Steve Parrish: Rational and Phased Retirement Planning (TAM Classic)

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welcome to fun with annuities where

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let's get to

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[Music]

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it welcome to fun with annuities I'm

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your host Stan the annuity man America's

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annuity agent and as you know licensed

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in all 50 states I encourage you to go

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to my site run your own quotes you know

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get my books I'll send them to you for

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free you can schedule a call with me as

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well but this podcast fun with annuities

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we are really enjoying bringing on

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experts in their field to educate you um

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because you know in our world you know

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you buy an annuity for what it will do

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not what it might do those are the

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contractual guarantees and there's no

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urgency to do that the urgency is to

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understand what you're buying Our Guest

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today his name is Steve per he is he's

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got so many um letters and things behind

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his name I don't even know where to

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start but the bottom line he is he is a

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lawyer he is the an Adjunct professor

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for the American college which is in our

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world where people go go to learn to do

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the right thing from the standpoint of

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advice giving advice from a retirement

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standpoint he also writes for a myriad

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of places one of those is Forbes you've

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probably seen him um if not when you see

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the next time you see a Forbes article

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come by by Steve Paris make sure to read

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it so with that that being said in the

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introduction Steve welcome to fun with

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annuities thanks Stan it's nice to be

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here well excellent let's let's start in

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let's jump in I read an article a long

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time ago that um you had these three

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reasons why why you feel people don't

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understand

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annuities um and there's a lot of

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reasons you know because I don't think

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the annuity industry does a very good

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job of educating the public that's kind

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of where I step in and where I hang my

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hat as an edutainer what are those three

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things and and if there are more into

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the more things that are kind of

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confusing the people when they when they

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talk about annuities I think that's a

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good place to start because um really

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annuities are a form of insurance right

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it's just insurance for the longevity

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versus dying too soon and everybody

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understands the concept of insurance but

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they don't want to pay for it or at

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least they don't think they want to so

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they get into things like saying well

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why would I buy an annuity because if I

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die you know two days after I buy I

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don't get my money back so part of it is

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they don't understand the whole concept

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of annuities not being an investment but

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really being a form of insurance uh that

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makes the investment that much better uh

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the other thing is and you even

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commented on it I suppose traditionally

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the uh industry hasn't done a great job

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of explaining it it's not the simplest

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thing in the world and sometimes people

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try to baffle them with their BS a

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little bit right really the concept is

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pretty straight for if you think about

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it the bells and whistles are nice but I

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think sometimes people lead off with the

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bells and whistles of I can you know I

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can make the this guaranteed income for

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life and not really explain what annuity

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is so I think it's really more a matter

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of financial literacy though I hate that

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term um in other words knowing more

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being a little more educated then really

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an annuity is a fairly simple thing and

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you realize that the whole idea of I

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don't want to pay for it is is just

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saying uh they're they're not always

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grasping the idea that some people are

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going to die before their life

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expectancy some are going to die after

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their life expectancy and so really get

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kind of a mortality premium if you live

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afterwards and that's the insurance part

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is hey I may the technology may come

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along I may live to 110 even though I

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didn't think I was going to make it past

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80 this is the advantage of insurance

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it's just kind of the flip side of life

3:58
insurance I I think the annuity industry

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um unfortunately has just has just not

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hurted the cats for lack of a better

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phrase you know when you say the word

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annuity most people think of Lifetime

4:08
income annuities and and those are

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primary the primary types but there's

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many that protect the principle and do

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other things long-term care Etc um but

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they're all guarantees they're all

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transfer risk products my if I was Z for

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the day in the annuity industry first of

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all it'd be a lot of fun second of all

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our Mantra would be got guarantees like

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the got milk ad because these are

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guarantees their contracts and the

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question is what are you trying to solve

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for um and I I've broken it down to an

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easy acronym called pill principal

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protection income for Life Legacy and

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long-term care and always ask people

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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 I

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really believe it's that simple however

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we've let outside people frame the I

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hate annuities culture which is somewhat

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funny to me because every single person

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you know that has Social Security owns a

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social security annuity the best

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inflation annuity on the planet um why

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do you think that the messaging within

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the industry is so poor because American

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the American college I mean you guys are

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the academics you're the guys with the

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you know with the the Tweed jackets and

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the Ascot and smoking the pipe and

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you're this you're the guys in the tower

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that are smart and we all look to you

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for your guidance and your Insight but

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for the consumer how did things go wrong

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and how did the annuity industry earn

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this bad reputation that we currently

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have I think I think the main thing is

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historical frankly annuities as a are

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really a form of insurance in a very

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positive way and so it gets associated

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with its cousin life insurance and

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people have that um conception of oh

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wait a minute this is something with

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high commissions and where somebody's

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gonna you know break my arm to to do

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that and realize that's all changed um

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when I used to work on very high-end

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accounts dealing with life insurance and

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I'd be talking to the CPA and the CPA

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would give you the same line as you hear

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with annuities is oh we were using

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corporate own life insurance say oh I

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don't like I don't like life insurance

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and I said okay we're not going to call

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it life insurance we're going to call it

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Fred now here's what Fred does and we go

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through it all they get a little laugh

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and say yeah actually that works taxfree

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death benefit and all that same thing

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with annuities I think it's associated

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with the idea that it's somebody's going

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to they're G to take all your money

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right which you could do all kinds of

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things and buy all kinds of things with

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and they're just going to give you back

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a fixed payment as you said they see

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annuity is just this one single fixed

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payment and most of it's going to be

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bled off with commission so I I think

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it's just historical that's why I said

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it's not

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insurmountable people just if they read

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about it and listen to your podcast just

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speaking out loud it makes a lot more

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sense and yes one other comment is I'm

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at an academic institution I don't get

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paid by anybody other than the

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institution and I'm just telling you as

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somebody who works through the numbers

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and does retirement financial planning

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annuities are a very important part of

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the equation and the proofs and the

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pudding that I own annuities as part of

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my retirement plan well and I you know I

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I think that um you know people when

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they say I hate all annuities I say

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that's like saying you hate all

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restaurants or you hate all trucks or

