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Lifetime or Interest Income?: Shootin' It Straight With Stan

Stan Haithcock
June 7, 2023
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Welcome to Shootin' It Straight With Stan. I'm your host, Stan The Annuity Man, America's annuity agent, licensed in all 50 states, and I'm so glad to be here! Man, I love doing these things, and I hope you enjoy them, too. It's therapy for me because I get to vent and rant and edutain while the other annuity people out there are trying to just sell, sell, sell, sell, sell! Some of you might not need an annuity: spoiler alert. Yeah, that's actually true.

Today's topic is lifetime or interest income. I always say, "Well, you can't just say I hate all annuities." You know how people say all that? I had a person call me today, and this is a great story. Great guy, ex-military, it was, "Yes, sir. No, sir," which I felt kind of weird about because he was in his 70s saying, "Yes, sir. No, sir." I mean, but he was like buttoned up. I'm so glad. I mean, thank you so much for all you military people out there that serve. I'm one of those people that, if I find you and you have one of those hats that you're on the ship or something, I'd buy you dinner and all that stuff. But this guy was saying, "Well, you know, Stan..." started the conversation off like this, and there are occasional times when I've had too much coffee that I blast people when they say this. "Well, Stan, I just normally hate all annuities. Now let me tell you a little about me and the Mrs. I'm military, so I have a pension, and then we both have Social Security." I went, "Stop! You already have three annuities." He's like, "Huh?" Yeah, three annuities: two Social Security annuities and a pension annuity. Then he came off the, "I hate all annuities thing." But right now, at the time of this blog, interest rates, because our friends at the FED and the Treasury have raised them to a point where you have two choices regarding annuity income. Yes, my friends, there's more than one type of annuity. There's more than just the Indexed Annuity or Variable Annuity that everyone sells at the Bad Chicken Noodle Seminar.

My gosh, that's like a doctor holding a seminar about health and then prescribing one medication to everyone. You're talking to someone on a lot of medication, blood pressure, and cholesterol; you fill in the blank. I'm on it, and now my doctor's on to me about, in the South, we call it the sugars. Normal people call it diabetes, but in the South, it's like, "Yeah, he's got the sugars, and he's pretty sappy. He's kind of got the sugars." Sugars mean that I start with dessert. Sugars mean that my favorite staple food is a Snickers bar. But that's not good long-term, so I got the sugars, taking medication for the sugars. I'm not stabbing myself yet, but they want me to stab myself if I don't get my stuff together.

Types of Annuities

Lifetime income and interest Income. Everybody knows, and if you don't, you should, that there are four types of lifetime income products:

  • Single Premium Immediate Annuities
  • Deferred Income Annuities
  • Qualified Longevity Annuity Contracts
  • Income Riders attached to Variable and Index Annuities.

Index Annuity Riders typically have a higher contractual guarantee, so those are the ones we use. In addition, I don't sell variables. I only sell fixed. But lifetime income is a transfer of risk pension product that, as long as you're breathing, even if you're on a ventilator, the annuity company's on the hook and contractually obligated to pay you, and if you set it up joint to pay you and your spouse or you and whoever you set it up with, as long as one of you is breathing. If you're the male out there and you're married, I'm betting on your wife because I'm betting on my wife. After all, it's this evil plot to kill off all males, and we'll get to that later.

But lifetime income is a transfer risk primarily priced on your life expectancy when you take the payment. Interest rates play a secondary role. Interest rates play a secondary role. The older you are, the higher the payment.

"No, I don't believe you, Stan. I don't believe you." Tell me, Chester, are your payments higher if you're 70 with social security or 65? Good answer, 70. Why? Good question. You have less life expectancy, which means there are fewer projected payments, which means those payments would be higher. Same with annuity lifetime income. So it's a transfer of risk. Many people do that because they want to fill that gap for the income floor in combination with pensions, Social Security, and all of the other annuities they have.

Lifetime Income History

Lifetime income in the annuity category started in Roman times for the dutiful Roman soldiers and their families who were laying on the line for the empire. I do mean laying it on the line. So they created an annua, does that sound familiar? Mm-hmm, annuity for the dutiable Roman soldiers and their families. Lifetime income payments that's where it started. Then my friend, Moshe Milevsky will tell you that England and Europe were doing tontines, perpetuities, and all kinds of stuff, lifetime income streams. But that's lifetime income. But now, you can have interest income.

