Live off the Interest: Shootin' It Straight With Stan
Welcome to another Shooting It Straight With Stan blog. I am Stan The Annuity Man, America's annuity agent, licensed in all 50 states, every single one of them. I do that all the time, and then someone on a YouTube video the other day commented, "Are you licensed in Kentucky?" Yes, I'm licensed in Kentucky, but I'm revved up today because the topic is "live off the interest until you can't." What am I talking about, Stan The Annuity Man? I'm talking about current interest rates. Look at the date of this beautiful blog. And when I say live off the interest until you can't at this time of this blog, there are some current interest rates out there that you can take the interest and not touch the principal.
Most people go; I never bought an annuity, Stan, because the insurance company keeps your money when I die. That's one type. It's called a Lifetime Income Annuity, and that's one of 40 ways to structure it. Most of the time, we structure it so that 100% of the money goes to you or your family. Not the evil annuity company. But what I'm talking about are MYGA's CDs, treasuries, and money markets. The four places where you can get full principal protection, not pay any ongoing fees, and get a guaranteed interest rate from those four products. Again, money markets, CDs, treasuries, and Multi-Year Guarantee Annuities or Fixed-Rate Annuities. One of those four I sell is MYGA's, and that's the annuity industry version of a CD. At the time of the blog, there are some money markets that are 4%, and some CDs at five. There are some MYGA's at five and a half, and many of you out there have enough funds that whatever interest you can take off those products is sufficient, and you never have to touch the principal. So my question is, why wouldn't we do that?
I get calls, and you can also go and schedule a call with us. I'm the leader, of course, because I own the company, and there is a lottery pick that you might get me four or five times a day. I will pick up the phone, call the people that are scheduled, and I always go, "Hey! Stan The Annuity Man himself, you might have won the lottery or lost it. I guess we'll find out after the call because I am going to shoot it straight and tell you the truth, period". This is why people schedule the call with me. But most of the time, people are looking for income, and they think they will have to tie their money up with a Single Premium Immediate Annuity, a Deferred Income Annuity, a Qualified Longevity Annuity Contract, or an Income Rider. Those are the four primary lifetime income products in the annuity world. And I'm like, yeah, we can do that. That's turnkey. That's lock and load. That's if you're not hitting on all cylinders, losing some cognitive abilities, which we all will eventually. Those are great products because the income will hit; it's turnkey. You've ripped the knob off of the water faucet. But what if we don't have to do that? It's simple math because I always say, "Okay, tell me your total investible assets." Of course, you can't put more than 50% in annuities. I can push it to 60% if I use a couple of bullets with the carriers. But the annuity industry really does not want you to put more than 50% of your investible, not your card, not your guitar, not your house assets, investible assets in annuities. So, let's say you can get an average of 5% on everything, CDs, MYGA's, treasuries, or you can even say 4% to be very conservative. Of course, we can get that. Multiply that by the investible asset amount, not touching the principal. Will that be sufficient? If you have a million dollars, and you're getting a 5% yield, you're getting $50,000 a year and never touching the million.
I had a person on the line the other day. They were damned and determined, and as my grandmother used to say, "He's just damned and determined is what he is, damned and determined." I'm like, stop cussing grandma. You're driving me crazy. You're influencing me poorly. I don't want to cuss. But he was damned and determined to buy an Immediate Annuity or a Deferred Income Annuity because that's what he thought he needed. So, we went through the whole process and I'm like, okay, tell me about the assets and he needed X, Y, Z for X amount per month in income. And I said we don't have to tie the money up and buy an irrevocable. What does that mean? Can't get it. Can't touch it. That's what MC Hammer said, can't touch this, can't touch this. Can't touch the principal, can't touch it. You'll never forget that, will you? SPIA's, DIA's, QLAC's, those are annuitization products. Ripping the knob off a water faucet and the income's coming. We will structure it so that a hundred percent of the money goes to you or your family. But what if you don't have to do that? What if you can achieve that income amount and goal by taking interest from CDs, the money markets, treasuries, or Multi-Year Guarantee Annuities, Fixed-Rated annuities, and annuity CDs. What if you can do that? Why wouldn't you do that? Why wouldn't you keep the powder dry? Why wouldn't you control the asset? There's no good answer. Why wouldn't you? You should.