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you hate all shoes and you know I point

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back to the Social Security or a pension

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if they're so fortunate to have one um

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but I I think the annuity industry has

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kind of won the lottery because they're

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in the way whether they want to be or

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not of the biggest demographic tital

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wave of all time which is 10 10,000 Baby

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Boomers hitting age 65 and regardless of

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how bad a sales message may be they want

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guarantees and they're going to find the

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guarantees regardless of interest rates

7:38
political environment Etc one of the

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things that in doing the research my

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team and I were kind of laughing on one

7:43
of the your pound the table three

7:45
everybody has three words um and yours

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is refuse to

7:50
retire um which which I thought was was

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good and um I always tell people that

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are retirees are thinking about being

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becoming retired or or pointing toward

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that there's a chapter two in your life

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that falls under your category of refuse

8:07
to retire expound upon what that means

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to you right and I think this helps with

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a lot of people to think of it this way

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there is financial retirement and then

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there's emotional retirement so because

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of my Advanced age you couldn't tell

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from this picture I look so young but I

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am a person of a certain age who

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qualifies not just qualifies I'm on

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Medicare and I am getting Social

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Security payments so financially I'm

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retired I also get a pension plan from

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my former

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employer but obviously I'm not

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emotionally retired I I work a a full

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schedule I I travel well now that Co

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19's being controlled and I write and

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all these things so in my mind um I'm

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like a lot of people that you may run

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across who almost bristle when they look

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at me and say oh you must be retired and

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it's kind of why do you assume I'm

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retired so so that's the refuse to

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retire thing is it's nice to have the

9:03
option now some people really like it

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and um we a lot of research tells us

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that once people go through the

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emotional part of actually retiring once

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they're retired most people really enjoy

9:15
it yes there's the fear of um being

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bored and you they turn out guess what

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you can't golf every day but most people

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do enjoy it but a lot of us also enjoy

9:27
working and so that's what I mean by

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refuse to retire as long as I can do and

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add value I'm going to and I came up

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with a phrase recently called life

9:36
entrepreneur chapter two you become your

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the entrepreneur of your life the

9:39
managing of your company that which is

9:41
you and your family and your assets and

9:43
your retirement and your planning and

9:45
your legacy and your health um and I

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think you know everyone is is going to

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transition hopefully to that life

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entrepreneur stage but I just love the

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refused to retire one of the um kind of

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pivoting to a harder topic um one of the

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Articles you wrote recently in Forbes um

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and when I read it it everybody falls

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under this situation and everybody can

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point to someone that they know and the

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title of it I'm going to read the title

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was getting ahead of your diminished

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capacity

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worries and I need you to go into that

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because that's that's that's just you

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know you're you're stepping into a realm

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that we all know that's that's going to

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happen to all of us but it we all

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hesitate to plan for it so kind of walk

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us through what you think that means how

10:34
we should approach it the possibility of

10:36
an income floor using annuities helping

10:39
with that certainly that's been an in an

10:42
area of interest for me and to be honest

10:44
and partly because uh you know

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recognizing the age I just said I'm I'm

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getting at a lot I have a lot of friends

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that it it's become almost a lab for

10:53
watching what happens in retirement

10:55
because a lot of my friends that are

10:56
similar ages are now retired and I'm

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starting to notice certain aspects of

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diminished capacity so it's it's really

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thinking about it this way is first what

11:06
what is Def diminished capacity it's not

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necessarily a long-term care event it's

11:11
not Alzheimer's that certainly is a form

11:14
of it but um and it's not just because

11:16
you can't remember uh names as easily as

11:19
you did before it's somewhere in there

11:21
it's not full-blown dementia is what

11:23
you're saying you're saying it's it's

11:24
the it's the stage of life where you

11:26
know that you know you got an 8-cylinder

11:29
engine but you're hitting on five

11:30
cylinders right yeah and some of those

11:33
cylinders might for example be um you're

11:36
you're perfectly functioning

11:37
everything's fine but you don't like

11:39
working with your monthly bills you

11:42
really don't like to have to make

11:43
investment choices and that kind of

11:45
thing so your capacity financially is

11:48
diminished but it doesn't mean you've

11:49
you've lost it and you're going into the

11:52
home so that's the that's the issue is

11:57
how do you address that in Advance

11:59
because guess who the last person will

12:01
be that knows you have diminished

12:03
capacity it's you you yeah that's true

12:06
that's a really good way to put it um

12:09
and I talked to Jamie Hopkins recently

12:11
he says you know forget Roi it's Ro it's

12:13
return on sleep and really what he's

12:15
saying is you you know taking care of

12:18
yourself chapter two of your life and

12:19
and the diminished capacity prediction

12:23
one out of one of us is going to have it

12:25
right right um and and how do you see

12:28
the

12:29
the annuity space or the industry

12:32
addressing that and do you think that as

12:34
an industry we might be a little

12:36
proactive even though it steps on a few

12:38
emotional

12:39
toes well I think that's a very strong

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point because annuities are um really

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it's a do-it-yourself defined benefit

12:48
plan if you think about annuities I

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sometimes call it a DIY DB meaning my

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dad you know had his his government

12:56
pension and and it was he didn't have to

12:58
think about so retirement was fine from

13:01
him he got his check right um most of us

13:04
you know are looking at 401ks and we're

13:06
dealing with sequence of return and

13:07
we're dealing with all these issues and

13:10
so what you're doing and that's why I

13:12
want to bring diminished capacity into

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it is as you uh retire maybe you even

13:18
don't have diminished capacity you just

13:20
don't want to deal with it anymore the

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fact is if you know that you have number

