052 Annuities and Inflation

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welcome to

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fun with annuities with your host me

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stan

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the annuity man america's annuity agent

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can annuities be fun

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can contractual guarantees be fun

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absolutely they can

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find out the brutal facts about

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annuities with no sales pitches or high

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pressure nonsense

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just the brutal and factual annuity

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truth which is all you need to hear

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let's have some fun with annuities and

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let's have that fun

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start right now

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[Music]

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welcome to fun with annuities america's

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number one annuity podcast with

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america's annuity agent

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stan the annuity man top independent

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agent in the country

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i represent pretty much every carrier

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out there and i'm licensed in all 50

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states

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today's topic is a good one

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annuities and inflation ah the beloved

1:00
word

1:00
inflation every the bogey the boogie man

1:04
the thing that we can't see the thing

1:06
that we can't track the thing that no

1:08
one knows about even though everybody

1:09
thinks they know something about it

1:12
inflation man i get calls so much about

1:14
inflation what do we do

1:16
what do we do when inflation happens

1:18
daily nudity man

1:19
um there's a couple of things there's a

1:22
couple strategies we're going to go

1:24
over all of that now a lot of us have

1:27
those economic classes in macro and

1:29
microeconomics and we understand

1:31
inflation from the standpoint of numbers

1:32
and how it all works and all this stuff

1:34
but but we can all agree nod your head

1:37
that

1:38
the times that we're in at the time of

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this taping some weird times i mean this

1:42
is what they call blue water we've never

1:44
seen it before

1:45
no one's ever seen money being printed

1:47
like this the

1:48
the global connectiveness of of

1:51
you know financial instruments

1:54
the 24 7 365 nature of it the fact that

1:58
over 85 percent of all trades are

2:00
non-human algorithmic black box

2:03
high velocity type trades that

2:06
institutions kind of run the market it's

2:07
always tell people

2:09
you know if if you're if you're trading

2:11
in the stock market it's kind of like

2:12
surfing beside a cruise ship

2:14
you know some some of the time you're

2:16
going to catch a wave and and you'll

2:17
you'll make

2:18
you'll you'll make hay you know catching

2:20
that wave but a lot of times you're

2:21
going to get sucked under the boat

2:23
and i think everyone's fears get sucked

2:24
under the boat another fear though is

2:27
is inflation what happens when inflation

2:29
hits now

2:31
i get a lot of calls and they're always

2:32
the same which is some you know

2:34
inflation has got to happen stan it's

2:36
gotta you know we got to have inflation

2:38
right

2:39
well i've been for the last five years

2:41
getting the call

2:42
well interest rates have to go up don't

2:44
they well

2:45
i'm going to wait for interest rates to

2:46
go up because interest rates have to go

2:48
up

2:48
interest rates are going to go up right

2:51
well in the last five years what have we

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seen interest rates going down so when

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people say

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well interest rates have to go up i'm no

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they don't

2:58
well how much farther can they go

3:00
downstairs the annuity mount america's

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annuity agent

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japan anyone they could go negative they

3:04
could go to zero i hope they don't

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i hope they don't but to cavalierly say

3:10
interest rates have to go up is the same

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as saying

3:14
well we have to have inflation well

3:18
you can in the world of confirmation

3:21
bias

3:22
media meaning that you can find the site

3:24
that will tell you what you want to hear

3:26
politically financially whatever

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you can find that site to echo what you

3:30
want to hear

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i mean you can find a site out there

3:34
that can argue for

3:35
inflation and then you can find sites

3:37
out there that argue for

3:38
deflation and make very good and strong

3:42
arguments my point is

3:43
nobody knows okay so when it comes to

3:47
annuities

3:49
there are ways to address address

3:51
inflation with annuities but the problem

3:53
is

3:54
too many times inflation is used as part

3:57
of a sales pitch

3:59
of a non-true incorrect misleading

4:03
sales pitch on a product that does not

4:05
address inflation

4:07
let me be very clear as the top agent in

4:10
the country

4:10
that represents all carriers that's been

4:12
doing this for a while i've worked for

4:14
dean witter payne weber morgan stanley

4:16
and ubs for a long long time

4:18
i understand markets this is pretty much

4:20
all i've done my whole life

4:22
okay i'm 56 years old at the time of

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this taping

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i want i want you to listen very closely