Interest Income

Interest income means that you can buy a MYGA, Multi-Year Guarantee Annuity, the annuity industry's version of a CD. Never touch the principal, never pay a fee, and just peel off the interest from the top. So, I'll give you an example. Let's say you bought a five-year or seven-year or 10-year MYGA with a guaranteed interest rate every single year. In some MYGAs, you can take off the interest monthly if you want to. Some are lock and loads, but it just depends on what you're trying to achieve. But my goal is, if you're going to do that interest income using annuities, what will you do? You're going just to peel off the interest, and at the end of that duration, I'm going to call you up and say, "Hey, how are you doing? It's Stan The Annuity Man. You got a MYGA that's coming due, and it's maturing. What do you want to do? What do you want to do with it?" Because you can get the money back, you can have the money sent back to that Fidelity or Schwab or Vanguard IRA, where it came from. Yes, you can use annuities in IRAs. Or, we can roll it to another Multi-Year Guarantee Annuity and keep doing this and peeling off the interest. Or, if you're feeling cognitively challenged and you want to prepare for the future, which you should, then we could shop all Single Premium Immediate Annuities and transfer that MYGA, matured money that you've been taking interest off, and shoot it over to an Immediate Annuity, non-taxable event transfer for lifetime income.

You’re in Control

The bottom line is, MYGA to SPIA, MYGA to MYGA, or MYGA to wherever it came from, you control the asset, but you're peeling off the interest for income. Is it lifetime income? No. Why? Because it's not a lifetime income stream. It's an income stream peeling off the interest you locked in for that duration. Now currently, at the time of this blog and check the date, there are a lot of people that are saying, "Hey, Stan The Annuity Man, America's Annuity Agent, why wouldn't we lock in a 10-year or seven-year or longer than you typically do, Stan The Annuity Man? Because I'm watching you a lot. Why wouldn't we lock those high-interest rates in and peel off the long-term interest?" Good question. And there's a good answer: there's no reason not to. Why wouldn't you?

Now, people say, "Well, I typically don't like locking in that long, Stan," and that's okay, but with 31 trillion in debt, I mean, that's the last stat I looked at. They're cooking that 31 trillion in debt every time they raise interest rates. That's a heavy load on the debt service, as you say. It'd be like me and you having a mortgage and saying, "You know what? It's a good interest rate, but I'm going to raise it." No, we wouldn't do that. Every time they do that, I'm waiting for them to try to find the light at the end of the tunnel to lower it.

So, with annuities, at this point in time, at the time of this blog, and I hope it continues, you have two choices: lifetime income or interest income. Keywords: income, lifetime income, interest income! Income! I love income. You love income! Chapter two of your life is all about income! It's all about money coming in and establishing that income floor that you don't care about. But at this point, I'm telling people, "Hey, yes, we can buy the Immediate Annuity. Yes, we can buy the Deferred Income Annuity. Yes, we can buy the Income Rider." But if there is a way for us to buy the MYGA and peel off the interest that's contractual annually, there are no market attachments, no upfront fee, no bonus, no caps, no spreads, no participation rates, none of that, no back tested. It is a guaranteed interest rate number that you could peel off the interest. Why wouldn't you do that? And, of course, we will.

"But what happens, Stan, if the interest rates go lower? What happens then? Okay, pal. Can you tell me that one? Tell me that one, son." I'll tell you what we'll do; we'll figure it out. As they say in the South, "When you come to the fork in the road, pick it up." Or go left and right. You could pick it up and go left and pick it up and go right, or you could go left or go right and not pick it up. Or you could pick it up, the fork. The point is: you're in control, and that's the key.

So I feel good. Can you tell? I mean, I'm happy. Happy! I don't know why, but I am. I feel good. Even though the doctors tell you, I got sugars. They already got sugars. Sugar's pretty hot. That's sugars. They're high, Stan, the sugars. Whatever, okay. So I don't have a snicker bar, so I don't start with the carrot cake with the sour cream icing. You know what I mean? God, I love that. Seriously. I mean, I really do like carrot cake with sour cream icing. My grandmother used to make something called blackberry jam cake. I swear you would fight someone for it; it was that good. You really would.

What does that have to do with lifetime income and interest income? Everything. Because it's all about lifestyle, and it's all about you living your life. It's all about you getting the income you need to go live your life and stop watching cable and sports and stop watching everything and start watching yourself and your life! That's what it's all about.

So, you can get income from annuities in two ways: lifetime or interest. Your choice, but something that me and you need to talk about. Go and book a call, and set a time with me. You might get me actually on the phone. That does happen, and I hope it happens with me and you. Listen, thank you for reading along. This is Shootin' it Straight with Stan. My name's 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.

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