13:25
one a stream of income that's

13:27
predictable and number two that it will

13:30
continue for the whole of life because

13:32
you don't know how long you're going to

13:33
live so it picks up the tail end if you

13:35
will of longevity that brings huge peace

13:39
of mind and security so where I'm going

13:42
with annuities as part of that solution

13:45
is that IT addresses those two questions

13:48
and when you're just not wanting to deal

13:51
with finances that's one thing when you

13:53
actually have diminished capacity then

13:55
it becomes extremely powerful because

13:58
one you you're getting the income and

13:59
you don't have to worry about it and two

14:01
it can very much help with elder abuse

14:05
so if you're sitting on a million

14:08
dollars of a 401k plan and taking 4% of

14:10
it every year that can expose you to

14:14
elder abuse if you're starting to lose

14:16
it and don't know it if instead you've

14:18
used a reverse mortgage or annuities or

14:21
those kind of things that lock in a

14:22
stream of payment it's harder for that

14:25
culprit uh which might be your kids um

14:29
to really raid the kitty because you're

14:31
getting a periodic payment much as our

14:33
grandparents got defined benefit plan

14:36
payments well and I think it's important

14:38
to point out a lot of people out there

14:40
think well the evil annuity company is

14:41
going to keep the money and you know

14:42
when I die money's going to go poof

14:44
that's one of about 40 ways to structure

14:45
it contractually and most of the ones uh

14:48
the the lifetime income streams that we

14:50
um you know structure for people in all

14:52
50 states uh the annuity companies on

14:54
the hook to pay but if you your lar jet

14:56
hits the mountain and you die then 100%

14:59
of any unused money goes to your

15:00
beneficiary so I think that's one of the

15:02
biggest misconceptions out there as you

15:04
were speaking I was thinking about it we

15:06
always think about Legacy products being

15:08
life insurance and and it really life

15:10
insurance is the best Legacy product on

15:12
the planet it's the best return on

15:13
investment you'll never see because

15:14
you're dead but it it transfers taxfree

15:18
probate free lump sum but in a

15:20
diminished capacity planning

15:24
scenario lifetime income annuities with

15:27
a cash refund that that all the money

15:29
goes to the family or the trust if you

15:31
die to me that's a really good Legacy

15:35
product as well would you

15:37
agree I'd agree and I'd even add to that

15:40
that the Legacy doesn't have to

15:41
necessarily be a lump sum so just as a

15:44
different example of that um I had some

15:47
life insurance that had over six figures

15:49
of cash value in it and as we moved in

15:52
in a phase of Life didn't need that we

15:54
had some other insurance um as you know

15:57
there's a thing called a 1035 exchange

15:59
it allows you to exchange it the cash

16:01
value taxfree to an annuity and by the

16:03
way for the people out there 1035 is a

16:05
reference to the IRS code if you're so

16:07
bored you can pull up section 1035 and

16:10
read it where it's a non taxable event

16:12
does not trigger any taxes and I I do

16:14
agree with you Steve that you can set up

16:16
what's called installment refund which I

16:18
always joke with my two daughters that I

16:20
don't want them getting the cash refund

16:21
because they'll just show up at the

16:23
funeral in a Lamborghini I want to

16:24
making payments on the Lamborghini you

16:26
know they're G to show in it anyway so

16:28
but yeah you can structure the death

16:30
benefit of an annuity it's customizable

16:33
you could have a cash refund you could

16:35
have installment refund installment

16:36
refund in Ence is a period certain to a

16:38
life expectancy you can do whatever you

16:41
want um the the annuity companies are

16:43
just going to bid on it because this is

16:44
a commodity product I I apologize for

16:46
interrupting but go ahead well and I'll

16:49
just add the third point so you know you

16:51
could do the lump sum as we started with

16:53
and then you said you can do installment

16:55
sure um I'll put you in the mindset of a

16:58
a person of my age and what we looked at

17:00
because I've been married for you know

17:01
42 years we looked and said that life

17:04
insurance was on my life if I who's the

17:06
main uh bread winner die you have this

17:09
money but we're at that phase where it's

17:11
not as big an issue but you still now

17:13
want an income we have social security

17:15
and other things so what we did is

17:17
actually had that annuity pay over our

17:21
joint life ni and so to me that's a

17:23
death benefit in the sense that we don't

17:25
know which one of us will go first but

17:28
my wife will take comfort in knowing

17:30
that if I'm the first one to go and you

17:32
know it's always the other one that's

17:33
going to go first absolutely yeah that's

17:35
just rule of thumb um she will have the

17:38
death benefit but the death benefit is

17:40
an income stream and a retiree thinks of

17:42
income streams more than lump sum so

17:44
that's where I was going with that idea

17:46
and what people need to understand about

17:48
joint life income stream what Steve was

17:50
was um just explaining is that income

17:52
stream continues uninterrupted and

17:55
unchanged for the life of the spouse or

17:57
partner which I think is a lot of you

18:00
know a lot of the the people that

18:02
getting back to the diminished capacity

18:04
um category in in the topic a lot of

18:07
those a personality gentlemen that call

18:09
me and set up the lifetime in joint

18:11
lifetime income they're taking care of

18:12
their wives and that's that's admirable

18:14
but I do um I find myself pivoting more

18:17
and more speaking to people about you

18:19
know I know you're sharp as attch now

18:21
Fred or whoever the guy's name is or

18:23
lady's name is Francine but have you

18:25
thought about when you're not hitting it

18:27
on all cylinders and what you need to do

18:29
to put something in place so that your

18:31
that your heirs don't have to deal with

18:33
that from a durable power power of

18:35
attorney standpoint know you're lawyer

18:37
and you specialize in these type of

18:39
things um do you see that being more

18:41
prevalent I know that you teach that

18:43
within your courses at the American

18:44
college but do you see that being more

18:46
prevalent as we get

18:49
older that's certifiable I mean in other

18:51
words there's plenty of actual hard data

18:55
to talk about age is one of the key

18:58
determinant

18:59
in diminish capacity I mean certainly

19:01
there are other morbidity issues that

19:03
can get you but but unquestionably if

19:05
you say what's the biggest one we all

19:07
know that as you get older your mental

19:10
your this sounds a little scary but your

19:12
capacity probably starts slowing down