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there there are no annuities that

4:31
address inflation properly

4:33
you know there there is no annuity type

4:37
that tracks inflation and if anyone

4:41
tells you that they

4:42
have it they're they're either stupid

4:44
dumb as a box of hair

4:46
or a sociopath and they're lying to you

4:48
just trying to get a sale

4:50
if there was an annuity type that

4:52
tracked inflation

4:54
then everyone would buy it and that's

4:56
all that we would sell

4:58
nod your head you can't be the rube at

5:01
the table you can't be the sucker out

5:03
there you can't be the person

5:05
the stupid person that believes that

5:07
upfront bonuses is free money you can't

5:10
believe that there's an

5:11
annuity product out there that tracks

5:13
inflation now in the current environment

5:16
the one that i hear from clients and and

5:18
people that are getting ready to be

5:20
clients

5:20
at the annuity man they'll call and say

5:23
well this guy said

5:24
this indexed annuity will track

5:25
inflation well that's a that's just a

5:27
bold-faced lie

5:28
it will not you know i have nothing

5:30
against indexed annuities so i'll

5:31
probably sell more than anybody

5:32
okay but we use them differently we use

5:34
them as cd products because they are

5:36
they're not market products and we also

5:38
use them as efficient and cost

5:40
efficient cost-effective delivery system

5:42
for income rider guarantees for future

5:44
income needs pension needs

5:46
so that's how we use them but there are

5:48
no

5:49
infl uh indexed annuities that are

5:52
perfectly adjusted for inflation

5:53
and i hear this all the time there's a

5:55
couple products out there that say

5:57
well if the index goes up by goes up

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then the income stream goes up by that

6:03
amount sounds fantastic on a broad brush

6:06
thirty thousand foot view but here's the

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details

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any time let me repeat it anytime

6:13
an annuity adjusts and increases

6:17
payments

6:18
whether it's projected payments or a

6:20
guaranteed cost of living adjustment

6:22
increase that you can do contractually

6:23
that i'll get to in a second

6:25
anytime there's an increase to the

6:27
income stream the annuity company

6:29
severely and significantly lowers the

6:32
initial payment

6:33
when you compare it to a similar or

6:36
exact same annuity without that increase

6:40
annuity companies have the big buildings

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for a reason they sponsor sports

6:43
stadiums for a reason

6:44
they have big logos on their private

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jets for a reason

6:47
and that reason is they don't give

6:49
anything away

6:51
so for example if your indexed annuity

6:54
salesman says i've got the indexed

6:55
annuity that'll adjust with inflation

6:57
and it will increase your income stream

6:58
for the life of the policy every time

6:59
the index do it

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doing good all right junk and they show

7:03
you

7:03
back tested projected hypothetical

7:05
theoretical unicode

7:07
butterflies proposal that's unicorn

7:10
chasing the butterflies for people

7:11
that aren't from the south that don't

7:13
speak fluent southern yell

7:16
it doesn't exist all they do is they

7:18
significantly lower the payment

7:20
you know for the people in podcast world

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i'm going to do a visual so just i'm

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going to explain the visual

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for people watching this on the fun with

7:27
annuities youtube channel you're going

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to see it

7:29
here's the annuity without

7:32
the increase here's the annuity with the

7:35
increase

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so what i'm doing is kind of a madonna

