What Is an Annuity Income Rider?

0:00
Hi there, Stan the Annuity Man,

0:02
America's annuity agent, licensed in all

0:04
50 states. So glad you joined me for

0:06
this video. Once again, we're taking

0:08
questions that have been submitted

0:10
underneath me by the people that are

0:12
watching these videos. So, you can do

0:13
that as well and hopefully we'll choose

0:15
your question and we'll go through that.

0:17
The gentleman today that wants to talk

0:19
about income writers is Eric Schubert.

0:21
And I appreciate Eric the uh I think on

0:23
a couple of videos you put some very

0:26
poignant questions about income writers.

0:27
We're going to talk about income writers

0:29
today, but only after this

0:38
music. So, the topic today is what is an

0:42
annuity income writer? And let's read

0:45
from Eric's questions. What would be the

0:48
purpose of a variable or fixed index

0:50
annuity with no income writer? So, let's

0:52
just answer that one. Number one, I

0:53
don't sell variable annuities because I

0:55
don't sell anything that goes down or

0:57
the potential to go down in value. No

0:58
offense to the variable annuity side,

1:00
but I my whole thing is you own an

1:03
annuity for what it will do, not what it

1:04
might do. And the will do is the

1:06
contractual guarantee part. But let's

1:07
talk about the question that Eric was

1:09
was asking about what's the purpose if

1:12
you do not add an income writer to a

1:14
variable annuity or an index annuity at

1:17
the time of application. And by the way,

1:19
that's when you add them. You can't buy

1:20
a variable or a fixed index and then

1:23
after the fact add the income writer.

1:24
The income writer which is an attached

1:26
benefit for future income has to be

1:28
added at the time of application. Okay.

1:32
But the reason if if you just bought a

1:34
standalone variable annuity or a

1:36
standalone fixed index annuity, it would

1:38
be for the the the unknown the potential

1:41
returns of each of one of those specific

1:44
strategies. Variable annuities, those

1:46
are mutual funds inside. They call them

1:48
separate accounts. Obviously, you get

1:49
market growth with that growth with

1:51
that. With indexed annuities, it's an

1:52
index option strategy. It's designed to

1:54
create normal CD type returns. But the

1:58
reason that you would buy it just as a

1:59
standalone with no income writer um

2:02
would be for those unknown returns. Hey,

2:05
also with variable and fixed index

2:07
annuities, you're also buying it in a

2:09
nonirra type account. You can buy an IRA

2:11
or Roth IRA, but in nonIRRA type

2:13
accounts, you're buying it also for the

2:15
tax deferral. Both of those products

2:17
have tax deferral. Um, MAS do as well.

2:19
Multi-year guarantee annuities have um,

2:23
tax deferral in a nonIRRA setting. But

2:25
once again, you can buy those in all

2:27
different types of accounts, IRA, Roth

2:29
IRA, nonIRRA. But with variable annuity,

2:31
fixed index annuity, and just let's

2:33
throw migas in there for now. Um, you

2:36
can buy those in specific durations. In

2:37
other words, there's specific surrender

2:39
charge time periods for each of those.

2:41
They don't have to be long, 10 years.

2:43
Some of them could be short like mas

2:44
have a 2-year index annuities are four

2:47
and five years at the shorter term as

2:49
long as 10 years 10 years plus. Um same

2:52
thing with variable annuities. So one of

2:53
the questions that he was asking was

2:55
just the term and the customer gets to

2:58
choose that and when you're working with

2:59
an agent hopefully me Stan the annuity

3:02
man I'm going to give you those

3:03
different options and those different

3:05
choices on the surrender charge time

3:07
periods. Eric also asked, "Would a fixed

3:10
index annuity with an income writer be a

3:13
good inflation hedge or work as a hedge

3:16
against inflation?" Let's kind of go

3:18
backwards a little bit because the topic

3:20
of the the um this video is about income

3:23
writers. Let's talk about an income

3:24
writer. What is an income writer? And

3:26
then I'll address this question. An

3:28
income writer is an attached benefit to

3:31
a policy. Typically, it's a it's a

3:34
either variable fixed index and some

3:35
migas. You can attach an income writer

3:38
for a future lifetime income stream. You

3:40
can go to

3:41
theanuityman.com and punch in your

3:43
numbers on the income writer calculator

3:45
and get those numbers. And income

3:46
writers typically are for when you're

3:48
deferring three, four, five, six, seven,

3:50
eight, nine, 10 and beyond years. So you

3:52
want to know to the penny what that

3:54
income amount's going to be five years

3:56
or seven years or three years or 10

3:58
years customizable. And remember that

4:00
lifetime income with any type of

4:02
lifetime income annuity is primarily

4:04
based on your life expectancy at the

4:05
time you take the payment. Interest

4:07
rates play a secondary role in pricing.