19:15
around age 50 that doesn't mean that

19:17
we've all lost it after 50 but that's I

19:19
can vouch for that I can vouch for that

19:21
Steve it's it's starting to

19:25
slip but it is what it is I mean and

19:27
it's something that uh as an estate

19:30
planning um expert like you are and by

19:33
the way you know who you're listening to

19:35
is Steve Parish he's got cowboy boots

19:36
older than most of you out there uh

19:39
that's that's even looked at Investments

19:40
he's been doing this for over four

19:41
decades we're going to have a specific

19:43
page set up for him on my site at the

19:45
annuity man.com so you can relisten to

19:47
this and if you want to shoot him an

19:48
email you can um but but he is one of

19:51
the gurus in our space um and and a

19:55
thought leader in our space when it

19:57
comes to um retirement life insurance

20:00
annuities understand that life insurance

20:02
companies issue annuities um one of the

20:05
other things I want to kind of pivot to

20:06
is is what you have done a lot of work

20:08
on which is called phased retirement can

20:12
you kind of dig into that so the

20:14
listeners and viewers can understand

20:16
what phase retirement is and how that

20:18
applies to them and what they might need

20:20
to

20:21
do I'd love to because that's just

20:23
something I'm experiencing and feeling

20:25
good about it and I'll start with a

20:27
personal example that my father got his

20:30
law degree after World War II became an

20:32
FBI agent guess what the FBI doesn't

20:35
want you uh working till you're 70 and

20:38
so his Encore career sometimes that's

20:40
the term used uh was to be a professor

20:43
in the last I don't know 10 years my

20:45
brother was a business executive after

20:47
doing one too many mergers and

20:49
Acquisitions um in his last phase became

20:51
a professor and guess what I was a

20:54
financial advisor and worked I was an

20:56
executive at an insurance company this

20:58
is my life last phase so that would be

20:59
an example of um a family that does

21:01
phase retirement but what I'm getting at

21:04
for most people is that the market has

21:07
changed you're going to live longer on

21:09
average actu earily and jobs generally

21:13
have become less manual there's not as

21:15
many ditch

21:16
diggers and so that means you're going

21:18
to live longer and the kind of job

21:20
you're involved in you may be able to do

21:23
longer um so people are looking and

21:26
going either because they want to work

21:28
more or because they need to work more

21:31
they'd like to have some options the

21:33
phase retirement and there's certainly a

21:34
lot of data suggesting this is where

21:36
people are going the golden watch

21:37
concept of you know you work your 40

21:39
years get your golden watch and you're

21:41
done really doesn't um show up that much

21:44
in data certainly people do it so look

21:47
at it this way you can be you can't be a

21:50
ditch digger that works to 70

21:52
realistically right but you could be a

21:54
customer service rep that could work to

21:56
70 if you need to or if you want to sure

21:59
and maybe you don't want to commute to

22:02
Manhattan until you're 70 but would be

22:05
fine on working from your office at home

22:08
until 70 that's what I do I work from

22:11
from home so phase retirement is um it

22:14
can either be with the employer you have

22:16
because a lot of employers are doing

22:17
this and covid-19 certainly made it

22:19
happen where you had to work from home

22:21
whoever knew what Zoom was we thought

22:23
that meant a fast car no clue I had no

22:26
clue what that was but it's amazing

22:28
what's what's Chang and hold that

22:29
thought for a second I was just thinking

22:30
as you talk my parents were both they

22:32
retired as as school teachers in the

22:34
state of North Carolina and their Encore

22:37
um I guess job after that is they were

22:40
volunteer well they they were paid I

22:42
call them volunteer they get paid a lot

22:44
at the Charlotte Coliseum and they would

22:46
they would go to the Hornets games and

22:47
they were ushers and they'd see all the

22:49
concerts so they saw every game and

22:51
every concert that went through

22:52
Charlotte that was their Encore um job

22:55
after the real job uh so when you said

22:57
that I'm like yeah you my parents kind

22:59
of did that which was cool they would

23:00
tell me about the Grateful Dead concert

23:02
or the ACDC concert they just saw and

23:04
I'm like that's incredible so keep going

23:06
with the phase retirement this is

23:08
interesting yeah I it's it's where

23:10
things are going whether we like it or

23:11
not and I think we should like it

23:13
because employers are are accommodating

23:15
that kind of thing I don't have to be um

23:17
the college is actually Philadelphia and

23:18
I'm sitting here in St Augustine so you

23:21
can do that kind of thing now the reason

23:24
I'm interested in that from a financial

23:26
standpoint is that means you're also

23:28
phasing your your finances somewhat so

23:32
um I would state that Social Security is

23:36
almost always something you want to

23:38
delay taking as long as you can ideally

23:41
at age 70 well if you have that kind of

23:44
thing and you're but you want to retire

23:46
before that that's where I was thinking

23:48
about things like annuities because they

23:49
can be Bridge assets they can kind of

23:52
carry you over so that you can leave

23:55
that let's say it's a six-figure job and

23:58
now what you're going to be doing is

24:00
working part-time or some of it's

24:02
volunteer so you're not making as much

24:04
your cash flow has slowed down but you

24:06
don't want to start taking social

24:07
security so my my interest in Phase

24:10
retirement in the financial side is what

24:13
Financial assets can we do to help you

24:15
bridge and to provide some of that cash

24:17
flow to accommodate this change in your

24:21
life interesting interesting I I and I

24:24
think that as people get older and the

24:27
funny thing about Co not funny it's been

24:28
tragic but I I think the interesting

24:30
thing about Co is I believe that it will

24:33
actually increase our life expectancy

24:35
because it's been a wakeup call from a

24:37
health standpoint for all of us to get a

24:39
little bit more healthy even though the

24:41
government doesn't want to say that I

24:43
guess that's not politically correct for

24:44
them to say hey let's get in shape let's

24:46
lose some weight but I think we all are

24:48
saying wait a minute life is fragile um

24:51
and I do think life expectancies after

24:52
we come out of this Co thing will be

24:55
longer because the one great thing about

24:58
this country is that we learn and we

25:01
adapt and we try not to get hit with the

25:05
same type of problem you know two times

25:07
in a row and I do think that there is so

25:10
much proactivity on the on the the

25:12