7:37
vogue if you saw that that video out

7:39
there everyone in podcast land

7:41
the the one the annuity without

7:45
the increase to the income stream is

7:48
much higher than the one that has the

7:49
increase in the income stream

7:50
so in other words there's typically a

7:52
depending on

7:53
depending on the age of the person etc

7:56
but let's just say

7:57
ballpark six to nine year break even

7:59
point from

8:00
the the annuity that has the cola

8:03
increase

8:03
increase uh for inflation and the one

8:06
that does not

8:07
that doesn't mean that you don't buy the

8:10
the annuity that has

8:12
the increase you might ladder it with

8:14
with a multiple array of annuities we're

8:16
doing a laddered situation or a laddered

8:18
purchase

8:19
but you don't believe the hype as the

8:21
rapper said you don't believe the sales

8:24
pitch

8:24
that says this one trucks inflation no

8:27
it does not

8:29
no it does not they don't give it away

8:30
now that's the index annuity pitch now

8:32
with

8:33
single premium immediate annuities you

8:35
can attach what's called a cost of

8:37
living or deferred income annuities

8:38
cetera

8:39
which is the cousin of single premium

8:41
immediate annuity annuitized type

8:42
products you can attach what's called

8:44
a cost of living adjustment cola cola

8:47
you can choose at the time of

8:49
application what the percentage increase

8:51
you want to be

8:53
okay which is great that's fine but

8:56
understand once again the annuity

8:57
company doesn't give that away

8:58
they significantly and severely lower

9:01
the payment when compared to the exact

9:02
same annuity

9:04
income annuity that doesn't have that

9:06
increase just

9:07
understand that they're not giving it

9:09
away and at the time of this taping

9:11
there are no more um consumer price

9:14
index

9:15
increases attached to annuitized

9:17
products they'll come back but for now

9:19
they're not around

9:20
the last one last carry just pulled

9:22
theirs because they were running on the

9:23
cpiu which is

9:25
consumer price index of urban consumers

9:28
which is kind of a little bit of a they

9:30
kind of play with that a little bit but

9:32
there is there are no is no however you

9:35
want to do that

9:36
annuities that that adjust perfectly

9:39
with inflation so if that's the case

9:41
stan if that's the fact stan if

9:43
if that's if there are no good solutions

9:45
with annuities for inflation

9:47
mr stan the annuity man america's

9:48
annuity agent how do you do it how do

9:50
you address inflation news and annuities

9:53
well this most simplistic way to do it

9:55
and boy do i like simple me and warren

9:57
buffett we like simple

9:59
if you can't explain it to a

10:00
nine-year-old don't buy it no offense to

10:01
nine-year-olds

10:02
but here's here's what we do if and when

10:05
inflation hits

10:06
you're going to have a gap of needed

10:09
income

10:10
that you're going to have to fill

10:12
because to make up for inflation

10:14
just tell me exactly what that is to the

10:16
penny and we'll do a reverse

10:18
engineered quote to solve for that

10:19
meaning that we're going to quote all

10:21
carriers to find the carrier

10:23
that will guarantee that contractual

10:25
income number using the least amount of

10:27
money

10:27
that's a reverse engineer quote that's

10:30
the that's the most simplistic

10:32
and efficient way to adjust for

10:34
inflation

10:36
um hyperinflation same thing is what's

10:38
the gap

10:39
and we go and solve for that but to try

10:42
to buy a product or try to buy

10:44
some packaged product that adjusts

10:48
is all you're doing is buying your agent

10:50
a car for cat i mean they're paying cash

10:52
for it

10:53
those type of products sound too good to

10:55
be true because they are

10:57
anytime an annuity pitch sounds too good

10:59
to be true it is without exception

11:01
period i mean annuities are contracts

11:04
you you base your decision on the

11:06
contractual guarantee

11:07
not a hypothetical theoretical

11:09