Now someone steps in and goes, "well, Stan The Annuity Man is kind of a simpleton, played college basketball, and didn't get an advanced degree and all that stuff. You should get a buffer annuity, an Index Annuity, or a Variable Annuity." Whoa, whoa. If you want to buy your agent a car, buy them a car. We're talking guarantees. Guarantee, as they say in Louisiana, guarantee. That's what we're looking at. There's no guaranteed return with Index Annuities. There's no guaranteed return with a Variable Annuity. There's no guaranteed return on buffer annuities. I'm not putting those down, but we're talking about guarantees, living off the interest, peeling off the interest, and taking the interest from the top. Why wouldn't you do that? We're at current interest rate levels where we can do that and you should do that. This question happens all the time. I'm on the phone, and we are solving the problem. The guy goes, "Oh, I love that." And the wife's hitting him in the back of the head. Of course, you like it because that's what I like. I like protecting the principal, and I like interest. And here's what they'll say. "Stan, that sounds pretty good. I really appreciate the honesty and the straightforward nature of your conversations." I'm like, thank you. "But what happens when interest rates go back down? With 31 trillion in debt, interest rates got to go back down. They just got to go back down. It's like raising the interest rate on your mortgage. No one does that long-term." You're right. I do not disagree with you. Let's say you buy interest rates, which are high right now, and lock them in. Three years, five years, seven years, 10 years, whatever.
Many people are locking in 10 year MYGA rates at about 5.4 or 5.5%. Why? Good question. Because they know this is a moment in time. And let me tell you something. If you lock in a 10-year rate at about 5.4 or 5.5%, and you want to call me six years from now, complain, moan, and call me names, I'll take the call. I'll take the call player; bring it because I'm going to tell you that you won't be disappointed. You're going to be mad that you didn't put more in. Of course, I'll remind you, but you can't. You can only put up to 50% of your investible assets in.
Going back to the question, everyone asks, "Hey, they're going to lower the rate, Stan. What are we going to do with that, Stanley? What will we do at that point in time? We'll figure it out mathematically. If we can still live off interest rates with CDs, MYGA's, treasuries, and money markets, we can still live off the interest, not touch the principal, and keep the powder dry. Now let's say we can't. Let's say mathematically we can't. At that point in time, we will then visit Immediate Annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, and Income Riders. At that point in time, we'll look for contractual guaranteed products for lifetime income because they're going to provide a higher payback of your money. After all, part of that lifetime income stream with Income Riders, QLACs, DIAs, and SPIAs is a combination of return of principal plus interest. So, if we have to do that to hit the bogey, to hit that monthly nut that you've got to hit financially, then we'll do an Immediate Annuity. But not until then, not until mathematically, we've been proven we can't do it with interest. Not until the cards have been laid out in front of us, and there's nothing we can do, and we have to buy an Immediate Annuity. Up until then, up until that point, and I don't know when it's going to happen, and you don't know when it's going to happen, and no one on CNBC knows when it's going to happen, and Jim Kramer doesn't know when it's going to happen, I can guarantee you that. Nobody knows. Nothing against him. I just have better hair, and I'm taller.
Nobody knows at all what's going to happen. But if they force, they meaning the math, they meaning the rates, they meaning the economic environment that we have with contractual guarantees, then and only then will we look at Immediate Annuities. Now, if you come back and say to me, Stan, I really want an Immediate Annuity or Deferred Income Annuity because I want it turnkey, I don't want to worry about it. I don't want to manage the MYGAs with you and then, at that point in time, convert it into an Immediate Annuity. I'm okay with that, and that's rational. But if you want to keep the powder dry and live off the interest, why wouldn't you? Again, there's no good answer to that other than, of course, you would. You're going to ride that interest-rate train as long as you can. You're going to ride that peeling off the interest as long as you can. You're going to ride that train of never touching the principal and never paying a fee as long as you can. And if rates go down, then we will pivot.
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.