biotech side and the pharmaceutical side

25:14
that that's just a great part about this

25:16
country do you agree with that do you

25:18
think we'll come out of this and maybe

25:20
life expectancy might

25:23
increase I think that's it's a given

25:26
unless we have something you know a

25:27
black SW event as they call it again

25:30
like this but but what's going on is

25:31
really last year was interesting if you

25:33
think about this is um mortality

25:38
increased basically meaning people were

25:40
dying one year sooner from a pure

25:43
mortality standpoint last year and yet

25:47
the IRS has new tables kicking in in

25:49
January one of this next year where they

25:52
assume your life expectancy is two years

25:54
longer than it has been in the past

25:57
meaning that you need these because the

25:59
IRS basically says if you have IRAs once

26:02
you hit 72 we're going to make you take

26:05
some of those out we have to use these

26:06
mortality tables and actually they are

26:09
assuming that people my age are going to

26:11
live two years longer than in the past

26:13
so where I'm going with this Stan is yes

26:16
there was a hit to mortality but it was

26:20
very much in the elderly Market put away

26:23
the TVs and all that it was basically in

26:25
kind of that 80 plus Market it was

26:27
otherwise ality really in macro wasn't

26:30
that much and Technology continues to

26:34
improve and as you point out I think

26:35
people maybe are getting better about

26:38
their their personal habits especially

26:40
when people retire they they tend to

26:41
realize their new job is to take care of

26:44
themselves no I agree it kind of feeds

26:46
into what um I was doing a podcast with

26:48
Tom hegna the other day and he's

26:50
pounding the table literally in St Stan

26:53
at this time the mortality credits are a

26:56
bargain he he just thinks that the

26:58
mortality credits right now you should

27:00
take advantage of because just remember

27:02
if if the prediction of the annuity

27:04
company is that you're going to live

27:05
longer that means they're going to be

27:07
more payments which means the payments

27:08
will be lower that's that's the that's

27:11
the simplistic explanation of what Tom

27:14
was pounding the table on on mortality

27:16
credits and it and it really kind of

27:17
leads in on what you were saying which

27:19
is yes there was a blip in the screen

27:21
and not to be not to be morbid but a lot

27:24
of those people were very close to

27:26
passing away um at the age in the 80

27:30
range and they just did with covid

27:33
unfortunately it was

27:34
tragic um and I had three friends my age

27:38
die um tragically too so it happened all

27:41
over but the point is I do think that

27:44
you know people always ask me is it the

27:46
right time to buy annuities and they're

27:48
always focused on the interest rate part

27:50
of it which is a secondary pricing

27:52
mechanism for life expectancy I think

27:54
between you and what Tom hegan you know

27:56
I've done some others with with Wade and

27:58
and Jamie they're all saying hey I think

28:00
it's actually a good time that's not a

28:02
sales pitch that's just a factual and

28:05
mathematical reality of what's happened

28:08
and I and I just find it interesting

28:10
once again Steve if me and you were

28:11
running the annuity industry the ads

28:14
would would already be running take take

28:17
advantage of today's mortality credits

28:19
lock in your lifetime income right now

28:22
yeah people don't understand and I I get

28:26
why because it can be complicated but

28:27
risk pooling there is no way you as an

28:29
individual yes can plan for your average

28:32
age the fact is if your life expectancy

28:35
is 84 you might live to 94 and what are

28:38
you gonna do then you know are you gonna

28:41
eat C food and live in your car so you

28:44
can only you have to plan for longer

28:46
mortality than the life expectancy table

28:48
say that the insurance company doesn't

28:50
have the same problem they can price

28:53
their products for average mortality and

28:56
so what you're doing is you're

28:59
essentially letting them have the

29:00
problem of who dies first rather than

29:02
you having it and so that's that that

29:04
mortality premium that that Jamie or

29:07
waiter talk about that's what we're

29:09
getting you can't personally do that you

29:11
have to kind of buy your way into that

29:13
with the insurance company and that's

29:15
again why people like me go out and buy

29:17
annuities it it just makes sense because

29:19
I don't want to have to worry about it I

29:20
got other things to do you said the word

29:22
plan in there and it jumped out in my

29:24
head

29:25
about kind of the current you know

29:28
current tax law it's kind of in flux you

29:30
wrote an article recently that that

29:32
jumped out because I remember when you

29:33
said that like there was an article you

29:34
did recently on that about how to plan

29:37
how do you plan right now when you know

29:40
Washington DC is as dysfunctional and

29:43
that's saying a lot as we've ever seen

29:45
it um and and you know whether they're

29:48
dysfunctional or not there's 60 there's

29:50
there's you know 10,000 people turning

29:52
65 every day they've got to do something

29:54
they got to plan all right Steve Parish

29:57
balls and your court what do we do well

30:00
and I I tend to uh eat my own word

30:04
sometimes in the last few weeks because

30:05
we're all going through this and uh I

30:07
just saw a couple hours ago the latest

30:10
versions come out um one thing I've said

30:13
that might help just as a way of

30:14
thinking about it is you know how a

30:16
traffic light works so you have green

30:19
yellow and the red in my mind is the

30:22
things that Congress people come up with

30:24
that you know is not going to pass so

30:26
maybe on the more liberal side it could

30:28
be this big wealth tax on the more

30:30
conservative side they've talked about

30:31
getting rid of the estate tax right

30:33
neither one of those are likely to

30:35
happen don't build that into your

30:36
planning I mean you know never say never

30:39
but it's not gonna happen be rational be

30:42
rational yeah certainly just wait and

30:44
find out what happens now the green

30:46
light means people have forgotten that

30:48
there is a thing called a secure act

30:50
that was ped back at you know just

30:53
before covid hit and most people haven't

30:55
changed their plans to deal with that

30:57
for ex example now you don't have to

30:59
take required minimum distributions

31:00
until 72 you have to take it at 70 and a

31:03
half once you pass on and if you have

31:06
inherited annuities the rules change

31:09
quite a way a bit what I'm getting at is

31:11
that's green light that is tax law and

31:14
let's worry about the existing stuff

31:16
like that before we worry about what

31:18
they're doing in Disneyland East

31:20