back-tested you know

11:10
unicorn chasing the butterfly example

11:13
that you're seeing in the proposal

11:15
in fact in some in some states the back

11:18
tested number you can't show anymore

11:20
thank goodness i wish all states would

11:21
do that i wish the

11:23
national association of insurance

11:24
commissioners would say no more back

11:26
testing we're not doing back testing

11:27
because

11:28
it's it's misleading and borderline

11:30
fraudulent

11:31
in my opinion for you to look back 10

11:33
years and say

11:34
well they want to know them 10 years ago

11:38
come on

11:38
everything was different back then and

11:40
with indexed annuities

11:42
the problem with the sales pitch is the

11:45
index

11:46
option can be changed at the contract

11:49
anniversary date

11:50
every contract anniversary date it can

11:52
be changed at the discretion

11:54
of the issuing annuity company without

11:56
talking to me or you

11:59
so you might have a 10 you might have

12:01
bought a 10-year indexed annuity or

12:03
someone's pitching you

12:04
a 10-year surrender charge indexed

12:06
annuity what are you really buying

12:07
you're buying a one-year guarantee with

12:09
a 10-year surrender charge

12:10
if it's a two-year option you're buying

12:11
a two-year guarantee with a 10-year

12:13
surrender charge

12:15
and so the key is renewal rates i just

12:17
did a a podcast on renewal rates the key

12:20
to

12:21
index annuities is annual rates renewal

12:23
rates and i'm not down on indexed

12:24
annuities they're just oversold

12:26
is is one of the primary reasons that

12:28
the annuity industry has a bad

12:29
reputation

12:30
is that if you went to a lot of agents

12:32
and advisors and said you know what

12:34
i really don't feel good i think i have

12:35
coveted i sprained my ankle what do you

12:37
think i should do

12:38
you know what their answer is going to

12:39
be i really think you should get an

12:40
indexed annuity that'll really help

12:42
because you'll get an upfront bonus and

12:44
with invented that i mean they're

12:46
myopic it doesn't matter what you say

12:48
they're going to say well i need income

12:50
right now well

12:50
you know you needed indexed annuity

12:52
really i thought i'd need an immediate

12:54
annuity because immediate annuities were

12:56
designed to provide the highest

12:57
contractual guarantee

12:58
if you need income right now i mean

13:01
they're they're like going just square

13:04
pegging around the whole selling index

13:06
and

13:07
especially when it comes to inflation

13:09
now one thing that you can do for

13:11
inflation and one product that's brand

13:13
new

13:14
to the annuity industry 2014 is the

13:16
newest

13:17
entry a product type to the annuity

13:19
industry is what's called a qualified

13:20
longevity annuity contract

13:22
and with that and i have a book on that

13:23
you can go to the annuityman.com

13:26
and you can you know order the book i'll

13:28
send you the book you can go to stand

13:29
the annuity man

13:30
youtube channel and watch qlack videos

13:32
on what they do

13:34
and i've done podcast on qlex as well

13:36
but in essence

13:37
a qualified longevity annuity contract

13:39
takes 135

13:40
25 of your ira or 135 000 at the time of

13:43
this taping

13:44
by the way it will change um whichever

13:47
is less

13:48
and you can have income start at a

13:50
future date so

13:52
for instance let's just say you're 67

13:54
years old and you're worried about

13:56
inflation in the future

13:57
you can buy a qualified longevity

13:59
annuity contract using your traditional

14:01
ira assets

14:02
and you can have the income start as far

14:05
out as age 85

14:07
it doesn't have to be age 85 it could be

14:08
you know 72 75 70 whatever

14:11
to combat future inflation one thing

14:13
that i tell people to do is ladder the

14:15
purchase so in other words buy

14:17
by three contracts by one with income

14:19
starting at age 70

14:21
one you know and then one with income

14:23
starting at age 70

14:24
at at age 70 at 75 80 and 85.

