Retirement Calculator: Is Your 401(K) Enough?

Hi there, Stan The Annuity Man at the annuity lab. It's the annuity lab we're in today. You thought you were at the Stan The Annuity Man website? No, it's the annuity lab. I have on my coat, my Annuity Man shirt, a giant calculator, and my safety goggles in case things fly. But the reason I have all of this and to get your attention is that we need to talk about your 401k. Is that enough for you to retire on? How do we know? How do we go about figuring that out? First of all, visit The Annuity Man, and get all my books. You can download them for free. You can set a time to talk with us, and you can use our proprietary annuity calculators, but we're getting ready to go deep into the lab. I would put on my goggles, but it would mess up my makeup. We don't want to do that because this is a face for radio, as we all know, but annuity calculators, lab coats, annuity lab. Let's talk about your 401k.

‌Pensions

‌I'm going to keep the safety goggles on just in case things start flying and things get crazy, and you always want to protect your eyes, but let's talk about your 401k. 401k has replaced pensions. Most companies don't have pensions, and private companies don't have pensions anymore. Over 90% of companies do not offer a pension. They offer a 401k and what's a 401k? It has mutual funds inside that. Hopefully, it grows when you're working, and the employer is putting money in and matching and all that stuff. But at the end of the time period that you work, when you retire, when they don't give you the gold watch, and you say, I'm out of here. I will take my 401k, roll it over to an IRA, and try converting it to income.

‌A Stadium of Retirees

‌Then the question is, do you have enough money in your 401k to retire? Over 10,000 people in the United States reach retirement age every single day. I want you to think about that for a second. 10,000 people every day. Think of a football stadium that seats 10,000. That football stadium retires everyday, and they have to figure out what they will do with that 401k rollover money. That's the reason you have Fidelity and Vanguard and all those companies like that, which are so huge, but a lot of people are looking to annuities as a possibility for a transfer of risk lifetime income. That's a good thing because annuities are the only product on the planet that provides a lifetime income stream you can never outlive. That's the reason it's called lifetime. They were developed in the Roman times as a pension payment for the dutiful Roman soldiers and their families.

‌That's where annuities come from, and that's what's been sold in this country for the last 200 years. And by the way, you already own an annuity. It's called Social Security, and it's the best inflation annuity on the planet because those increases are political. They're not actuarial, so that's a good thing as well. But when you have your 401k and the lump sum, you can go to our proprietary annuity calculators and start punching in numbers and looking at quotes. The bottom line is you don't know what you don't know. With annuities, you can structure these things in many different ways. There are 30 to 40 ways to structure a lifetime income stream payment: life only, joint life only, life with 10-year life with 20-year life with cash refund, and life with installment refund. That's the reason you need to talk to me. I need to make sure that we have your best interest at hand and you're getting the quotes that you need to get from the product that provides the highest contractual guarantee.

‌The 2 Questions

‌You need to ask only two questions to determine if you need an annuity. Number one is what do you want the money to contractually do? And number two is when do you want those contractual guarantees to start? From those two answers, we can match you up with the right annuity type that will provide the highest contractual guarantee for your specific situation, and we'll quote all carriers.

‌As Little Money as Possible

‌Now, getting back to the 401k, let's say you have half a million dollars in your 401k upon retirement, and you call me up and say, you know what? I want to set it up life only or joint life with my spouse or partner, and we want the income to start six months from now or a month from now or a year from now. We can run those quotes to see what that $500,000 would generate from a lifetime income stream, but I don't like to see people put all their eggs in one basket, and annuities are not for everybody.

I mean, that's an understatement. They have to fit and be allocated correctly and in proportion. What I would instead you do is say, me and the wife, me and the spouse, me and the partner need $1,225 a month. We've looked at Social Security, we've looked at all of the other income-producing items that we have, and this is the gap that we need to fill. Then, I can do a reverse-engineered quote to solve for that amount and use as little money as possible. I'm the only guy on the planet in the annuity business who would look at a lump sum of money and try to use as little of it as possible to solve for that contractual guarantee. Most people in the annuity industry are great people, but some people want to take all your money and put it in an annuity.

‌That's not good. The industry does not like that. You shouldn't have all your eggs in one basket. In fact, the annuity industry encourages through the application process that you have at most 50% of your investible assets in an annuity of any type, so you can only go some in. That's good. That's protecting you as the consumer. They don't want the agent to see the little old lady in St. Augustine, Florida, and put all her money into an annuity. That's not a good thing. So, that's kind of the process of if you have a 401k to determine if it's enough for you to live off of if you don't need the income. Then it comes down to what you want the money to do. If you want to protect the principal, there are certainly annuity types and non-annuity investments that protect the principal fully, like the Multi-Year Guarantee Annuity, which is the annuity industry version of a CD that protects the principal, and you get an interest rate payment. It really comes down to your customized situation.

‌Now or Later

‌For those of you out there whose mom used to drop you off at the store and used to go in the candy section, she'd say, go get some candy, Stan. I'd go and get these now and laters, which were these taffy things. It's surprising I have any teeth left, but I used to love the grape now and later, but now I've transitioned that into now and later for annuities. What does now and later mean? Now and later for income. You either need income right now or later and with your 401k or whatever investible assets you're looking at, I'm asking you to remember 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, hey, we need income right now, then that's an Immediate Annuity, a Single Premium Immediate Annuity, and we'll quote all carriers. If it's income later, say 2, 3, 4, or 10 years down the road, then we will quote Income Riders, Deferred Income Annuities, and possibly a Qualified Longevity Annuity Contract. So, you know down to the penny what that income stream will be when you start it in the future. That's a really good planning tool. But the bottom line with all of this is a one-on-one conversation, a consultative approach to say, what's in your best interest for you, your family, and your beneficiaries? How do you want to structure it from a lifestyle and legacy standpoint? In other words, annuities are customizable.

‌It's Your Life

‌I got a call the other day from a good client, and he said, "Well, this guy pitched me this product, and he said, this product does this, this, this and this, and this product does this, this, this, and this." And my answer is, who cares? I mean, you're trying to fit that person's product into your life. It's the reverse. Fit your life into the product. Let me do that again. If someone's pitching you a product, they're trying to fit that product into your life, and you're trying to figure out how it fits in your life. It's the reverse. Your life has to fit in the product, and it might not. Getting back to the questions, what do you want the money to contractually do, and when do you want those contractual guarantees to start? That's the starting point for determining whether you need an annuity. Be careful out there. There's a lot of what I call agenda selling where an agent is pushing one product, they must love it, they've only learned one, or if they sell enough of it, they go on a trip with their girlfriend to Bora Bora, whatever.

‌Don't just listen to one product. Annuities are commodities, period. People always call me, "Hey Stan, what's the best annuity that you have?" I don't know. I don't even know if you need an annuity, and even if you do need an annuity, I need to know what type, and then I'm going to quote all carriers. The best annuity for you is the one that provides the highest contractual guarantee for your specific situations and goals, period.

‌So, with that, thank you for joining me today, and I'll see you on the following Stan The Annuity Man blog.

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.