Annuities for Income vs. Accumulation | 7 Figure Annuity Sales Podcast | Ep. 289

If you're not positioning annuities for guaranteed lifetime income and you are positioning annuities for accumulation, you're missing out on a lot of opportunity. Welcome back to seven Figure Annuity Sales. It's Caleb north here with Chad Owen. We're talking today about annuities for income versus accumulation. And I tell you, this is one that's near and dear to both of our hearts because, well, Chad, quite frankly, for you, as much as you sell income products now, fias with income riders now, you were a, a tough ship to turn back in the early 2000s when they started rolling out, weren't you?

Yeah, I was. Because it sounded too good to be true.

That's the reality. If I'm going to be bluntly honest about it, that's exactly what it sounded to me. I'm like going, come on, how's this possible? Because, cause I already knew about obviously immediate annuities and annuitization. But you know, when these companies tell me how they can do the 10% bonuses. Well, actually at one time it was a 12% bonus and 8% compounded roll up rate for 20 years. You know, I was like, now granted, your death benefit's gone in 10 to 15 years. But the reality is, even with that, I was like, there's no way, there's no way. And now I have clients literally that have been living off of that and they are so over the top happy. And I mean, I have one guy that retired at 55 years old and we had to do a five year, we had to do a transitional annuity to get him to age 59 and a half. But this guy, literally his number one thing is golfing around the world. He just travels the world and golfs. That's what he does. And he's been able to do that from a very young age. I actually need to give him a call because he's, I mean this, now that I'm back in Colorado, this is where he is. But you know, it's just so great to see that. So, yeah, it took me a while to do that, but now try and convince me otherwise that they're not one of the best products that are out there. You know, I, I will die on this mountain and I will argue. Anybody all day long that tries to tell me their indexed annuity is better than an income annuity when there is an income need. And then I'll go even farther to say along the lines are, well, there's not an income need, then you're generally most of the time not doing A complete fact finder, because I know the number of clients I get in touch with is usually way more than most people. You know, I'm running anywhere from 10 to 15 appointments a week. So I'm talking to a lot of people. An income need, if you do your fact finder right, is almost always a concern of some shape or another. You know, whether they have a pension, they have their Social Security, whatever it is, if the spouse passes away, the lower of the two social securities goes away. A lot of these pensions, they go 50% or they completely go away. We have inflation, we have other things. And we also have to understand, and I know you might be getting to this, but income isn't necessarily just for income. It could be for legacy, it could be for vacations, it could be for grandkids, college, it could be for, you know, whatever. You know, I have people that did income on annuity, and because I lived in Texas, you know what the property taxes are like. There's their income off that annuity. The sole purpose of that was to pay property tax. So, I mean, there's all sorts of reasons. But you know what, when we keep doing these hypothetical scenarios off of these and try and get guarantees, when you talk about index strategies, that often can be challenging if we don't do it right and we don't talk with our clients every single year and help them navigate through what index is the best to pick. We. I mean, it just. See, now you've got me triggered.

Because. Yeah, because the reality is, you know, most agents, it's either because they're lazy, they don't want to understand how the income part of it works, or they want that new business in five, seven or 10 years. And they know if they get an income rider on that, they'll never have any more business from that client again for that particular money. And to me, it's not my money, it's a client's money. So I'm going to do whatever's best. And I had somebody tell me one time, they literally, an agent goes, well, you just do the income rider because it's better for you. I mean, tell me how that's better for me. I no more future business ever for that money again. Tell me how that's better for me. And they couldn't. Yeah, and then they started to go, well, you're right. I said the why? Why'd you do the indexed annuity? And it turns out they didn't even understand the concept of the income side of the annuity, and they didn't Understand what products were available out of this. So that's lazy. And so that is what it comes down to. There is no excuse for not learning in today's age. We have so many ways we can learn and when we understand what is good for our clients. And that goes back to the two questions we've talked about many times before. How long are you going to live for? And where's the stock market going to be tomorrow, let alone five or ten years from now? When you, when you have that, there is only one product that can do that.

