Sep 6, 2023
In this episode, The Annuity Man discussed:
Transferring risk through annuities
Single Premium Immediate Annuities
Annuities are commodity products
Structuring annuities to combat inflation
Annuities are transfer of risk products. You are transferring the risk to the annuity company to pay as long as you’re breathing. Through annuities, you can create an income floor that you can never outlive.
A SPIA or Single Premium Immediate Annuity is when you want income to start as soon as 30 days from the issuance of the policy to as far out as a year. There are no moving parts, no market attachments, and no annual fees. It is a very simple transfer of risk.
SPIAs, DIAs, QLACs, and Income Riders are all going to pay as long as you are breathing, all four can be set up so that 100% of the unused money is going to go to the beneficiaries instead of the annuity company. There is no “best” when it comes to these commodity products. The best is the one that gives the highest contractual guarantee.
You can attach increases to annuity products that increase to hopefully combat inflation. However, annuities decrease the initial payments to make up for that increase whether potential or contractual. It sounds good in theory, but mathematically, it typically doesn’t hold up.
"The COVID wake-up call for all of us is ‘go live your life’ and because of that you need to look at how you create your own personal pension." — Stan The Annuity Man.
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