Comparing Index Annuity Income Riders and DIAs: Shootin’ It Straight With Stan (TAM Classic)

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Welcome to Shooting It Straight with

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Stan. I'm your host Stan the Annuity

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Man, America's annuity agent, licensed

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in all 50 states. Today's topic is

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comparing fixed index annuity income

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writers to deferred income annuities,

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DAS, and we get this a lot from a

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questioning standpoint. Which one's

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better? As I always say, with annuities

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in general, I don't care what type

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you're talking about, each and every one

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has its benefit and limitation, good and

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bad. So let's go over that. Let's start

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with a deferred income annuity first. A

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deferred income annuity is nothing more

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than an immediate annuity. A single

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premium immediate annuity that you defer

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past one year. So with an a single

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premium immediate annuity, the

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grandfather of all annuities in the ro

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you developed in the Roman times. That's

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where the word annuity comes from.

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Annual means payment in lat Latin.

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Deferred income annuities is when you

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ask the two questions. What do you want

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the money to contractually do? When do

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you want those contractual guarantees to

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start? Anything past a year, an

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immediate annuity magically turns into a

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deferred income annuity? Now, the

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positive about the deferred income

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annuity, there's no moving parts.

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There's no annual fees. There's no

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market attachment. It is a straight

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transfer of risk product for lifetime

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income. You can use it inside of a IRA.

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Um um it can either be a DIA or a QAC,

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which is a a deferred income annuity

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that you use inside of a an IRA. I've

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done videos on that. We we'll go down

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that rabbit hole, but um a deferred

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income annuity can be used in Roth IAS,

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nonAS, IAS, etc. Um so it doesn't matter

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which one. The income coming and derived

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from the deferred income annuity is

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going to be taxed based upon what type

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of account you have it in. But let's

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look at it from a contractual guarantee

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standpoint. You know, it is a stripped

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down transfer risk pension product. You

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can structure it your life, joint life.

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You can structure just a period certain

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or a combination. You could do life with

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a installment refund or life with cash

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refund, life with um period certain or

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joint life. All of those above. There's

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40 plus ways to structure it. If you go

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to my site at theanuityman.com, you can

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run DIA quotes all day long. We have the

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best DIA calculator on the planet

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quoting all carriers. It is a rigid

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contract. So when you buy a deferred

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income annuity, you have ripped the the

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knob off the water faucet. You own it.

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So in other words, if we ask the

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question, what do you want the money to

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contractually do? And when do you want

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those contractual guarantees to start?

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Um, you know, and you say, you know, I

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need to start past one year. We're we're

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going to quote deferred income

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annuities. Okay. Now, in a nonIRRA

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standpoint, the income has a what's

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called an exclusion ratio. It's a

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combination return of principal plus

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interest. So,

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um if you're getting back your

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principal, you're not paying taxes on it

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in a non-qualified account. In an IRA

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account, it's all taxable. But getting

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back to the liquidity part and ripping

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the knob off the faucet, let's just say

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you wanted the income to start in five

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years. You can't get your money back.

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There's not, well, I don't I don't want

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to do that anymore. Send me my money.

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You're going to get it, but it's going

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to be in in payment form. Um, but again,

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there's 40 ways to structure it. Life

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only, life with period certain, life

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with installment refund, life with cash

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refund. We will explain all of that to

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you. I've written a deferred income

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annuity owners manual you can get for

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free. We've done tons of videos on it.

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But just think of this. It's a It's an

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efficient um no cost, no fee transfer of

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risk pension that you can defer one year

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out to 40 years. Now, you say, "Wait a

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minute, Sam. Why would you do 40?" Like,

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for my daughters who are in their 20s,

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they have deferred income annuities that

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I purchased for them that start way in

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the future because I'm not sure Social

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Security will be there for them. Plus, I

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want them to have a pension. And even if

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they like me or don't like me, you that

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money is going to hit every month and

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they can just cuss me out as the money's

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hitting their bank account. So deferred

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income annuity, it's it's a great

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product. The other thing you need to

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know about it is the big boys play

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there. The big carriers, I'm not going

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to name the names, but you know who they

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are. The double A plus, they offer

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deferred income annuities. So if if

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quality is what you really want, if you

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really want the top tier type A plus

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carriers, deferred income annuity is

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where you're going to land. Okay, so

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that's deferred income annuities. Let's

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talk about income writers attached to

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index annuities. So income writers ride

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on top of the policy. You don't have to

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put it on an index annuity, but but at

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the time of application, you can choose

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to attach a income writer for future

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income needs. Now, currently at the time

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of this taping, that's the only way

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pretty much 99% of the time that we're

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using indexed annuities. we're using as

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a cost-effective and efficient delivery

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system for that income writer guarantee.

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The income writer is a separate ledger.

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It's monopoly money, but we in other

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words, you can't cash it in or transfer

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it, but you can use it to determine your

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lifetime income stream. So, that's a

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good thing. It's a flexible contract,

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meaning that you could get to the end of

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the surrender charge time period and you

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can say, "Send me all the money back

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from the accumulation value, the index

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value, not the writer value." So you can

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pivot. It's a pivot product. Also too

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with indexed annuities, um most, not

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all, allow a 10% free withdrawal of your

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money on an annual basis. But

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understand, if you do that, then you're

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going to disrupt the contractual

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guarantees of the income writer. You

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just can't take 10% out of the

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accumulation value and not disrupt the

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income writer. So I know that's being

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said out there occasionally. I just

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think that's agents that really don't

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know what they're doing. But if you take

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money out, it's going to affect the

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income writer guarantee, but it does

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have liquidity. So, let's do do kind of

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a side byside. Um, also too, one last

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thing, the income writer that's attached

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to the index annuity has a fee for the

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life of the policy. And typically, it it

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depends. There's so many different ones

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out there. It can it can range from say

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3/4 of a percent up to 1 and a half% 2%

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you and that's something that you need

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to look at and we will help you with

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during your due diligence process. So

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look let's look at the fees on it. Okay

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so index annuity with an income writer

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has a fee for the life of the policy.

