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Retirement Withdrawal Strategies: SPIAs

Stan Haithcock
June 29, 2023
Retirement Withdrawal Strategies: SPIAs

Hi, there. Stan The Annuity Man, America's annuity agent, licensed in all 50 states. Today we're discussing retirement withdrawal strategies using Single Premium Immediate Annuities. SPIAS, that's the acronym.

So, I'm wearing a unique shirt that says, "Annuity Man Steakhouse." Of course, people ask me, "Do you own a steakhouse?" I'm like, "No, I don't." Here's the reason I have this on my shirt. In annuities, you buy the steak, not the sizzle. You buy the contractual guarantees, not the sales pitch. You own an annuity for what it will do, not what it might do. That's my saying. That's what I stick to. That's how you should buy annuities.

But with retirement withdrawal strategies using Single Premium Immediate Annuities, this is a very efficient way to add to your income floor and add your own personal pension. We will go over the details of Single Premium Immediate Annuities and how to put together your personalized retirement withdrawal strategy using SPIA.

SPIA Basics

What is a Single Premium Immediate Annuity? It's a pension. It's a personalized pension plan that will pay you for the rest of your life as long as you are breathing. It doesn't matter how long you live. The annuity company's on the hook to pay for as long as you live.

Single Premium Immediate Annuities can be traced back as far as the Roman times, where the dutiful Roman soldiers were laying it on the line for the empire and the empire, and the Roman Empire created pensions for the soldiers and their families. The same structure that you see today with Single Premium Immediate Annuities.

There are many types of annuities, but this is a pro-customer product. No annual fees, no moving parts, and no market attachments. The pricing is based primarily on your life expectancy. Interest rates play a secondary role. The older you are, the higher the payment. You can't time the purchase. If the contractual guarantees work for you, then perfect. You already own a version of an Immediate Annuity called Social Security, which is the best inflation annuity on the planet. So Single Premium Immediate Annuities are a very efficient, cost-effective, no fee, transfer of risk pension product that you can customize, set it up for your life, set it up for you and a spouse or partner's life, joint life, and you can also structure it so that 100% of any unused money goes to your list of beneficiaries. Meaning that when you die, money doesn't have to go poof, like many people believe happens with Immediate Annuities. No, you can structure it so that the annuity company's on the hook as long as you are breathing or your spouse is breathing, partner's breathing. And then, you can structure it so that 100% of the money you don't use goes to the beneficiaries when you pass.

What's the Best Immediate Annuity?

A question I always get is, "What's the best Immediate Annuity? What's the best carrier, Stan The Annuity Man, America's annuity agent? You have to know, you're the best. You know everything about annuities." You're right about that, I do. That's a good point.

But there's no best Single Premium Immediate Annuity. The best Single Premium Immediate Annuity is the one that provides the highest contractual guarantee for your specific situation.

You can get a quote 24/7 365 by going to our SPIA calculator and putting in your information. It will pop up the best quotes for life only and life with cash refund. Now, that's only two of many ways to structure it, but those are two of the most popular ways. And then, if you want to dig in, book a call with me, Stan The Annuity Man, and we can go through your situation. I can customize the quote for you.

A Period Certain

Those are the two ways that when you go to the SPIA quote, the calculator on our page, which is phenomenal because we're quoting pretty much every carrier out there. You see your life only and life with cash refund quote, there is another way that Immediate Annuities from a retirement withdrawal strategy can cover your expenses, and that's a period certain. In other words, you can say, "I need the payments to pay for 10 years or 15 years, or 20 years total. That's it."

Let's take a 20-year period certain example, it's going to pay you or somebody that's listed as a beneficiary for 20 years. If you live for 10 years and die, then your beneficiaries will get 10 years of payments. If you live for 15 years and die, then your beneficiaries will get that additional five years of payment. So it's a period certain.

You can combine the life with period certain. In other words, they are going to pay you for as long as you are breathing. Or the period certain, which means that if you died in year seven, someone will get 13 years of payments. But if you lived past 21 years, no beneficiaries will get the payments, but it will still pay you because you're still breathing. So remember, you can customize the quotes.

Required Minimum Distributions

One of the questions I also get is, "Tell me how Immediate Annuities work from a retirement withdrawal strategy standpoint with Required Minimum Distributions." Now, if you have an IRA at age 73, at the time of this blog, the IRS wants you to start taking money out of your IRA so that they can tax you on it. Which leads me to, I always laugh when I see these articles, "Never buy an annuity inside of an IRA." It's just comical. It's garbage. It's people that don't know anything about the annuity world. If you hear that, just tune these people out. It's like me giving ballet advice. You would never listen to me give ballet advice. I mean, I got the Annuity Man Steakhouse. You're like, "He doesn't know anything about ballet." Same thing with most people with annuities. They really don't know what they're talking about. But for Required Minimum Distributions, the IRS is tapping you on the shoulder to say, "Hey, you're 73. You need to start taking Required Minimum Distributions." With Immediate Annuities, when you're using IRA money to buy an Immediate Annuity, that income stream coming from the Immediate Annuity fully satisfies that Required Minimum Distribution. It's turnkey.

Now, you can't use any overage from that income stream you're receiving to apply to non-annuity assets. Let me give you an example. Let's say you have $500,000 in your IRA and bought a $100,000 Single Premium Immediate Annuity as part of your retirement withdrawal strategy. That income coming from that $100,000 Single Premium Immediate Annuity will fully satisfy the required minimum distributions for that $100,000 you have in the SPIA. The additional $400,000 you have in your IRA and non-annuity assets means that you need to take the calculation and take RMDs from those non-annuity assets.

Let's Talk About Taxes

So, if you're looking for a turnkey approach for your IRA, for RMDs, Single Premium Immediate Annuities fit that bill. When receiving income from a Single Premium Immediate Annuity, it is not taxed last in, first out. Let's go backward. You can have an Immediate Annuity in a traditional IRA. And so, if money's coming out of that, that's taxed at ordinary income levels because it's coming out of an IRA. If it's in a Roth IRA, it's tax-free because you already paid taxes on the Roth. But if it's in a non-qualified, non-IRA account, it's not taxed last in, first out; there's an exclusion ratio. Remember, with Single Premium Immediate Annuities, the income stream is a combination of return of principal plus interest. You're getting your money back with interest in that non-IRA, non-qualified account. Remember, don't freak out. That's the way it works. The annuity company's on the hook to pay regardless of how long you are breathing, so as long as you live.

Under that scenario where you're getting your money back with interest, only the interest portion is taxable. We call that the exclusion ratio in the annuity business. What's excluded from taxes? The return of principle. You have to pay taxes on the interest.

It can be tax favorable in your favor if you use non-qualified, non-IRA money to purchase a Single Premium Immediate Annuity as part of your retirement withdrawal strategies. If you're saying, "Okay, should I take it from the IRA, or should I put an Immediate Annuity inside an IRA or a non-IRA?" That's where me and you have to talk. You set an appointment with me, and we can discuss it and decide which makes more sense. It might make more sense for some of you to use non-qualified assets. It might make sense for you to use IRA assets if you want the RMDs to be turnkey. At the end of the day, it's got to be customizable to your specific situation. And that's the information, guidance, and recommendations I'm going to provide.

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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