold, hold, hold, hold, and then when you want to transfer that risk for lifetime income, you can do that at that specific time. There are a lot of players out there that are good in the markets, and you really don't want to top your money and make it irrevocable, they'll ladder in that lifetime income, say by $100,000 every year for five or six or seven years, but you do not have to do that.

‌Another way to keep your powder dry for lifetime income is a lot of you out there who run the money and run the investments; you have spouses who don't care. I'm one of those. The lovely Christine of 35, getting ready to be 36 years, could care less. She only wants to see the kids, grandkids, and granddogs; that's all she can do, as well as grand kitties. We're very happy about that. That's all she cares about. If that's you, you don't have to set something up for your spouse now. What you can do is go to your estate planning lawyer, and please use the lawyer, please, and set up something in the trust that says when you die, an Immediate Annuity is purchased for your spouse to fill in that lifetime income gap for them. That's keeping your powder dry. That's not locking anything up now. It means that the triggering effect of purchasing the lifetime income stream annuity is when you die. Think about that.

‌It makes sense, especially for all you "A" personalities who are hitting on all cylinders and managing the money. Knowing that annuities are a good idea, but maybe not right now for you, you can do that via a trust, so that's something purchased for your spouse. Now, you've got to make sure that they shop all carriers for the highest contractual guarantee. Obviously, we would love for you to use The Annuity Man. I might not be here, I might be dead, but there'll be somebody running it, I can guarantee you. The point is that you have to shop all carriers for the highest contractual guarantee because annuity lifetime income products are commodity-type products. Don't fall for, "This is the best one, sir." It's crap. You have to shop all carriers. It's like shopping for a plane ticket.


‌The other way to do keeping your powder dry income planning is if you say, "You know what Stan, I don't want to do lifetime income, but I do need some income." I would say consider a MYGA, a Multi-Year Guaranteed Annuity, which is the annuity industry version of a CD. And you don't have to touch the principal, and you can peel off the interest with some, not all MYGAs, off that, but a lot do, peel off the interest, never touch the principal, and then at the end of the duration that you've chosen, you still have all your principal intact. You've just taken interest off the top, that's keeping your powder dry.

‌Income Riders

‌Another way to keep your powder dry is with Income Riders. These are, unfortunately, mis-sold in the industry, but if you go to The Annuity Man, we have the only Income Rider calculator currently that's worth a crap. It quotes pretty much all carriers, and you're quoting for the highest contractual guarantee in the future. When I ask the two questions, what do you want the money to contractually do, and when do you want those contractual guarantees to start? If you say, "I need lifetime income, but I want it to start in the future. I'm a planner, Stan. I'm a box checker. I need it to start 5 years, 7 years, 4 years, 8 years, 10 years, whatever down the road," Income Riders are keep your powder dry income planning because the number, the contractually guaranteed number that you'll see on the quote for 7 years or 10 years or whatever, that deferral time period contractual. That's going to happen.

‌Income Riders are typically attached to an Indexed Annuity or Fixed Index Annuity, and the reason we choose that is because, historically, they outperform Variable Annuities with Income Riders. So, Fixed Index Annuities with Income Riders. We don't look at the index side of the caps and spreads and the participation rate nonsense. We look at the Income Rider contractual guarantee. The reason is to keep your powder dry.

‌Let's say, as an example, you bought an Income Rider attached to an Index Annuity with the goal being that you're going to turn the income stream on in 10 years. So, let's say that happens. You buy it, and then 10 years from now, we're in touch with you and say, "Hey, player, you still want to turn the income from that Income Rider." Remember, the guarantee. It's contractual. It's a separate calculation from the accumulation value of that index side. You can say then, "No, I do not want to do that. Send me my money back." I kept my powder dry. "I don't need that income anymore. Send me that accumulation value."

‌Now, spoiler alert, that income value, that monopoly money, and that phantom account money calculate that first-lifetime income payment, but that's not something you can cash in. You can cash in the accumulation value, but that's okay. It's a keep-your-powder-dry strategy, meaning you can go into this with a plan for future income needs. In the future, you know exactly to the penny what that will be. Still, suppose something changes between now and then. In that case, you can get all your money back because the underlying value of walkaway money is with that Index Annuity, which is a Fixed Annuity. So, that's a good way.

‌I guess to sum it all up, in only Stan The Annuity Man speak, I was trying to think of a fun way to put it, but let's not be fun, let's be brutally factual. When you look at income, lifetime income, yes, you can do a rip the knob off the water faucet, irrevocable Single Premium Immediate Annuity, Deferred Income Annuity, Qualified Longevity Annuity Contract. Those are called annuitized strategies. But if you say, "You know what? I'm not sure I want to do that. I'm not sure I want to commit to that. I'd like to have my cake, a little bite of that cake, and eat it too; I want the guarantees. I want to know to the penny what those are, but I want to be able to pivot out and keep my powder dry," then there are ways to do that.

‌Visit The Annuity Man and schedule a call with us. You're going to get somebody really smart who talks, speaks, and acts like me. Tell them your situation and think about do you want to lock and load and rip the knob off the water faucet and have the income coming and never worry about it again, and there's nothing wrong with that, or do you want to keep your powder dry or do you want to do a combination of the two?

‌My name is Stan The Annuity Man, and that's Shooting It Straight With Stan. I'll 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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