4:10
Interest rates play a secondary role in

4:12
pricing. It's really about your life

4:14
expectancy. Give you an example. Social

4:16
Security, the older you are, the higher

4:17
the payment. Income writers, the older

4:19
you are, the higher the payment. It's

4:21
it's the same thing. It's a transfer of

4:23
risk for lifetime income as long as

4:24
you're breathing and you can set up for

4:26
your life or for your spouse's life. But

4:28
to get back to Eric's question about

4:30
inflation, inflation's like this grill

4:32
in the room that everyone's talking

4:34
about, what am I going to do with

4:34
inflation? Stand. There's no perfect

4:37
answer, just really bad sales pitches.

4:39
The way to address inflation used in

4:41
annuities with an income writer, like an

4:43
index annuity with an income writer, is

4:45
having income start at a future date

4:47
with the projections being that there

4:49
will be inflation at a future date.

4:51
That's the best that you can do. You

4:53
don't have to buy an income writer for

4:54
and and start at a future date for an

4:57
inflation hedge. You could always wait

4:59
and buy an immediate annuity at the time

5:01
you need to solve for that amount of

5:04
money that has uh affected your income

5:07
floor for inflation. Give you an

5:08
example. Let's just say you had right

5:10
now you're getting $2,000 a month and

5:11
then seven years from now you really

5:13
need $2,500 a month. You need an

5:15
additional $500. You can at that point

5:18
in time, seven years from now buying an

5:20
immediate annuity uh reverse engineering

5:22
the quote. You can use our site at

5:23
theanuityman.com and all our calculators

5:26
to do that to solve for that specific

5:28
need. But you can also to be proactive

5:30
with that step like Eric's talking about

5:32
and say, "Okay, I'm going to buy an

5:33
index annuity with an income writer. I'm

5:35
going to have that income writer start

5:37
five years or six years or seven years."

5:38
And by the way, you can you can decide

5:40
when the start date is going to be after

5:42
the policy has been issued with the

5:43
income writer to address inflation at

5:46
that time. So to answer Eric's question,

5:48
yes, you can use an index annuity with

5:51
an income writer to address inflation at

5:54
a future date. Is it perfect? No. Do you

5:57
know exactly what inflation's going to

5:59
be in the future? No. But it is a

6:01
contractual way to have income starting

6:03
at a future date. And that's always a

6:06
good thing when you're thinking about

6:07
inflation. All right, Stan the annuity

6:09
man. This income writer thing sounds

6:11
good because it sounds like I can I know

6:13
to the penny contractually what my

6:16
income benefits going to be, my lifetime

6:18
income stream's going to be with this

6:19
income writer. That sounds good to me,

6:21
Stan the Annuity Man. And thank you,

6:23
Stan the Annuity Man, for having an

6:24
income writer calculator on your site.

6:26
You're welcome. But wait a minute, Stan,

6:29
there's got to be a cost to this. Well,

6:31
there is. Annuity companies have the big

6:33
buildings for a reason. They don't give

6:34
anything away. You know that. I mean,

6:36
they have the logos on the planet as my

6:37
CEO says, she goes, they also start

6:39
they're starting to sponsor sports

6:41
stadiums, which means that, you know,

6:43
they know when we're going to die, and

6:44
they do charge fees. But with income

6:46
writers, let's do a visual. So, draw a

6:49
line down a blank sheet of paper

6:50
visually. This side is that index option

6:53
side. By the way, it's going to return

6:55
CD, normal CD type returns. It's not a

6:57
market product. So, don't let agents

6:59
tell you, well, if you'd owned this,

7:01
you'd have 14. No, CD normal CD type

7:04
returns. But on this side is the income

7:07
writer. It's a fictitious account,

7:09
monopoly money, a phantom account that

7:11
you can use to calculate your uh

7:14
lifetime income stream when you take it

7:16
in the future. But for that guarantee,

7:18
there is a fee. And typically with the

7:20
index annuity um income writers, let's

7:23
just say the average free fee is around

7:26
1%. It could be less, it could be more,

7:27
but let's just say as an example, it's

7:30
1% and a lot of them are. So that fee

7:32
for the income writer is 1%. That fee is

7:35
not taken out of the income writer side.