Yeah, yeah, you're so right. And I think part of it, Chad, is the way that agents go about asking questions. Right? You made the comment they're probably not doing full fact finding. And I bet you there's listeners that are saying, no, I do full fact finding. But I don't see clients that are asking for income. And my argument is that's exactly why you don't see people asking for income is because you're asking do they want income or do they want accumulation? If you ask the question is this a plan for living or a plan for dying? All of a sudden you turn up a ton of cases that are all about a plan for living. Well, what is a plan for living? They're going to use that money to live on. If you ask somebody that doesn't understand how income works in annuity, do you want income or accumulation? They're for the last 40 years been trained, they're all about accumulation, growth, growth, growth. Because they've spent four decades in the accumulation phase of retirement planning. Now they're in distribution. If you ask them you want income or growth, they're going to say growth. Why? Because they think that their income is dependent upon the growth. They think that if I can go average 8% a year, then I can make my 4% withdrawals. Well, okay, great. But that's not the way that income needs to work in annuity products.

That's the same guy that told you he wouldn't take a billion dollars at 0% interest. And he, There is a, there is.

A well known individual that says you can draw 8% out of your. Because the average is 10. Okay, here, this is. Okay, I'm just gonna say if you know what we're talking about, then props to you if you don't. Okay, you can look it up.

It rhymes with hamsy.

The annualized average return of The S&P 500 over the last decade is a hair over 10% compounded. The annualized return of the S, P 500 since the turn of the century is a hair over 4.3. But his argument is you can take 8% out of your investment portfolio per year because it averages 10. That's insane, because it has no consideration for the down years. It's not saying you get 10 every year. And then.

And if we take another 50 drop. I know. See, you said I was a little tired, but now I'm not, man. Now I'm getting wired. Because if. If we have another 50 drop, which we know we will, we don't know when. I mean, every economist right now speculated that we should have catastrophic drops already. And if we stop stinking, printing money and propping the market back up. You know, the government keeps. I said this in one of my radio shows. The government does not make money. It takes money. That's the reality. It takes taxes, and the only way they pay anything is through what it took from us. That's a fact. I mean, fine, find me proof that that contradicts what I'm talking about. So when you take money from other people and then you print money, we don't have, you know, this current administration got and said, well, I saved us a trillion dollars. You were spending. The goal was to spend 8 trillion more than what we had. We still spent 7 trillion more than what we had. You didn't save us a trillion dollars. You spent 7 trillion more than what we have. And you wonder why the stock market keeps going up and these billionaires become uber billionaires, and these big institutions get bigger and bigger because they're the ones that get that money. They, not us. So, okay, yeah, done with the rant.

I have another argument for the.

I'm test my pulse right now. See, you got to watch this on YouTube, man.

I need. I need to watch the nurse come flying in here. Put the blood. Blood pressure cuff on. Calm down now.

Calm down.

No. Okay. I'm not gonna calm. Do you. Do you remember? You're. You're way, way, way, way too young for this. So am I. Do you remember why the Boston Tea Party started? Like, what. What that big upheaval was.

It was over taxation. It was over.

And how much was.

Was. It was like a percent or three or something.

It was. Yeah. It was a fractional amount. And that all started. Yeah. You know what? We need to do another Boston Tea Party.

I might be in trouble here, but, you know, we might need to do that. Yeah.

If Chad's not with us anymore, we know why.

Well, you know, my office. I could do things if I needed.

To look behind You?

Yeah. Oh, this. Well, these are the. These are the decor. These are the old school, man. This is. I mean, if you look what's in front of me, there's a lot of ways we could start a movement.

I have a logical argument calling.

Wait, let's just be specific. I'm not calling because we saw someone try and tell people to calm down, don't do anything, and then he's being accused of starting a riot. So I'm telling everybody, calm down, don't go kill anybody, don't go causing riots. We'll do this peacefully. Okay? So I have a peaceful. The Million Person Annuity March, Washington. Let's do it.

All right, Say the date and time and we'll be there.

Have a logical argument for income products versus just using it for accumulation. Okay? And it comes down to, why do retirees buy accumulation products and what are the alternatives? So if you think about it, historically, annuities have been used by financial advisors, brokers, whatever, as bond replacements, right? So bond alternatives. So to that point, bonds are an alternative option to an indexed annuity that's just being used for accumulation. Now, again, I have my preferences. I think we all have our preferences on what would actually be used in that point being for accumulation or protection. And still some upside. There are alternatives. What else out there can create guaranteed lifetime income regardless of how long you live and regardless of what kind of performance you get in the portfolio itself, outside of an indexed annuity with an income rider and still maintains control of that account?

Yeah, it's interesting you say that, because I have a lot of agents ask me how do I get people off the fence by telling them there's nothing else out there to do what this does and prove it with your knowledge.

There's not.