otherwise known as

31:23
DC and I guess the where you're probably

31:26
wonder okay what's the yellow light

31:27
that's the caution one but you know what

31:28
I am figuring out and this is someone

31:31
who's a tax attorney in many

31:33
ways a lot of those really only deal

31:37
with AF very affluent to wealthy people

31:41
um so a lot of the things being talked

31:43
about we've been rushing around madly

31:45
and we've most of us have realized we

31:47
probably uh were right to just hold

31:50
because they keep changing the rules so

31:52
how do you plan for it um when you

31:55
really scrub all that away a lot of that

31:57
is known

31:58
you plan for it the way you would have

32:00
before Congress got at it or after a lot

32:02
of the rules aren't going to change I

32:03
mean the taxation of annuities I don't

32:05
think is going to change there's nothing

32:07
out there to suggest it so long way of

32:09
saying you go with the green stuff keep

32:12
an eye out for the yellow but for most

32:14
consumers a lot of that is for the ultra

32:16
high net worth and and high net worth

32:18
individual and I think that's a great

32:20
way to look at it which is the green is

32:22
what what we need to plan for right now

32:25
the yellow is is something that you can

32:26
rationally see happen happing red stuff

32:29
like another red one that I think is R

32:31
hope it's red is I've read some things

32:34
about our friends in DC messing around

32:37
with the Roth IRA and um I I have

32:41
predicted that ever since you know they

32:42
walked out of the building and and pass

32:44
the Roth IRA I'm like they're trying to

32:46
figure out how to tax it because and

32:48
hopefully that is a red one but that

32:50
might be a yellow one for now just to

32:52
see what they're going to do but I do

32:54
think that people need to get up to

32:55
speed and we can get you up to speed if

32:57
needed on on the SEC the secure act and

32:59
all of the stuff that's green that's

33:01
going to be there um so that you can

33:04
make those plans but I certainly

33:06
wouldn't hesitate or put off a plan

33:09
based upon some

33:12
newscast or something you read because

33:16
um nobody really knows you know

33:18
especially in the climate that we're in

33:20
yeah the things that are the at the

33:23
planning level that we deal with are if

33:25
you're going to sell a business maybe

33:27
you sell it now keep the capital gains

33:29
down or um some very sophisticated trust

33:32
planning with life insurance but in the

33:34
world that a lot of what you deal with

33:36
annuities and roths and all that um I

33:40
don't think there's anything to worry

33:41
about you know they're talking about

33:42
putting a maximum on Roth I wish I had

33:44
the kind of money they're talking about

33:46
you know these are very large amounts

33:48
before you have to worry about it so

33:50
well what triggered the whole raw thing

33:52
is the the hedge fund guy that started

33:53
with the Roth and he put his 5,000 now

33:56
it's worth five billi

33:58
yeah um and that made everybody mad and

34:01
he played by the rules now he's he had

34:03
some insight and some sweetheart deals

34:05
from the standpoint of IPOs and things

34:07
like that we can go into that later but

34:09
that's what's triggered all this is one

34:11
guy now that has a five billion with a B

34:14
dollar Roth IRA that he can now take out

34:17
tax-free and that's driving some DC

34:19
politicians absolutely bad which I think

34:23
is kind of is kind of funny um Steve

34:26
some of the courses that you teach at

34:28
the American college um just the just

34:31
fantastic I I wish that in the future

34:34
those could be you could do maybe a

34:36
Hillsdale College model where Hillsdale

34:38
College teaches a course to their

34:40
students on the Constitution but they

34:42
open it up to the public um I'm not some

34:45
right-winger I'm not a left Winger I'm

34:47
I'm a capitalist but I think that's a

34:48
good idea but in looking at your courses

34:51
you know one of them that kind of jumped

34:53
out was just managing the income plan

34:55
and I know that you're you're you're

34:57
approaching

34:58
in your in your course content to the

35:00
adviser and the agent and the ra and and

35:03
the C you know the cfp and those people

35:06
and the

35:07
semas for the consumer managing the

35:11
retirement plan means what to

35:13
you that's a that's a great way of

35:15
looking at it because we only have so

35:17
much bandwidth and interest and really

35:20
man first of all think that retirement

35:22
is not just an event the people think

35:25
well I take care of Medicare I take care

35:27
of social security and and everything

35:28
else continues the same not not really

35:32
um especially when you truly retire

35:34
you're going to have time in your hand

35:36
you're going to be with your spouse in a

35:37
way you've never been before all those

35:39
kind of things so you have to kind of

35:40
think of it as truly a change in life so

35:43
part of it is the behavioral or

35:45
emotional part not the money right as

35:47
far as when the the events you think

35:49
about for money I would just bring up

35:51
three key things one is your Social

35:54
Security decision is absolutely key even

35:57
for the affluent because of the way it's

36:00
structured you can take it between 62

36:01
and 70 and it makes a huge amount of

36:03
difference it does for the rest of your

36:05
life Medicare is incredibly complex I

36:10
apologize I don't know why I didn't come

36:12
up with the law it's nice to have um but

36:14
you see all the the things going on in

36:16
TV because we're in open enrollment

36:18
right you really need to make that

36:20
decision very thoughtfully and you got

36:23
to do it at 65 you can't put it off so

36:26
those are the two big ones but the third

36:29
one that people are still slow to to

36:32
think about is what I mentioned before

36:35
our parents or our grandparents had

36:37
toine benefit pension plans so they had

36:40
a company provided knowing they knew

36:42
they were going to get some money that

36:44
would take care of a lot of it uh now

36:46
they have 401k so suddenly have to

36:48
decide what to do with it also even if

36:51
you had other savings my parents would

36:53
have had savings bonds and passbook

36:56
accounts they called it back then

36:57
basically bank and savings bonds well

37:00
now we have mutual funds and we have

37:02
efts and all all these different things

37:05
so the third stool of that if you take

37:07
Medicare Social Security is what do you

37:10
do with your your 401k the qualified

37:14
side and what do you do with your other

37:15
savings the non-qualified side because

37:18
no one else is going to do it for you

37:20
that's something people like you and I

37:22
have to deal with that our parents or

37:23
grandparents did not deal with and and

37:26
the word that she used to a lot of times

37:28