14:28
so by three contracts and just stagger

14:30
the income start date

14:31
that's a very easy way to

14:35
address inflation you can do that with

14:37
all types of income products you can do

14:39
that

14:40
with deferred income annuities which is

14:41
the sister product of qualified

14:43
longevity annuity contracts

14:45
and those can be used inside of an ira

14:46
or out but you can say okay i want

14:48
income to start at age

14:50
65 70 75 80. and i've got 200 000

14:53
so let's buy 50 000 in each and have

14:56
income starting at those

14:57
intervals that's how you address

14:59
inflation if you're not or you can just

15:01
keep your powder dry until the very last

15:02
second

15:03
and then tell me the amount you want to

15:05
solve for and buy an immediate annuity

15:07
so inflation is is the bogey that no one

15:11
can it's like nail and jello to a wall

15:13
no one no one knows

15:14
and there's no one knows when it's going

15:16
to happen when hyperinflation is going

15:18
to happen there's an argument that

15:20
inflation's happening right now at the

15:21
time of this typing yeah sure some of

15:23
the prices are going up

15:24
etc but you need to quantify

15:28
exactly what that dollar amount is so

15:30
that i can then

15:32
help you put together a strategy either

15:34
to solve for it right now or

15:37
we can solve for the possibility

15:40
of of inflation in the future or the the

15:43
fact that you know

15:44
the cost of living will go up you know

15:46
with a lot of things that we use and buy

15:48
and things like that

15:49
and have incomes you know increasing and

15:52
starting

15:53
starting at different intervals you can

15:55
also you know put a cola on some

15:57
let's just say you bought four immediate

16:00
annuities at the same time or four

16:02
and you said okay i want three of them

16:04
to be static and i want one of them to

16:06
increase with a cola you could

16:08
do that those are the type of things

16:09
that we need to talk about

16:11
one-on-one you can schedule call with me

16:13
at the annuityman.com

16:14
it's a 30-minute block of which we we

16:16
get down to business

16:18
and i start pinning down exactly what

16:20
you're trying to do contractually

16:22
and then i'll put together a customized

16:23
plan run the quote send them to you

16:25
and so that you can fully understand how

16:27
this works i'll explain the benefits and

16:29
limitations

16:30
the good and the bad but what i want you

16:32
to come away from this

16:33
is yes annuities can address inflation

16:36
can they do it perfectly

16:38
no is there one product that that solves

16:40
for it no

16:41
uh can we uh you know ladder

16:44
income with future start dates yes can

16:47
we buy

16:48
a cost of living adjustment right or

16:49
increase to an immediate annuity yes but

16:51
you got to understand

16:52
the annuity companies just simply

16:53
lowering the payment and there's a six

16:55
to nine year break-even point in most

16:57
cases

16:57
that doesn't make it a bad thing but you

17:00
just need to know the facts

17:01
i guess the biggest part of this podcast

17:03
is

17:04
don't believe that there's a product

17:06
that addresses it there really is not

17:08
um and we and we really don't know um

17:11
[Music]

17:13
you know when it's gonna happen if you

17:14
came to me and said stan what would you

17:16
do

17:17
stand the annuity man what would you do

17:19
for your mom or dad or uncle or yourself

17:22
you know i'm 56 so i i'm i've made the

17:25
decision if inflation hits

17:26
then i'll just buy an immediate annuity

17:28
at that time solving for that specific

17:30
dollar amount

17:30
but for someone like my you know my

17:32
uncle or someone in their

17:34
their late 60s or early 70s i might say

17:37
you know what

17:37
let's let's buy a culac okay

17:41
and let's have it staggered income

17:43
starts maybe 75 80 85

17:45
and split that 135 thousand dollars we

17:47
can do that

17:48
that way you know some incomes coming in

17:50
at those intervals and it's going to

17:51
increase

17:52
you also know that your social security

17:54
payments are going to increase because

17:56
our politicians want your vote and

17:57
they're going to increase it to get your

17:58
vote

17:59
and they don't care what they have to do

18:00
to print money to get it so they're

18:01
going to do it so it's going to increase

18:03
which is the reason i always say you

18:04
know if you hate annuities you're an

18:06
idiot because you already own one it's

18:07
called social security and oh by the way

18:09
it's the number one top inflation

18:12
annuity on the planet

18:13
and then with the remainder of the money

18:15
i would tell you to do kind of my

18:16
strategy without doing for myself

18:18
is at the time you need income at the

18:21
time you need extra income

18:22
at the time that you can quantify the

18:25
inflation

18:26
dollar amount that you need to fill in

18:28
your income floor

18:30
that's when we go in and we reverse

18:32
engineer the quote to buy a single

18:34
premium

18:34
immediate annuity to solve for that

18:37
specific dollar amount

18:38
follow-up question that always is well

18:40
what happens stan if it

18:41
if inflation keeps going up we just keep

18:44
doing it we just keep

18:45
solving for that inflation amount using

18:48
the least amount of money humanly

18:49
possible

18:50
i always tell people one of the biggest

18:51
mistakes people make with annuities and

18:53
the annuity guys are frowning right now

18:54
because they know what i'm getting ready

18:55
to say

18:56
oh by the way there are annuity gods um

18:59
anyway

19:00
is to use as little amount of pot as

19:02
money as possible to solve for the

19:04
contractual goal

19:05
i mean period if you just did that then

19:08
we just

19:08
each time inflation kind of hit we'd

19:10
fill in that gap fill in that gap fill

19:12
in that gap

19:13
and we'd also have discussions about

19:15
okay what what's social security

19:16
increasing by

19:17
you're always going to be you know

19:19
figuring out what that income floor is

19:21
going to be

19:22
so it really comes down to what's the

19:24
income floor and that's

19:25
you know that's social security pension

19:27
if you're so fortunate

19:29
rental income whatever's coming in every

19:32
month

19:33
and that income floor is going to be the

19:35
basis to decide if

19:38
number one inflation has been hitting

19:40
your lifestyle

19:41
and if so what that inflation amount is

19:43
so that i can go in and help you

19:46
solve for it contractually because with

19:49
10 000 baby boomers

19:51
reaching retirement age every single day

19:54
which is 65.