7:37
The fee is taken out of the accumulation

7:39
value side, which is that index option

7:41
side. And it's taken out of that index

7:44
option side for the life of the policy.

7:48
Yeah. For the life of the policy. So

7:50
yes, there are fees, but it's not going

7:53
to interrupt or lessen the income

7:56
guarantee. So the way that we primarily

7:58
use index annuities is as a

8:00
cost-effective and efficient delivery

8:02
system for that income writer guarantee

8:05
for a person. They ask the two

8:06
questions. What do you want the money to

8:08
contractually do? And when do you want

8:10
those contractual guarantees to start?

8:11
So if the answer to the first is I want

8:13
lifetime income and the answer to the

8:15
second question and I want income to

8:16
start in the future. Okay. Then we're

8:19
going to quote all income writers for

8:22
the highest contractual guarantee for

8:23
your specific situation. And we're going

8:25
to base our decision on the guarantee,

8:27
the will do, not might do. Remember,

8:29
will do is the contractual guarantee.

8:31
That's what I say. We're in the will do,

8:32
not might do studios for a reason. We're

8:34
going to base our decision on the income

8:36
writer guarantee and really not pay that

8:39
much attention to the index annuity

8:41
side, the in indexed option side,

8:43
because once again, it's designed to

8:45
create normal CD type returns. But those

8:48
normal CD type returns are going to be

8:50
lessened by the fee coming from the

8:53
income writer. So a question I get all

8:55
the time is so are these income writer

8:58
fees good or bad? I mean should I be

9:00
concerned about that when I'm when I'm

9:02
purchasing an index annuity with an

9:04
income writer? Well, all I'm going to

9:05
tell you is you know that the fee is for

9:07
the life of the policy and you know it's

9:09
going to come out of that index option

9:10
side for the life of the policy. You

9:12
need to make very sure that when you're

9:14
buying an index annuity with an income

9:15
writer that you are going to turn on

9:18
that income stream and you're going to

9:20
transfer that risk to the annuity

9:22
company to pay you for the rest of your

9:23
life as long as you are breathing if

9:26
it's joint life as long as you and you

9:27
and your spouse or partner are

9:29
breathing. Don't just buy the income

9:31
writer because you might turn it on or

9:33
it looks good or it sounds good or you

9:34
you bought it during the sales pitch.

9:36
No, no, no. buy that for a future

9:39
pension um lifetime income stream and

9:42
make sure you're going to turn it on.

9:44
And I think one of the most tragic

9:45
things I see is when people, first of

9:47
all, they buy it from other people,

9:48
which is tragic other than the annuity

9:50
man. But they'll show me a policy and

9:51
I'll go, "Why do you have an income

9:53
writer if you're not going to turn it

9:54
on? Turn it on. Transfer the risk. Don't

9:56
just sit and watch it." You know, the

9:58
insurance companies love that. You're

10:00
just they're getting rich off that,

10:02
right? The policy is there for you to

10:04
turn on lifetime income. So before

10:06
making the decision to purchase the

10:07
lifetime income stream income writer,

10:10
make sure that you are going to turn it

10:12
on and it's part of the plan to turn it

10:15
on and that way the fee is almost

10:17
irrelevant because you're getting the

10:19
net amount from that lifetime income

10:20
stream from the income writer. Hey, I

10:23
really want to thank Eric Schubert once

10:25
again for for commenting on these videos

10:28
um and and really asking some good

10:30
questions because I think the questions

10:31
that Eric asked are questions that you

10:34
probably have in the back of your mind.

10:35
And if you don't see those questions

10:37
being answered, then put your questions

10:38
down there and we'll answer them not

10:40
only on the YouTube channel, but they

10:42
might get on this video and I might

10:44
mention your name next time. Hey, thanks

10:46
again for for joining me on the Stan the

10:49
Annuity Man YouTube channel. I'll see

10:51
you next time. Heat. Heat.

11:00
[Applause]