I mean, that's reality. Because a lot of times why people are on the fence is they think there's something better out there that will do something that they want. And most people, 80% of clients have an income need of some sort. Prove me wrong. Because you can't, you know, I mean, when you talk about inflation, things costing more, you know, you're. You're living too long, you know, whatever it is. Well, you can't live too long. You can outlive your money. But I mean, and then, and then we have, you know, this can be sensitive subject, but we have people living miserably longer too. You know, they're literally existing in their house, just collecting money because they don't have the physical ability to do anything. But it still requires money coming In.

Yep.

You know, and so we have to look at that. We actually. We have to really step in the gap. For these people that don't understand what true retirement is, they've got this painted fantasy that their brokers talk them about, about, you know what you are these dumb talking heads about pulling out 8% of your money. I mean, the reality is, instead of if you have a million dollars, you employ 8% of your money, which is $80,000 a year, when the real number is closer to 3%, which is $30,000 a year, that's a $50,000 difference that these talking heads are trying to convince people they can do. And they have this pie in the sky. And honestly, I am very concerned about what the retirement situation is going to look like in future generations. When you talk about half the people that call on my radio show are 55 years old thinking of starting a retirement, and that's the more affluent clientele. And then you start to think about 50% of people, actual retirees don't even have $1,000 in the bank. I mean, this is problem, man. This is. This is a serious concern. And we always know Social Security is about 2 to 3% behind actual inflation. So when we're looking at that, I mean, we have need to help. We need to be direct. It's not being rude. It's not being, you know, disrespectful as being blunt and honest, you know, and that's what we have to do. This is. This is my truth, okay? This is what I'm feeling.

I'm triggering a lot of.

You sure are. You know, I had a conversation, Chad, just a few weeks ago with an internal wholesaler at an insurance company, and they were asking us about, or asking me about the ratio of business at retirement realized financial, you know, what are our agents producing? And I said, Man, 80 to 85% is indexed annuity with income riders. And he's like, wow. Because when you look at 2023, and he was asking specifically about 2023 because rates were so high, and you. 2023 agents, who primarily sell indexed annuities for protection and growth were selling mygas like crazy. So that hurts the agent. And then the client's gonna have to renew and buy some new policy in 3, 5, 7, 10 years. Right? And rates are not going to be what they were almost certainly in 2023, but your income products were really, really great. And because we train agents to approach the question thing a little bit differently and ask, is it a plan for living versus a plan for dying our agen 80 to 85% of production as FIAs. 10 year indexed annuities. Okay. With income riders. And clients were doing great for it. And it's, they're getting exactly what they need.

And I did have clients go, well, man, I missed out on that 20% gain in 2023. I said, yeah, how much did you lose in 2022? Nothing. Oh, how much did your income roll up rate go up? Oh, well. And then that's why clients just don't get mad. Yep. I mean, I have very, very happy clients and that's how I choose to keep it sometimes.

So sometimes agents will say I won't, you know, use income products because of the fee or I want my clients to get the maximum rate of return or whatever. And it's, to me, it's, it's just not thinking through, oh, wait, wait, wait.

If they want to get the maximum amount of return, then get them out of the annuity and go pick those, play the stock market.

Well, even then though, it's like everything's limited because as soon as you get a 24 return, you could have a 25% drop. So it's all internally limited.

So I thought Nvidia did incredible. You know, I had like a 2000% return or something. There were multiple other stocks that had higher returns than that over the past five years. How do what, I mean, yeah, maximum.

Return means your money is a hundred percent into the single.

Holding.

Yes, that. And then you get it at the perfect low and the perfect high without any discrepancy. It's a, it's a whole fallacy. But point being, a lot of times agents will say that, and my argument to that is you're, you're only looking at one type of return. You're looking at interest rate of return. But there's a thing called internal rate of return, which is the idea that if client starts an annuity with $200,000 and 25, let's say 20 years later, 25 years later, they've taken out $500,000 worth of income. Well, they've had, what would that be? A 250%, 150% growth rate. They've literally 2. Yeah, think about that. That's an internal rate of return. That's not an interest rate of return. They didn't see that go to their account value, but they benefited from it. So you need to look at both the internal rate of return and the possible interest rate of return. And in indexed annuities with income riders, you can benefit from both. Whereas when you're playing a market or you know what, or just dealing with an indexed annuity with. Without an income rider, you are explicitly trying to obtain an interest rate of return.

Well, thank you for raising my blood pressure. Now I'm going to have to go relax in the sauna for a little.

Bit, so good luck.

Yeah. Have a great day. Happy selling.