19:56
and they're looking for guarantees

19:59
the big thing that people want to do

20:01
really it's two it's number one protect

20:02
the principle

20:03
and number no first is protect the

20:04
principle or

20:06
number one is is um lifetime income

20:09
stream

20:09
or filling in the income floor my

20:12
opinion most people need to focus

20:14
on the income floor part what is that

20:16
guaranteed amount of money

20:18
that you need to come in every single

20:19
month

20:21
so that you can live the lifestyle that

20:22
you've earned and you've scrimped and

20:24
saved and sacrificed

20:26
to get it's the income floor and then

20:29
from that income floor amount

20:31
is when we look at you know and you you

20:34
everyone's situation is different you

20:35
can look and say okay

20:36
we're getting by on this fine i know we

20:39
we read about inflation but for us

20:40
it's happening this is good or you say

20:43
well

20:44
inflation's really hitting so we need to

20:47
address that and we need to do a reverse

20:49
engineer quote

20:51
cut for a second brielle because i got a

21:00
drink

21:03
so one of the things i want you to to

21:05
walk away from this podcast

21:08
of fun with annuities is that don't

21:10
worry about inflation

21:11
don't worry about something you can't

21:13
control don't worry about something that

21:15
in a lot of cases

21:17
you can't quite quantify we can help you

21:21
solve contractually to fill in that

21:23
income gap

21:24
if inflation hits so just put that in

21:26
the back of your head

21:27
go live your life as i tell people all

21:29
the time there's no u-hauls behind

21:31
hearses

21:32
think about it i need you to live your

21:34
life i need you to have fun i need you

21:36
to

21:36
to um realize that life is precious

21:40
live it don't worry about things you

21:41
can't control i can help with the

21:43
contractual guarantees to fill in those

21:45
gaps

21:46
but if covet hasn't done anything for us

21:49
it's been a tough year

21:50
you know time of this taping but it's

21:52
it's hopefully made us all realize that

21:55
life is special life is precious i joke

21:58
when i say there's new u-hauls behind

22:00
herself to kind of drive home the point

22:02
you know you can't take it with you you

22:04
live your life you do the things you

22:06
want to do

22:06
don't don't worry about whatever other

22:08
people think do what you want to do

22:11
have fun and put in those contractual

22:14
guarantees you don't have to worry about

22:15
anything

22:16
hey and that's what i'm here for the

22:17
annuity man so as we say about

22:20
the fund with annuities podcasts are

22:21
saying here is live in the reality not

22:23
the dream and what does that mean we're

22:24
living the contractual realities

22:27
not the sales pitch dream and that's

22:29
what i want you to do

22:30
so i appreciate you joining me on fun

22:32
with annuities the number one annuity

22:33
podcast on the planet

22:34
and uh i'm your host stan the annuity

22:37
man america's annuity agent and i'll see

22:39
you

22:40
next week

22:46
thanks for listening to fun with

22:47
annuities please hit the subscribe

22:49
button and make sure to go to my site

22:52
at the annuityman.com where you can run

22:54
your own

22:55
spea dia and culat quotes and see a live

22:58
feed of the best mega fix rates

23:00
in the country and even get indexed and

23:03
income rider quotes as well

23:05
you can also sign up for my six annuity

23:07
owner's manual books and i'll ship them

23:09
for free and under no

23:11
obligation i also encourage you to

23:13
schedule a one-on-one call with me

23:16
stan the annuity man so we can have a

23:18
full discussion

23:19
of your specific situation it will be

23:22
the best

23:22
brutally factual and truthful advice you

23:26
will ever get and that's one guarantee

23:28
you should definitely take advantage of

23:30
so join me next time for the number one

23:32
annuity podcast on the planet fun with

23:39
[Music]

23:48
annuities

23:50
you