Pension Income Streams
So, you're interested in pension income streams. Aren't we all? Wouldn't you like to have a pension income stream? Unfortunately, most employers at this point don't provide that. They provide some type of 401(k) or 403(b) or something that allows you to grow money. But at the end of the day, when you get to the pre-retirement stage and see the finish line of all of this hard work, you need to understand how to create that pension income stream, right? That's what we're going to cover today.
We're talking about pension income, which is probably what you're looking to do, right? We all are. For me personally, I'm going to work for a little bit more down the road as Stan The Annuity Man, hopefully, but I'm planning for income in the future. I have income annuities that are going to start at future dates and joint life with my spouse.
Reverse Engineer Quotes
I had a call the other day. A guy wanted the same amount of income his Social Security provided. And I forgot what it was. Let's say it was $2,500, in that range per month. He said, "I would like to have the same amount of lifetime income stream I'm getting with Social Security." I said, "Fine. That's an easy quote." That's called a reverse engineer quote. We can do that for you all day long using our proprietary annuity calculators. And we'll shop all carriers. We'll put in the $2,500 per month amount and then find out how much money it would take to create and guarantee that monthly amount. So, you're reverse engineering the product.
There are two ways to get a pension-type quote. Number one is, "Here's the lump sum, Stan. How much will it create?" Or, in this gentleman's situation, "Hey Stan, here's the amount I want to create monthly. How much money would it take to create that guarantee?" We can do it either way. I mean, it's a commodity quote. We quote all carriers. I asked him a couple of questions: "Do you want it joint life with a spouse, or do you want it single life?" And I explained that single life would be a higher payout than joint life because the annuity companies only cover one life, not two.
I also had to explain that Social Security is the best inflation and annuity on the planet from a pension annuity-type standpoint because those increases to the payment are political. They're not based on life expectancy or anything like that. Our friends in DC are raising it just to attract the voters. Because people that are getting Social Security represent a lot of the voters.
Cost of Living Adjustment
Now, I had to tell him that to add a COLA, Cost of Living Adjustment increase to an annuity, would significantly lower that payout. I advised him to just solve for that raw number, what it is this year. I mean, that was that $2,500 amount. And so that's what we did. So, an interesting call. He just wanted to replicate Social Security. The good news is he was already putting Social Security in his head underneath the annuity category, which it is.
Pension income streams. Let's talk more in-depth about the structuring of it. Number one, ask yourself two questions. What do you want the money to contractually do, and when do you want those contractual guarantees to start? With annuities, you can have income start as soon as 30 days from when the policy is issued, as far out as 40 years. So, you got to say, wait a minute, Stan, who would defer for 40 years? I would. I have two daughters. They're in their 20s. They're wondering about ambiguity, wonderful girls, and who knows, they might be rich as heck, but I'm not going to take my chances. What I did is I bought Deferred Income Annuities for both of them and going to have income start when they turn 50. In that way, even though I'm going to be in annuity heaven, right? Nod your head. I'm going to know that they're going to get a lifetime income stream.
For your wondering, ambiguity, children who we all love, that's a way to use income later guarantees with annuities. But for your situation, you tell us when you want the income to start. Remember that it's primarily based on your life expectancy at the time you start the payments, interest rates play a secondary role, and that income stream that you'll be receiving is a combination of return of principal plus interest. And we can structure that lifetime income stream so that when your Learjet hits the mountain, and you die, whatever money's left in the account would go 100% to your beneficiaries. We can structure it, so the evil annuity company doesn't keep a penny even though they're on the hook to pay you for the rest of your life.
Apples to Apples Comparison
Just an FYI, and I get tons of calls like this. We'd be more than happy to help you if this is your situation as well. If you're at a company that's offering a pension, they're offering a payout when you retire, and you want to make sure that's the highest contractual guaranteed payout out there, send us that quote, and then we'll run that quote apples to apples comparison with all annuity companies to make sure that your company is providing the highest contractual guarantee for your specific situation. Spoiler alert, most of the time, and when I say most, I mean like 90% of the time or more that we found that the companies, your company, whether you like them or you love them, or you hate them, they're going to provide the highest contractual guarantee when you compare that apples to apples quote with all of the other annuity carriers.
So, you're doing a pension quote and comparing it with all the other pension annuity quotes, and you'll say, "Why would that be?" Think logically. Your company wants to hold onto the money and then dole it back to you over your life expectancy. In other words, they don't want to come up with a cash lump sum to give you so that you can give to Stan The Annuity Man.
That's okay for us to show you those contractual guarantees; which one's the highest. We always do that to ensure you own an annuity for what it will do, not what it might do. And the will do is the highest contractual guarantee available. If that's not with Stan The Annuity Man, that's okay. Part of our job is to make sure that you're getting the highest contractual guarantee.
Is A Pension The Same As An Annuity?
Another great video I did is on the question, Is A Pension The Same As An Annuity? I think we covered that here as well. Still, I go a little bit more in depth in that one to talk about Single Premium Immediate Annuities and Deferred Income Annuities. I dig deeper so that, in correlation with this video, we'll fill in the gaps for anything that I missed in this one because I'm riffing. I'm bringing this off in Stan The Annuity Man noggin with all this annuity information just overflowing.
Remember, you can always get a quote using our annuity calculators. I also have a podcast called The Annuity Man Podcast. See the correlation of all the brands, The Annuity Man? And to pile on just a little bit more, we offer free books from The Annuity Man. Everything, no cost, no obligation.
And with that, since you're going to do all of that, get the books, get the quote, listen to the podcast, do one more thing, and subscribe to our YouTube video channel. I do like having a bunch of subscribers and people who want to educate themselves on annuities because you need to make your annuity buying decision on your terms and timeframe. And with that, 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.