because the 401K side is the building up

37:31
of assets is accumulation and then I

37:34
think falsely we use the word

37:36
decumulation which just sounds like

37:39
decomposing uh I think we need to change

37:41
that to you know transitioning to income

37:44
transitioning to a pension because I

37:46
think the latest stat that I read is I

37:48
think it's less than 9% of all you know

37:51
private companies offer a defined

37:53
benefit type pension plan which means

37:55
that everyone else if you're not working

37:57
for the government or a very good labor

37:59
union has to figure out how to create a

38:01
lifetime income stream and this is where

38:03
the annuity industry by default going to

38:05
look like Heroes they have the only

38:06
product type that will provide a

38:08
lifetime income strength so they're

38:09
sitting right in front of it of the

38:11
demographic tidal wave uh what makes me

38:14
frustrated Steve is that most carriers

38:17
are pushing the growth story instead of

38:21
the income story now I understand it's

38:23
it's a revenue issue from the standpoint

38:25
of you know the growth products you know

38:27
create more commission and revenue and

38:29
all this stuff which could easily be

38:31
solved if we just put all annuities at

38:33
the same commission level which I know

38:34
is never going to happen but you know I

38:36
Can Dream Steve I can dream about

38:38
sixpack ABS I can dream about that I can

38:40
dream about the Anu industry telling

38:42
people about lifetime income um but

38:46
that's managing your plan I think does

38:48
come down to those three things that you

38:50
mentioned since that was so good I wrote

38:53
down another one of your your um courses

38:57
is is the sources of retirement income

39:00
and I think it would be beneficial to

39:03
the the listeners and viewers for you to

39:05
kind of look at it from a consumer

39:06
standpoint and remind people of those

39:09
sources some of them are pretty glaring

39:12
but you need to you know as you're

39:14
building your income floor as I tell

39:15
people and that's the amount of money

39:16
that's hit in your bank account every

39:18
single month regardless of who's in

39:20
office what contributes to that income

39:23
floor yeah I'm glad you ask it that way

39:26
because and sounds like you probably

39:28
think the same way I do I don't like it

39:29
when you say what's your number at

39:31
retirement what what's that mean you

39:34
can't spend a million well yeah you

39:36
could spend a million dollars of but you

39:39
spend it you'd be sorry you did it's

39:41
really what income you're getting so

39:42
you're looking at your sources of it and

39:44
your sources are either going to

39:46
basically come from the government like

39:48
Social Security um or they're going to

39:51
come from um income that you have from

39:54
an annuity or from your employer if you

39:56
do have defined benefit or it's going to

39:59
come from Capital which means your

40:02
Investments here's a I think a handy way

40:05
of thinking about it and and when I say

40:07
this to to Consumers they kind of goe

40:09
and looked at it this way when you're

40:11
accumulating your assets really what you

40:15
know what is your target is to is your

40:18
return on the money so if you made 8% in

40:20
the market this year AG sure what's your

40:23
risk well we can get fancy and talk

40:25
about standard deviation and all that

40:27
but basically the risk is volatility or

40:30
you know default that kind of stuff not

40:32
so once you retire once you actually

40:34
retire what's your return is not what

40:37
you got in your investment your return

40:38
is what you're paying yourself each

40:41
month because that's you're retired your

40:43
human capital is gone you're not out

40:45
there in you're not really investing

40:47
you're you're I liked accumulating but

40:50
whatever you want to call it you said

40:52
human capital that's you know are they

40:54
copying you Steve because all I hear now

40:56
is is human

40:58
infrastructure I think they someone

41:00
someone absconded your uh your saying so

41:04
human capital what's human capital again

41:07
the ability to work so there you go yeah

41:10
I mean if and I've seen that with a lot

41:12
of people say I'm going to retire for a

41:14
few years and see how it goes but their

41:15
licenses expired or they're staying up

41:18
in the industry stopped and their

41:19
contacts went away their human capital

41:21
expires right so if that goes away then

41:25
you really have to replace it somewhere

41:27
and to finish the the thought I had on

41:29
that is think about it when you retire

41:32
your return is whatever you pay yourself

41:35
what's the risk in retirement the risk

41:37
is essentially that you run out of money

41:39
before you run out of oxygen right do

41:41
you really care if you have zero I mean

41:43
unless you want to leave a legacy but

41:45
you could take care of that with other

41:46
things like life insurance you know so

41:50
you have to look at it different and

41:51
it's a long way of answering your

41:53
question about sources of income really

41:55
in retirement that's your bogey is is

41:58
income um so that can come from those

42:01
things I said but in many cases the

42:03
tricky part is taking the part of it

42:05
that's capital Investments and all that

42:07
and figuring out the magical way to turn

42:10
that into retirement income and

42:11
obviously that's why we're talking about

42:13
annuities and things because sure that's

42:15
the one that tells you you will not run

42:17
out of money before you run out of

42:19
oxygen because it's going to pay out

42:21
during your lifetime you know as long as

42:23
you're breathing and I always tell

42:24
people you need to figure out how much

42:25
risk you want to transfer and must risk

42:27
you on a shoulder and annuities aren't

42:30
for everybody I have the 85-year-old

42:32
that says you know I'm fine in the

42:33
markets go for it knock yourself out if

42:36
you don't need to transfer risk fine and

42:38
then I might have the 47y old that goes

42:39
I'm tired of it okay um and they need to

42:43
transfer risk kind of to close out

42:46
because I think that um you this has

42:49
been fascinating for me because just to

42:51
just to be able to sit down with someone

42:52
like you that's had so much experience

42:54
in the field and and your your fingers

42:56
on the pulse

42:57
of things that are new which is also

42:59
unique that you bring all this

43:01
experience to the table but yet when

43:02
you're you know you work for the

43:04
American college you're with everyone

43:05
else who's the thought leader which is

43:08
exceptional um the retirement income

43:12
process and you teach a course called

43:14
retirement income process strategies and

43:16
solutions and I apologize for keep going

43:19
back to your courses but once again

43:21
these are the type of courses that I

