Jun 20, 2023
In this episode, Stan The Annuity Man discussed:
Lifetime income with SPIAs
DIAs are SPIAs that you defer
What counts as qualified money in QLACs?
What an Income Rider is and what it isn’t
Index Annuities are the annuity industry’s version of a CD
Variable Annuities, charitable gift annuities, and buffer annuities
A Single Premium Immediate Annuity (SPIA) can be structured however you want that pension payment to function while you're alive and whatever you want the money to do when you're dead. If it's an Immediate Annuity, there are no moving parts, annual fees, or market attachments. It’s a straight transfer of risk.
A Deferred Income Annuity (DIA) is an Immediate Annuity that you defer. A Single Premium Immediate Annuity past 13 months turns into a Deferred Income Annuity.
A Qualified Longevity Annuity Contract (QLAC) is a DIA that you can use with qualified money. Qualified money means IRA, not Roth IRA, but traditional IRA. Some 401k’s are also now offering QLACs.
An Income Rider is not an annuity, it’s an attachment to a Variable or Index Annuity that provides guaranteed income. An Index Annuity is the most cost-effective and efficient delivery system for an Income Rider. An Income Rider is non-transferable, cannot be cashed in, and can’t be peeled off of, it also comes with a fee.
MYGAs are the annuity industry’s version of a CD. If your time horizon is three years or more, historically, Multi-Year Guarantee Annuities give you a higher contractual annual yield than a CD.
Fixed Index Annuities were created In 1995, to compete with CD returns, giving you the potential to earn a little bit more than CD returns. If you do get a gain, it's locked in permanently and there is principal protection. But the bad news with a lot of Index Annuities at the time of this taping is that annuity companies can change the rules at their discretion every single year when the index option matures.
Variable Annuities are a security that is essentially a bunch of mutual funds wrapped with a life insurance wrapper, which means it would grow tax-deferred, and you could have tax-deferred mutual fund type growth.
A charitable gift annuity is a lifetime income stream typically either starting immediately or down the road. When you die, the charity keeps the money that's left in the account, and they get to hold it while they're paying you back the money based on your life expectancy.
"There's a lot of annuity products out there. Not all of them are great. Not all of them are perfect, but all of them are contractual. So you have to look at the contractual guarantees of the policy. I always tell people don't buy the dream, because you're gonna own the contractual reality." — Stan The Annuity Man.
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