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That fee is not taken out of the income

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side. It's taken out of the accumulation

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value side. Okay. I know I'm throwing a

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lot at you. You might want to uh listen

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to it a couple times. The deferred

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income annuity has no fees. Period. end

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of story. Um, from a flexibility

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standpoint, the index annuity of the

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income writer is flexible. Couple

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flexibility points. You can take out um,

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uh, typically 10% annually with most

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index, not all. Um, but it's going to

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disrupt the income writer because you're

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taking money out of the policy. The

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deferred income annuity, no liquidity,

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none. Okay? You've ripped the knob off

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the water faucet. Period. Um, from the

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standpoint of a taxation, I don't do tax

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taxes on because I'm not a, you know, a

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CFP or a um, tax lawyer, but just basic

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30,000 foot view. With a deferred income

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annuity in a nonIRRA account, there's

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going to be some tax preferential

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treatment of that income because

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remember, it's return of principal plus

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interest. So, you're only paying the

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interest portion. when you run the

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quotes on my site with DAS, you'll see

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that if you put in non-qualified with um

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the income writers, last in first out.

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Okay. So, I'm not sure that's a reason

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to buy DAS, etc. But it it is for some

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people it is, you know, but I think that

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when going when comparing, you got to

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compare. You need to you need to quote

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both. We'll quote both for you if you

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engage us and and set up a time at

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theanuityman.com. Not one's better than

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the other. The first filter I think

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should be which one provides the highest

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contractual guarantee number. Period.

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Period. Well, I mean that's where we are

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um with all of this. You own it from

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annuity for what it will do, not what it

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might do. When you look at contractual

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guarantees of the policy, you've

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commoditized the product. You shop all

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carriers for that. Okay. So, that's the

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first thing. Second thing, claims paying

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ability of the carrier. Okay. For

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lifetime income, I have a rule. My my

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team follows it. A+ or better for

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lifetime income. Okay. So, it's got to

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be rated A+ or better for lifetime

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income. And so, C could there be

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exceptions? Maybe. But they better run

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it by me. Okay. But A+ or better, you

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don't need a sweater. How about that?

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Um, so that's, you know, that's the

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first two things that you look at. And

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then I think the third thing is the

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flexibility. Do you need potential

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flexibility

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uh of that money? Some people don't. uh

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some people want to go with those blue

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blood companies with that that offer the

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deferred income annuities and I think

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the fourth thing to consider are fees. I

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don't think fees should play into it.

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Number one, deferred income annuities

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don't have fees. And number two, the

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fees coming from the income writer are

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taken out of the accumulation value so

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it doesn't disrupt the guarantee of the

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income writer

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payment. Okay, so let's go over that

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again. And when you're comparing them,

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you can do it yourself. If you can

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engage us and get a and set an

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appointment or you can run the quotes

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yourself. Run income writer quotes. Run

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deferred income annuity quotes. First

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filter who provides the highest

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contractual guarantee. Not the potential

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hypothetical theoretical. We don't do

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any of that. It's who provides the

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highest contractual guarantee. You know

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who's the uh who's got the you know A+

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or better. You got to look at the

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ratings. Then you look at flexibility

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whether you need it or not or

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potentially need it or not. Okay, those

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are the three. And then fees. I don't

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think should even plan it. But that

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those are the four things. And then I

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would, you know, read the income writer

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book. I would read the deferred income

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annuity owners manual book that I have

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up there. I would pull up the the videos

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that are specific on those two products

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that I've done. I'd have a conversation

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with us and my team. They're not high

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pressure. You're going to make your

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decision on your terms and your time

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frame. But in essence, what you're

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putting in is part of your income floor

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that's going to combine with social

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security. um and a pension if you're so

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fortunate or whatever income producing

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items are hitting that bank account

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every every single month. And there

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might be it's not a and or it's it's a

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and and maybe this other you you could

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do one or the other. You could do you

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want half in a D and half in a um you

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know in an income writer and hedge your

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bet. A lot of it comes down to who

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provides the highest contractual

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guarantee and if if it's A+ or better.

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And if it's a substantial difference,

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there's no need to split it. Period.

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Remember, they're contractual

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guarantees. You own them for what they

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will do, not what they might do. Once

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again, I encourage you to dig deep. Go

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to our site. I have the books. Deferred

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income annuity owners manual, income

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writer owners manual. You can do it dia

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calculators till the till the cows come

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home, as they say in the south. You can

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do income writer calculators till the

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cows come home. We provide all of that

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for free under no obligation. No one's

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going to call or show up at your

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doorstep and then you can engage with us

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and set an appointment. We would love to

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have you have you as a client, but take

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your time. Don't fall for sales pitches.

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These are contractually guaranteed

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commodity products. There's not one

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that's better than the other. And if you

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use those four filters, you're going to

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make a good decision. Hope that helped.

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I think it did. you know, try to break

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it down simply like I do. And that's

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shooting it straight with Stan. My name

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is Stan the annuity man.