43:23
think would be so beneficial for the

43:24
consumer which is the reason I do the

43:26
podcast because I bring you on to talk

43:27
about it what's the pro what's the

43:30
strategies and solutions that you

43:32
haven't already covered that maybe be a

43:35
nugget of wisdom for the for the

43:37
consumer out there that's either

43:39
pre-retired retired post- retired or

43:41
just trying to be better at retirement

43:44
that's a fair question so without going

43:46
through the the 10 steps that we teach

43:49
sure in uh in doing the process you

43:52
think about first of all what are you

43:53
going to need in retirement and it's not

43:56
necess neily going to be 100% of what

43:58
you had pre-retirement in most cases

44:00
it's going to be somewhat less but just

44:03
because somebody on the internet said it

44:05
was 80% of what you made pre-retirement

44:07
isn't necessarily correct you have to

44:09
think about what expenses am I going to

44:11
have so first of all what amount of

44:13
income the other part of that is is it

44:16
something that you want to tilt heavily

44:18
towards the early years of retirement

44:20
you've probably heard that term go-o

44:23
years versus the slowo years versus the

44:25
noo years go go slowo noo noo I love if

44:31
you think about it most people are that

44:33
way you retire and B and now as CO's

44:36
being contained you can get in that

44:37
plane and go take your grandkids to

44:40
Disneyland or make that European trip

44:42
you never got around to you may actually

44:44
end up spending more at at the early

44:46
part of retirement then you're going to

44:48
slow down and not necessarily go to

44:50
restaurants and as much and that kind of

44:51
thing and then the nogo years are are in

44:54
Frailty so part of it is a kind of you

44:57
don't have to be an actuary to do it but

44:59
kind of lay out what you think that

45:02
needed cash flow is going to be that's

45:04
part of the process part of it is to

45:08
picture um to really Envision what

45:11
you're going to do in retirement in fact

45:13
I should have put that first what how do

45:14
you define retirement right there are

45:16
people like me that's say I'm going to

45:17
work until you know you're gonna have to

45:18
take me out in a gurnie but the fact is

45:21
you have to kind of think through what

45:23
is it going to be like and what are my

45:24
risks so um in my for column I always

45:27
talk about uh I deal with risk in

45:29
retirement because people always talk

45:31
about retirement income sure but that's

45:34
fine but what happens if you you know

45:36
have long-term care issue or your spouse

45:39
dies um that has both financial and

45:42
emotional issues so you identify your

45:45
risks then you start thinking about what

45:47
we already talked about sources of

45:48
income because I will just I can't

45:51
emphasize it enough big issues like when

45:53
you take Social Security how you tap

45:55
your home equity like reverse mortgages

45:57
those kind of Concepts and how you

46:00
structure your taxes make a huge amount

46:02
of difference we haven't even mentioned

46:04
that but annuities have at least

46:05
nonqualified annuities have the

46:07
advantage of spreading out your taxation

46:09
so you work through those kind of things

46:12
and and then you start figuring out how

46:14
am I how am I going to deal with it once

46:16
I retire because we talked about

46:18
diminished

46:19
capacity have I taken care of making

46:22
sure I have a power of attorney do I

46:24
have a will all those kind of things so

46:27
that when the the the date comes you

46:30
feel like you have a plan um don't let

46:32
anybody fool you that you know you have

46:34
to spend a billion dollars to do this

46:37
but you do need to go through that

46:39
because you've never retired before so

46:41
you have to Envision what that is and

46:42
think through the process and it's more

46:44
complicated than it was for past

46:47
Generations again because the government

46:49
or your employer not just making it easy

46:51
for you that's well put and I do

46:54
encourage everybody that and it's hard

46:56
to hard to tell people this but when

46:59
people get to phase two of their life

47:02
chapter 2 um slow go slow go go slow go

47:05
or noo you know you have to enjoy

47:07
yourself you've you've worked hard out

47:09
there you've checked the boxes you've

47:11
scrimped you've saved you've

47:13
planned and people sometimes forget to

47:17
focus in on themselves and take care of

47:19
themselves and do some things that you

47:20
probably didn't expect to do or want to

47:21
do or plan on doing but now you've

47:23
worked hard and you can do it um

47:26
annuities aren't the The Cure All for

47:28
anything but they can provide that base

47:30
income for you to go do that and um and

47:32
enjoy yourself Steve Parish it's been a

47:34
blast we've kind of blown through a

47:37
bunch of time here but um I really do

47:39
appreciate you coming on I'm GNA hold

47:41
you to it but I hope that you will come

47:44
on again when a when a flash of

47:46
lightning hits you when you or else I

47:48
read one of your articles and and call

47:49
you I hope that you come on again any

47:52
last words as we close this thing out

47:55
well I just want to keep emphasiz izing

47:57
that idea of a income because something

47:59
you said deals with a conversation we

48:01
had just yesterday one of them was with

48:03
Wade fou who's been one of your uh

48:05
people before and I said because of my

48:07
age the world is one big lab where I see

48:09
friends uh dealing with retirement if

48:12
you know what retirement income you have

48:15
and it's enough I mean so that you can

48:17
pay for your housing and that kind of

48:19
thing people are incredibly adaptable

48:21
and so I know people who were captains

48:23
of industry when they were working and

48:25
now are running around with you know a

48:27
coupon the Denny's and all excited about

48:30
it but you know what Stan they're not

48:32
unhappy they they really kind of have

48:34
adapted and changed um because they know

48:37
what they have to work with right and

48:39
there's so much stress when you retire

48:41
and you're so used to earning a paycheck

48:44
and now you're not getting one that

48:46
that's one of the reasons I like this

48:47
whole idea of a known income because

48:49
that's the way people think in

48:50
retirement is don't talk about my number

48:54
just tell me what I'm getting a month

48:55
and so I think that's important is

48:57
convert it into income in any way you

48:59
can build build that income floor

49:02
absolutely Steve Parish thank you so

49:03
much for joining us and thank you to all

49:05
the listeners and viewers for watching

49:08
and listening to the number one annuity

49:10
podcast on the planet and it just

49:11
happens to be called fun with annuities

49:18
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