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Retirement Income Planning Using Annuities

Stan Haithcock
June 10, 2024
Retirement Income Planning Using Annuities

Stan The Annuity Man, America's annuity agent, licensed in all 50 states, and, yes, this is not a drill. We're talking about retirement income planning using annuities.

So, this guy called me the other day, and this is a call I get a lot and see my previous life. And yes, I did have a previous life. No one makes themselves Stan The Annuity Man out of thin air. I was named after Stan Musial, the baseball player for all you old cats out there. My dad was a baseball fan, of course, and because of that, I didn't play baseball because I was a contrarian. But I get this call all the time. The guy says, "Well, my retirement planning advisor, guru, master of the universe, broker, wealth advisor, architect," whatever they call themselves, "says that I do not need an annuity when we do retirement income planning."

I can comment on this because I'm Stan The Annuity Man, America's annuity agent, and I used to work for the large brokerage firms, all the names that you know, and I'm not going to say them because they already do too much advertising. So, I've been on that side of the table where I was doing holistic planning and all of that stuff. The common theme in the hinterlands of retirement planning is this: "Well, with your investments, we can just peel off 4% for income and have the investments grow and offset the 4% that we're taking out." Well, that's pretty good in a raging bull market, Fred, but when the bull goes to bear and things start going down, that 4% rule goes out the window. It's crap. As I always say, you can't polish a turd, but you can roll it in glitter. Think about that for a second.

‌Lifetime Income

‌That's the 4% rule in a down market. You can't polish a turd, but you can roll in glitter, meaning that you're taking 4% out and you're losing money at the same time. It doesn't work. My comment to all these people who call on this specific person is, why wouldn't you have annuities as a portion of what you do? Because it's guaranteed income. It provides that income floor. I'm not sure he's going to listen to me because he's pretty intact with this advisor, but when markets get volatile, people start thinking. My phone starts ringing with all these seeds that I've planted: "Hey, you might need a transfer of risk retirement income annuity as part of your retirement income plan so that you have guaranteed income." Because guess what? You already have a little bit of that in place, and you're saying, "No, I don't, Stan The Annuity Man. There's no way. This isn't a drill, Stan. This is a hammer. No, there's no way to buy an annuity."

You already own one, Chester. It's called Social Security. Everybody in the country owns one; it's the best inflation annuity on the planet. And you go, "No, Stan, I don't own one." I just told you Social Security is an annuity. Why? It pays for life. It's a lifetime income payment, and that's what annuities do. You already have part of your retirement income plan in place. You might need to take a look at how to put annuities inside of that retirement income plan so that it makes sense.

‌The 4% rule is peeling off 4% from your portfolio, which is perfect in a bull market. Never forget this. Don't confuse a bull market with genius, right? And then you'll have the person say, "Well, let's do a pie chart, Fred, and you're 60 years old, so 60% needs to be in equities and 40% needs to be in bonds." The old napkin rule, I've been around a long time, player; I've been doing this for a long time, so I've seen all this stuff. So, what's Stan The Annuity Man's take on this? Nothing's wrong with that. When the markets are going up, nothing's wrong with that if it's managed properly, but let's put in some guarantees. And with 10,000 baby boomers not retiring but reaching retirement age every single day, they're looking for guarantees. And the more volatile the market is, the more guarantees people are looking for.

‌Income Floor

‌Here's what I'm saying: retirement income planning comes down to your income floor. What is that income floor? What is that dollar amount that comes in every month that you need to live, to pay the bills, to live your lifestyle, to set your spouse or partner up so if something happens to you, that monthly amount's coming in, what is your income floor? You need to add all of that up. Let's just say you have Social Security as part of it. You have a pension as part of it. This will probably surprise you, but part of your retirement income you have to factor in is your Required Minimum Distributions because that's a guaranteed amount you have to take out of your IRA when you turn 72 now. So, what's all that amount? What is that total dollar amount?

‌Now, if that's sufficient from a lifetime income stream, then you don't need any type of annuity. But if it's not, or if you want to plan for future income to solve for, say, inflation, then you can do a contractually guaranteed quote that has income either starting right now to fill in that gap or in the future to fill in that gap. So, you need to consider how much risk you are willing to shoulder. Right here, you're shouldering the risk. 100%, you got it right here. Do you want to shoulder risk, or do you want to transfer risk?

‌It's Customizable

‌Not everybody's the same. There are some young cats out there that want to transfer risk. There are some 80-year-old futures traders that don't want to transfer risk. It's customizable. I don't agree with putting people in a pie chart or a specific thing everybody fits. There's not a one-size-fits-all in anything. But what you need to talk about with your spouse, your significant other, your partner, and your family is risk transfer and the income floor with retirement income planning.

‌Now or Later

‌Retirement income planning using annuities comes down to two things. You either need income now or income later. "Wait a minute, wasn't that like a candy in the store you could get?" Yeah, there were Now and Laters. Do you remember those? They were like taffy. Our parents used to let us eat it, which is crazy. I mean, I would never let my kids eat that. They probably do anyway. But income now, income later, income now means income will start between 30 days in a year.

‌Say, "Stan, I need income to start immediately." Or income later, which is 13 months up to 40 years. And you're saying, "Hold on, wait a minute. What in the heck are you talking about with 40 years? Who in the heck would buy a 40-year deferral?" Me. This is not a drill. It's a hammer. My two daughters, in their 20s, might never make a living. I'm just going to guess they're not going to make a lot of money because one's a dancer, a writer, a kind of artist thing, whatever. I bought them an income later strategy, a Deferred Income Annuity with income starting in 40 years. Why? Because I'll be long gone. I'll be in annuity heaven if there's such a place. There probably isn't, but let's just say there is. I'm there. They're going to be getting a lifetime income stream that's called handcuffing your beneficiaries, by the way.

‌I digress, but that's a good story. You might have those wondering, ambiguous children as well. I love them, though. So, income now, income later. Income now is a Single Premium Immediate Annuity. You can get quotes for that if you visit The Annuity Man. It's the purest form of annuity. The old one from the Roman times, pure transfer of risk. What's happening in the hinterlands of annuity sales is that you have people trying to sell Variable Annuities and Indexed Annuities, FIAs as income now products. Total crap. And the reason I tell you that is this is going to provide the highest contractual guaranteed income 99% of the time, I would say 100, but someone would probably pull something out of midair and say, "No, at this 1%." 99%. So, stay right there.

‌Three Products

‌It's a very simple product. There are no annual fees, there are no market attachments. It's very easy to understand. Now, income later comes down to really three products. Deferred Income Annuities, Qualified Longevity Annuity Contracts, a Deferred Income Annuity used inside your IRA, and what's called Income Riders. All of these can be quoted in this timeframe, deferred for as little as 13 months up to 40 years. And we'll quote them all, depending on the type of account you're looking at: IRA, traditional IRA, Roth IRA, non-qualified, whatever. We'll quote them all and show you the highest contractual guarantees for each of these, then give you the benefits and limitations on how they work and what might suit best for you. So, with retirement income planning, think of that taffy stuff we used to buy in the store called Now and Laters.

‌You either need income now, or you need income later. Based on those two decisions, 30 days to one year or 13 months to 40 years, we can quote all annuity carriers for the highest contractual guarantee for your specific situation.

‌If you still need to download my books, get the books. You can download it for free. Yes, I'm an author. Stan The Annuity Man, author of the seven of the best annuity books on the planet. Make sure to go to my site for videos, podcasts, and all kinds of other neat stuff, and to use my proprietary annuity calculators to find the best quote on the planet for your situation. See you on the next 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.

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